The popularity of manufactured homes, or mobile homes, is on the rise. Currently, an estimated 20 million Americans live in a manufactured home. For those looking to get the most for their money, a manufactured home could be the answer. Manufactured homes can cost up to 35 percent less than a comparable site-built home on a cost-per-foot basis. Manufactured homeowners receive all the perks and amenities that come with site-built homes, but for a fraction of the cost. But it’s important to do your homework and know your financing options when buying a manufactured home.
Difference between Manufactured Home and Site-Built Home
A manufactured home is built in a factory and a site-built home is built on the site, or land, of the home. Manufactured homes must meet the federal Manufactured Home Construction and Safety Standards (or HUD Code) and site-built homes must meet the guidelines set by the local or state building codes. Before the introduction of the HUD Code in 1976, manufactured homes were better known as “mobile homes.” While the terms are interchangeable, a home that follows the HUD Code is more often referred to as a manufactured home simply because the quality is far more superior with the higher building standards set in place.
How to Finance a Manufactured Home
Financing a manufactured home is similar to financing a site-built home. You must have a down payment, you’ll receive an interest rate based on the market and your credit score, and you’ll have a term that ranges from 15 to 30 years.
3 Financing Options When Buying a Manufactured Home
A Traditional Mortgage
Perhaps one of the best ways to finance your manufactured home is through a traditional mortgage. Advantages of going this route include lower interest rates, better terms and qualifying for tax deductions. In order to finance your manufactured home with a traditional mortgage, the home must sit permanently on land the homeowner owns. Your home must be classified as “real property” in order to qualify.
An FHA mortgage
FHA loans exist for those looking to purchase a manufactured home. However, in order to qualify, the property must be on land that the buyer owns, not leases. According to the FHA, the mortgage must cover the unit and the site and the loan term cannot exceed 30 years. An FHA mortgage differs from a traditional mortgage in that the down payment requirements are lower (3.5 percent minimum), credit standards are looser, and the paperwork is lengthier. Keep in mind that with an FHA loan, like that of a traditional mortgage, the home must be properly secured to the land that it sits on.
A Chattel Mortgage
Finally, for those that lease the land that the home will sit on, their only option for financing is with a chattel mortgage. A chattel mortgage comes with higher interest rates and shorter terms, which increases the monthly payment. Those with good credit may be able to get rates in the high 6-percents. But those with poor credit should expect to pay a 10 percent or more interest rate. If the buyer doesn’t own the land under the home, the home is considered “personal property” as opposed to “real property.”
If you plan on staying in the home long-term, it could be in your best interest to purchase the land with the home. This way you can qualify for better interest rates and terms. Many manufactured homeowners are not aware that they can qualify for a traditional mortgage or FHA loan. Before signing any loan agreement, research your options considerably and make sure you fully understand the terms of the loan.
Related: The Brilliance of Making Additional Principal Payments.
Thank you for reading Mobile Home Living!
Author Bio: Sarah Brooks is a personal finance writer and editor currently living in Charlotte, NC. She is the Content Editor for LendingTree. And she holds a B.S. in Finance from Arizona State University, plus has been featured on a variety of personal finance websites and blogs. In her free time, she enjoys spending time with her husband and daughters, baking, and being outdoors.
I have called a bunch of local lenders and even ones who do FHA loans – I have not found one that will do a traditional loan on a mobile home, no matter the foundation type. Is there some resources that might list from State to State lenders? I am looking WV. Thank you.
Hi Barb,
WV is a tough one (I’m from WV!). If you are trying to buy a ‘mobile home’ that was built before 1976 you will probably only be able to get a personal loan regardless of the installation. If you are trying to buy a new manufactured home you’ll probably need to secure it with land or go through a dealer (21st century, etc). I know mobile home/manufactured home is used interchangeably but I want to be thorough on my advice.
WV has a weird housing market. The state wasn’t hit by the housing bubble as much as other states so the banks and the market held fairly steady.
Best of luck!
What exactly does “permanently installed on the land” mean?
Hi Donna,
Permanently installed simply means the proper tie downs and straps have been used on the home based on your location and wind zone. It has very little to do with the skirting or foundation (whether that be brick, cinder block or vinyl)- just the tie downs and strapping that secures the chassis to the ground.
A “Land Contract” is another option for a manufactured home mortgage. The owner of the home holds the mortgage. You may need to come up with a good sized down-payment and the conditions may be limiting as to what you can do on the property. We are considering holding a mortgage for someone who wants to buy our home up North.
Thanks Beth! In WV, we usually refer to that as owner-financing though I’m sure there’s some legalities I know nothing about…Hope you’re loving your new life in Miami!