Mortgages

How to Buy a Mobile Home

A manufactured home is considered personal property instead of real property like a traditionally built home, which means the financing, insurance, and timelines for this home from order to move-in will also look a little different than a traditional home.

Mobile Home

A manufactured home is an option for those who wish to be homeowners and want to get the most square footage for their money. No matter the size or type of their chosen property, the financing options and the steps from ordering the home to moving in are typically the same.

What Are Manufactured, Mobile, and Modular Homes?

Manufactured, mobile, modular homes, and pre-fabricated homes, are structures that are factory-made and then transported to the new owner’s preferred plot of land. There are three categories of pre-fabricated homes:

Manufactured Homes

A manufactured home is a mobile home style dwelling built after June 15, 1976. This date is important because the US Department of Housing and Urban Development (HUD) changed the standards surrounding the construction of mobile homes, mandating they be safer and more durable.

Customers can choose from floor plan and fixture options and have the home delivered, assembled, and connected to plumbing and electric outlets on their land. Designers create this type of dwelling to move from the factory to the land, where it’s affixed to the ground with masonry, permanent foundation, or metal piers. 

Mobile Homes

Because of the HUD standards enacted in 1976, manufactured homes and modern mobile homes are virtually the same variety of structures. They’re premade dwellings designed to attach semi-permanently to the ground upon delivery. Historically, mobile homes were similar to transportable trailer homes, with wheels, axles, tow hitches, and trailer frames. Any structure built before 1976 is still referred to as a mobile home, while many consider those produced after 1976 as manufactured homes. 

Modular Homes

Modular homes are built in several pieces in a factory setting and then delivered and assembled once they’ve arrived at their permanent site. Unlike manufactured homes, modular homes lie on top of a previously poured foundation. Once the home pieces have been delivered and assembled, the contractor adds the flooring, cabinets, and any other finishes the customer selects.

Average Cost of Manufactured Home

The cost of a manufactured home can vary based on several factors, including size, type of home, style of home, region, and where it will be delivered. According to the US Census, the average price of a new manufactured home in January of 2022 was $122,800, which is less than half of the price for a new home built around the same time. The home price doesn’t include the price for the land, which is something to be tallied separately.

How To Finance a Manufactured Home

Because a manufactured home is typically considered personal property, several additional options exist to finance the purchase not accessible without a traditional new home build or purchase. The primary ways to finance the purchase of a manufactured home are as follows:

Conventional Loan

Most lenders are unable to lend money for purchasing a manufactured home (MH). For those that do, the government has a couple of loan options to help borrowers:

Fannie Mae MH Advantage

To qualify for this type of loan, a borrower must meet the minimum credit score requirement of 620 or higher and have a down payment of 3% of the purchase price. Fannie Mae requires the manufactured home to be built on a permanent foundation so it can be titled as real estate. The home must also be a double-wide MH with a driveway and must never have been moved.

Fannie Mae Standard MH

The Fannie Mae Standard MH is a loan for dwellings that don’t qualify for an MH Advantage loan. Most single-wide MH buyers will need to rely on this loan type. Because it’s more accessible and less regulated, the Standard MH is prevalent in rural and high-cost areas and requires a down payment of 5%.

Freddie Mac Manufactured Home Mortgage

This type of loan works similarly to a Fannie Mae MH loan, but it is for manufactured homes that are 600 square feet or more versus Fannie Mae’s minimum of 400 square feet.

FHA Loan

FHA loan, or a Federal Housing Authority loan, is provided to help those with low credit scores to buy affordable housing. Potential borrowers can obtain these loans with a minimum credit score of 580 for a manufactured home to be used as a primary residence. The down payment for this loan type can be as low as 3.5% of the total purchase price.

VA Loan

VA loans are for current and former service members and their surviving spouses who wish to purchase a manufactured home. VA loans require a 5% down payment for manufactured homes. The loan terms are typically less than Fannie and Freddie’s 30-year loans with VA being 20 or 25-year loans depending on the property.

Personal Loan

Due to the smaller purchase price of a manufactured home compared to a traditional home, a person may qualify for a personal loan large enough to cover the costs of their manufactured home. The home isn’t used as collateral to receive the loan, but the interest rates for the personal loan tend to be higher than what one would find with a traditional mortgage loan.

Chattel Loan

A chattel loan is a personal property loan where the property guarantees the loan itself. These loans tend to carry a higher interest rate with shorter terms, which can result in higher monthly payments. This loan is especially popular with those who don’t own the land where they plan to put their home. These loans also tend to close faster and with fewer restrictions than a buyer would experience with a traditional mortgage loan making it very attractive for some buyers.

Dealer Financing

A buyer could obtain financing through the manufactured home dealer when purchasing the home. Be aware that these loans can come with higher interest rates, longer terms, and low down payments, which can translate to higher monthly payments for extended periods.

Advantages and Disadvantages of Purchasing a Manufactured Home

As with anything, owning a manufactured home has several advantages and disadvantages. A short list of both the pros and cons are:

Advantages

  1. Manufactured homes can be more affordable.
  2. One can potentially gain more space for the money.
  3. The homeowner could move a manufactured home if it were necessary.
  4. Manufactured homes require less construction time.
  5. Manufactured homes offer controlled environments built to the same standards as traditional dwellings.

Disadvantages

  1. Manufactured homes quickly depreciate in value, while traditional homes usually appreciate each year after completion.
  2. Manufactured homes can come with higher insurance costs.
  3. Homeowners who lease land in a manufactured home community still have landlords even though they own their homes.
  4. Many manufactured homes do not always affix to the ground permanently.
  5. Manufactured homes can require additional inspections before buying.

What Are HUD Tags?

A HUD tag is a label approximately 4” by 2” in size that must be permanently attached to the outside of a manufactured home. The tags are usually red with silver writing and are usually attached to the back of the home. The tag certifies that the home has been inspected and meets the requirements of the June 15, 1976 standards for a new manufactured home. The label also shows in which state the home was made and includes a code unique to the manufacturer.

Steps to Purchasing a New Manufactured Home

A buyer is typically ready to move into their manufactured home four months after placing their order with the dealership. The general steps to purchasing a manufactured home are:

Pick Your Location

The homeowner needs to decide where they want their home to be delivered. They can either have the home delivered to a plot of land they own, purchase their parcel of land, or lease a plot in a manufactured home community. The homeowner needs to double-check with the local zoning office or neighborhood association to ensure they can install their home on the land before setting the final plans. Also, make sure to check that utilities can or are set up for your home.

Find Your Manufactured Home

Then, Homeowners need to pick a plan and style of home that works for the land within the homeowner’s budget. Things for the potential buyer to consider can include:

  1. The potential buyer must consider whether they want a new or used model.
  2. One must consider whether to purchase their home either from a real estate agent, a home dealership, or a manufactured community.
  3. The potential buyers must consider whether they want a double or single-wide home.
  4. One must consider any customizable options, like unique fixtures, countertops, or flooring options.

Secure Financing

A manufactured home is typically considered personal property when purchased new. While the traditional options for financing a home, like an FHA loan, VA loan, and a conventional loan, are options, a buyer can purchase a manufactured home with a personal loan or a chattel loan. The buyer can also secure financing directly through the home dealer or purchase the home with cash.

Prepare Location

The buyer must ensure the home’s site is level for a secure fitting on the land and that the plumbing systems are in place and ready for home delivery.

Home Delivery

The manufacturer delivers the home on a chassis and wheels, similar to a trailer. Once delivered, one can install the cabinets and other finishes on site after the home is stabilized in place.

Purchase Insurance

Manufactured homes won’t typically qualify for a standard homeowners policy and if so, it can be very expensive compared to traditional homes. A buyer will need to secure a mobile home or a homeowners insurance policy to protect the property from unforeseen issues like fires, weather, and structural issues that can damage the home and bring much larger costs.