Manufactured homes, alternatively referred to as “prefab” or prefabricated homes, are constructed within factory settings. In contrast to conventional homes that are built on-site with a permanent foundation, manufactured homes are assembled on a temporary chassis and subsequently transported to the designated location for installation.
Before June 15, 1976, prebuilt homes were commonly referred to as mobile homes. However, following that date, all manufactured homes were required to adhere to the standards established by the U.S. Department of Housing and Urban Development (HUD). Considering the exorbitant cost of real estate, contemporary manufactured homes present an opportunity for individuals who have been excluded from the traditional housing market to achieve homeownership.
Throughout history, manufactured homes have served as a cost-effective alternative to conventional and stick-built homes, offering buyers a more affordable housing option.
Due to their relatively lower price, manufactured homes are particularly suitable for first-time buyers or individuals seeking lower monthly loan payments. While manufactured homes are available for purchase to anyone, certain programs impose criteria regarding loan eligibility, borrowing limits, and location restrictions. These factors may vary and can influence the qualification process for prospective buyers.
For instance, a Title II FHA manufactured home loan is exclusively accessible for a permanent primary residence constructed after June 15, 1976. The property is required to have a minimum size of 400 square feet, and the loan must encompass both the property and the land on which it is situated. Similarly, VA and USDA manufactured home loans will require either owning the land where the home is located or applying for a loan that covers both the land and the property.
Approximately 27% of manufactured homes are situated in designated communities commonly referred to as “trailer parks.” Nonetheless, manufactured homes can be purchased in rural, suburban, and urban areas throughout the country. The most thriving markets for manufactured home sales are observed in North Carolina, Florida, and Texas. However, in terms of the proportion of manufactured home sales compared to overall single-family home sales, Mississippi, West Virginia, and Kentucky lead the list of states with the highest sales of manufactured homes.
Most traditional lenders do not provide financing options for manufactured homes, and those that do often impose restrictions on eligible properties. Certain manufactured home lenders limit financing to homes constructed on a permanent foundation, excluding mobile homes. Additionally, some lenders only offer manufactured home loans for properties that are less than 15 years old.
The cost of a manufactured home is influenced by several factors, such as its size, age, and location. The price tag for double-wide manufactured homes is approximately twice that of single-wide homes. Homes situated in urban and suburban areas typically come with a higher cost compared to those in rural areas. Furthermore, newer homes tend to be more expensive than older ones. Obtaining a manufactured home mortgage that includes both the property and the surrounding land will understandably result in a higher loan amount compared to a loan solely covering the home
In 2020, the average cost of a manufactured home was $82,000, with single-wide homes averaging $57,300 ($52.81 per square foot) and double-wide homes averaging $108,500 ($61.64 per square foot). However, the subsequent two years following the Covid pandemic witnessed a significant surge in the sale of mobile and manufactured homes. During this period, the average price of a manufactured home increased by nearly 50%, reaching $123,000.
Despite variations in prices, manufactured homes generally remain more affordable than traditional and stick-built homes. One of the key advantages of manufactured homes is their construction in factory settings, eliminating concerns regarding weather delays and minimizing the risks of theft or vandalism.
Furthermore, the use of factory-line assembly for manufacturing homes enables them to be built to scale, resulting in reduced costs of materials and labor. Additionally, manufactured homes typically have lower property taxes due to their smaller size and assessed value.
Unlike traditional homes, where the value generally increases over time, manufactured homes have the potential to either appreciate or depreciate based on factors such as age, location, and maintenance. Well-maintained, newer homes often experience appreciation at a similar or even faster rate compared to traditional homes. Conversely, older and poorly maintained manufactured homes may experience depreciation over the years. This is particularly applicable to older manufactured homes that have been relocated from their original installation site or mobile homes purchased as personal property instead of permanent real estate.
When considering the purchase of a manufactured home, the key factor that determines its merit as a worthwhile investment is the value it offers. Manufactured homes have a comparatively lower cost per square foot, often amounting to a 50% reduction compared to traditional or stick-built homes.
On one hand, newer manufactured homes align with the same energy efficiency and safety standards as their traditional counterparts, while also providing an extensive array of amenities and upgrade options. On the other hand, older homes tend to have a lesser ability to retain their value compared to newer homes and may not meet contemporary energy efficiency or safety standards. In the case of owning a manufactured home while renting the land it occupies, your monthly rental payments are susceptible to the discretionary decisions of your landlord.
Additionally, it is worth noting that the interest rates on loans for manufactured homes are generally higher when compared to rates for traditional homes. However, despite the downsides, buying a manufactured home offers individuals the chance to generate wealth, build equity, and possess property to be passed on to loved ones.
Searching for a suitable loan for a manufactured home has become increasingly convenient. Numerous retailers specializing in new and pre-owned manufactured homes now provide financing options for both the property and the accompanying land. online aggregators exist to assist you in comparing quotes from multiple lenders, allowing you to determine your eligibility for various home loans, such as conventional, USDA, VA, or FHA loans.
Personal loan providers and local credit unions offer alternative financing options for older or less expensive properties that do not meet the criteria for a conventional or government-backed mortgage.
Conventional manufactured home loans operate in a similar manner to traditional home loans. alternative financing options that can be explored when the interest rates for these loans are higher compared to conventional mortgages. Chattel loans are tailored to individuals who wish to buy a home while renting the lot where the home sits. These loans generally come with higher interest rates but often have shorter terms, enabling borrowers to repay their debt at an accelerated pace. It is also possible to purchase a manufactured home using a personal loan, which grants financing for the home without requiring collateral and typically involves less paperwork.
Before applying for a manufactured home loan, it is better to ensure that all your documents are organized and in order. It is advisable to review your credit reports prior to submitting your application and address any inaccuracies or errors through the dispute process, aiming to enhance your credit score.
Ensure that you have prepared copies of the listing sheet and title for the property, along with the title for the land where your home will be situated or the park lease agreement if you’re renting the land. Gather proof of income, tax returns, homeowners insurance, and any other financial resources that you intend to utilize for a down payment.
