If you’re looking at lower-cost housing options, buying a manufactured home may have come up on your radar. Buying a new manufactured home or an existing one could be a good way to get into a home more quickly and at a lower cost than a site-built home.
Manufactured homes shed their mobile home and trailer rep in 1976. Since then, manufacturers have touted their quick turnaround times and high-quality materials.
If you’ve ever wondered how to buy a manufactured home, what financing options are available, and whether the titling of a home as real property or personal property makes a difference, read on.
What Is a Manufactured Home?
A manufactured home is built in a factory on a permanent steel chassis.
They often come in one, two, or three sections: single-, double-, or triple-wide. They must be able to fit on the highways, so the sections are limited to 16-foot widths in every state except Texas, which allows 2 extra feet.
Manufactured homes are not modular homes; nor are they considered mobile homes anymore. Manufactured homes are built entirely in a factory, whereas the components of a modular home are taken to the land and put together on-site. The two types of housing also follow different building codes.
Mobile homes are considered those built before June 15, 1976. After that date, manufactured homes were required to follow the HUD code, which covers manufactured home construction and safety standards. A manufactured home will have a “HUD tag,” a red metal certification label, on the exterior.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Why Should You Buy a Manufactured Home?
Manufactured homes are less expensive than site-built homes or modular homes, which must meet the same state and local building codes that stick-built homes do.
The average sale price of new manufactured homes nationwide was $86,500 for a single-wide and $158,800 for a double-wide as of August 2022, according to the Census Bureau’s Manufactured Housing Survey.
They have quicker build times than site-built homes, too.
Manufactured homes sold as part of a land package may hold their value much like a standard home, depending on upkeep and the local real estate market.
Speaking of land, if you’re a homebuyer and plan to lease the lot under you, beware of rising lot rents. Then again, if you’re looking for investment property, the ability to raise the lot rent could be a big draw.
Process of Buying a Manufactured Home
Buying a manufactured home is different from buying a site-built home. There are a lot of variables that you’ll need to know about.
Getting Financing for a Manufactured Home
Financing a manufactured home generally depends on whether the home will be attached to the land (real property) or consists of just the home (personal property, or chattel).
Financing Just the Home
It is possible to finance the manufactured home apart from the land. In this case, you’ll need to get a personal loan, a chattel mortgage, or dealer financing.
Another option is a government-insured home loan like an FHA Title I loan (which has loan limits) from an approved lender.
Financing the Home and Land
If you’re buying a manufactured home that’s permanently attached to a foundation on its own land, some lenders will finance the purchase with a conventional home loan.
An FHA Title I loan can also be used for just a developed lot or for a home-lot combo. FHA Title II loans are for buying a manufactured home and land whose price is above the Title I loan amount. Title II loans adhere to FHA loan limits, which are based on a percentage of the Federal Housing Finance Agency’s national conforming loan limits for conventional loans.
VA loans are available to eligible borrowers to buy a manufactured home that is permanently attached to the land.
And an option for low- to moderate-income buyers is a USDA loan if the home is in a USDA-eligible rural area.
Recommended: What Is a Chattel Mortgage?
Searching for a Manufactured Home
In your search for a manufactured home, you’ll want to consider:
Manufacturer. Many companies build and sell manufactured homes. Keep your search broad at first, and ask friends and family for referrals. You may also want to keep a spreadsheet comparing the prices, incentives, and inclusions each company provides. Be mindful, however, that while some manufacturers are able to provide comprehensive services, the quality of their homes may be lower than that of another manufacturer who does not provide every service.
Model and layout. Tour models and figure out what you really need. Are there enough bedrooms? Do you prefer a separate kitchen and living room, or is an open layout more your style? Is there enough storage?
Customization. There are a lot of options when it comes to selecting custom design elements. Would you like patio doors? A fireplace? Separate vanities? The manufactured home builder will have a list of upgrades that you’re able to select from.
Exterior additions. When your home is placed, some exterior elements can make it feel like a site-built home. Porches, garages, and decks are a few examples.
Site. Do some research on what it takes to place a manufactured home on a lot. Do you want a lot in the country with a view? Are you able to pay for the cost to bring utilities to raw land? Would you prefer to lease land? Where you want to place your home will help you select the right one.
Buying Land for a Manufactured Home
Buying land comes in three forms:
• Cash. You can buy land with any savings you have on hand.
• Land loan. It is possible to finance land separately from your home, which is also the case with some tiny houses. You’ll have closing costs on both loans if you choose to finance separately.
• Home and land. The easiest route is a manufactured home-and-land loan. Getting loan approval before searching for land or a manufactured home will allow you to see exactly how much you qualify for.
After buying land, it will need to be prepared for your manufactured home. This may include:
• Soil condition tests
• Making a plan for where the manufactured home is to sit
• Clearing the area
• Grading for proper drainage
• Checking the holding capacity for ground anchors
• Sewer or septic tank
• Well or water connection
Recommended: Typical Personal Loan Requirements
Delivery and Installation of Your Manufactured Home
After your land has been prepared and the home has been built, it can be transported to the site and installed. Your manufacturer will likely coordinate delivery and may be able to help you find contractors to install the manufactured home.
Homeowners insurance for manufactured homes usually covers the structure, personal belongings, and any other structures on the property. Some insurers require that a manufactured home be placed on a concrete or block foundation.
The coverage might also include liability insurance, which helps protect your finances if you’re responsible for damage or injury to someone else. A standard policy may not cover earthquakes or floods.
To figure out how much homeowners insurance you need, start by getting enough dwelling coverage to fully replace your home if it needed to be rebuilt. The replacement cost may be higher or lower than the home’s value.
Cost of a Manufactured Home
The cost of a manufactured home will vary by size, quality, customizations, and manufacturer. Not including the cost of acquiring and developing land, a new model may range from $86,500 to over $200,000.
There’s that mention of land again. As the Consumer Financial Protection Bureau says, “Manufactured housing is the largest source of unsubsidized affordable housing in the United States, but financing a manufactured home can be costly, especially for borrowers who do not own the underlying land.”
To ease the housing shortage, the Biden administration’s “Housing Supply Action Plan” aims to deploy new financing mechanisms for manufactured homes and accessory dwelling units (ADUs). The plan also prodded the Department of Transportation to modify its grant programs to favor cities that adopt zoning rules allowing dense housing and transit-oriented development.
Buying a manufactured home is usually more affordable than a site-built or modular home, but it’s helpful to understand all the financing angles and the long-term stability that owning the land underneath you can bring.
3 Home Loan Tips
- Traditionally, mortgage lenders like to see a 20% down payment. But some lenders, such as SoFi, allow mortgages with as little as 3% down for qualifying first-time homebuyers.
- When building a house or buying a nontraditional home (such as a houseboat), you likely won’t be able to get a mortgage. One financing option to consider is a personal loan, which can be faster and easier to secure than a construction loan.
- Thinking of using a mortgage broker? That person will try to help you save money by finding the best loan offers you are eligible for. But if you deal directly with a mortgage lender, you won’t have to pay a mortgage broker’s commission, which is usually based on the mortgage amount.
How long do most manufactured homes last?
Manufactured homes that are regularly maintained can last for 30 to 55 years, according to HUD.
How do I pay for a manufactured home?
Financing a manufactured home largely depends on whether the home is permanently attached to the land or not. A home that is not may be financed with a personal loan, one kind of FHA loan, a chattel mortgage, or a dealer loan.
How do I cut down on costs for a manufactured home?
The cost of a manufactured home itself could be relatively low. The biggest expenses you’ll likely encounter will be purchasing land and preparing it. If you can find a lot that already has utilities, it may help.
How is a converted shipping container classified?
Shipping containers that are converted into housing units can be accepted as manufactured homes if they are provided with a permanent chassis, are transported to the site on their own running gear, and otherwise comply with the HUD code for manufactured homes.
Photo credit: iStock/Marje
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.