You may have grown up calling manufactured homes mobile homes, and the two terms are sometimes still used interchangeably, but these dwellings have evolved.
They’re more customizable and arguably fancier than previous iterations. Still, it’s a good idea to look beyond the sticker price.
Characteristics of a Manufactured Home
First, to clarify a popular point of confusion, modular and manufactured homes are different types of houses.
Both are built partially or entirely in a factory, but modular homes — aka kit homes — must adhere to the same codes that site-built homes do.
Manufactured homes are intended to be permanent dwelling units. Starting in 1976, they began to be built to a code developed by the Department of Housing and Urban Development (HUD) and moved past the name “mobile homes” and the notion of trailers placed atop blocks.
The manufactured home, built on a permanent chassis, is tested to ensure that it can be transported properly before being attached to a foundation, or the underlying chassis may be “skirted” by blocks or siding.
The home may be movable, depending on its age and condition, but few are moved. Moving a manufactured home, if it is new enough to be moved, can cost $15,000.
Pros and Cons of a Manufactured Home
Before buying a manufactured home, the housing choice of about 20 million Americans, take a look at the following advantages and disadvantages to help you in your decision-making.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Pros
• Cost effective: According to the Manufactured Housing Institute, manufactured homes cost around 10% to 35% less than comparable site-built homes, excluding the price of land.
• High quality: Manufactured homes must adhere to the HUD code, which applies to the home’s design, construction, durability, transportability, strength, and energy efficiency. Factories also need to adhere to standards and must inspect each step during construction.
• Few delays: Because manufactured homes are built indoors in a controlled environment, the weather won’t interfere with the timeline to construct the home.
• Home warranties: Most manufactured homes have some form of warranty to guarantee the quality of the home, usually for one to five years. The seller has its own warranties for transporting and installing the home.
• Customizable: Most manufactured home makers allow homebuyers to customize some aspects of the home, such as certain finishes, porches, vaulted ceilings, and fireplaces.
Energy efficient: The HUD code ensures that manufactured homes have a high degree of energy efficiency.
• Financing: The financing options include loans even if the buyer will not own the land the home will rest on.
Cons
• Questionable appreciation: Manufactured homes may not appreciate at the same rate as other types of homes and may even depreciate. The resale value depends on the location, and the age and condition of the home.
• Limited customization: You can customize some parts of a manufactured home, but you may not have the options you want, depending on the builder.
• Price increases: The average sales price of a manufactured home increased nearly 50% during the pandemic, driven by the demand for affordable housing.
• Lot rent: Most residents own their homes but rent the land. Those who lease lots face uncertain increases in monthly costs. Park rents have been doubling and tripling.
Financing options may carry higher rates. Whether the home is considered real property or personal property makes a big difference.
A manufactured home built on or after June 15, 1976, and considered real property might qualify for a conventional or government-backed loan. To be considered real property, the home must be at least 400 square feet, permanently attached to a foundation, and on land that you own or plan to buy. The loans usually carry slightly higher interest rates than mortgages for traditional homes.
Financing options for manufactured homes classified as personal property include chattel loans, which come with a higher interest rate and a shorter term than most traditional mortgages. (A chattel mortgage also may be used for tiny house financing.)
FHA Title I loans and personal loans are other options for manufactured homes classified as personal property. Rates for unsecured personal loans will be higher than rates for secured loans like mortgages or chattel loans.
Finding a Manufactured Home
Most manufactured homes are sold through retailers instead of the builders. It’s also possible to purchase manufactured homes through real estate agents and online manufactured home marketplaces.
Think of buying a new manufactured home like going to a store where you can view model homes. You’ll be able to see your options, such as the number of bedrooms, layout, and customizable features. Depending on the retailer, you may even be able to apply for financing and arrange for delivery all in the same day.
Before signing on the dotted line, make sure you read the fine print, such as what warranties come with the home. You may be able to purchase both the land and home through a manufactured home community.
Who Should Get a Manufactured Home?
A manufactured home may be a good fit for a retiree or a first-time homebuyer who is looking for a more cost-effective housing solution than a condo or single-family home — especially if they own the land underneath them.
It also may be suited for those who want a new construction home and to be able to customize parts of the structure.
The Takeaway
A manufactured home may be a good choice for some buyers, and others may want to try to buy a condo, townhouse, or single-family home.
If you’re in the latter group or buying investment property, SoFi can help you get started by providing a rate quote with no obligation.
3 Tips
1. Traditionally, mortgage lenders like to see a 20% down payment. But some lenders, such as SoFi, allow home loan mortgages with as little as 3% down for qualifying first-time homebuyers.
2. Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.
3. When building a house or buying a non-traditional 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.
FAQ
What are the advantages of manufactured homes?
The main advantages of manufactured homes are the relative cost and the building standards they must meet.
Is a manufactured home considered real property?
A manufactured home is considered real property if you own both the land and the home and the structure is permanently attached to a foundation.
Can I get a loan to buy a manufactured house?
Yes, though the type usually depends on whether the home is considered real or personal property. Classification as personal property is almost certain to preclude conventional financing. A borrower need not own the land for an FHA Title I loan from an approved lender. The loan may be used to buy a manufactured home, a lot on which to place the home, or a manufactured home and lot in combination. There are maximum loan amounts and terms.
Are manufactured homes safe?
Manufactured homes built after mid-1976 abide by HUD standards, and most come with warranties.
Photo credit: iStock/clubfoto
SoFi Mortgages
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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.
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