When it comes to buying a first home, many people only think about traditional single-family homes. However, mobile or manufactured homes offer an alternative that, in some cases, actually provides more space and amenities for the listing price. But how do you buy a mobile home? Do you need to have land? Will you be able to find financing for your mobile home purchase? Here we take a deep dive into the world of mobile homes and how they can offer a great alternative when purchasing your first home.
- Mobile homes include manufactured, mobile, modular, and park homes.
- Financing options include conventional and government-backed loans, chattel mortgage, and personal loans.
- When purchasing a mobile home, consider whether the home will be placed in a park or on owned land, the age of the home, financing options, and rules and regulations of the park.
What are mobile homes?
When considering a mobile home, chances are you hear multiple different terms, such as manufactured, mobile, modular, and even park homes. But what do all these terms really mean and is there a difference?
Mobile homes are constructed in a factory and were originally considered to be homes that were able to move and change location. Any mobile home built before June 15th, 1976, is considered a mobile home. These homes may or may not be permanently fixed to their foundation and were made to be easily moved. However, in 1976, the U.S. Department of Housing and Urban Development (HUD) created the National Manufactures Housing Construction and Safety Standards Act which placed new restrictions on how mobile homes were made and placed.
Manufactured homes are the same as mobile homes as they are built in a factory before delivery. However, because of the National Manufactures Housing Construction and Safety Standards Act, these homes are built with the intention of immediately being placed on blocks, metal piers, or a permanent foundation and becoming a permanent home structure. These homes must also meet local building standards and all designs are pre-approved by a HUD-approved Design Approval Primary Inspection Agency in order to meet safety requirements.
Modular homes are similar to manufactured homes, as they are still built in a factory and delivered to a specific location. However, modular homes are often placed on a traditional foundation that can include a more traditional crawlspace or basement.
Park homes are different not so much in their building construction but in the land that the home sits on. Manufactured homes placed in a manufactured park are permanent homes in a park-like residential setting. When you purchase the manufactured home, you are only purchasing the home. The land is owned by the park, and you typically pay a monthly land rental fee.
Financing mobile homes
Years ago, financing a mobile home left you with few options. However, as the manufactured home market began to boom, financing options increased and, in many cases, the same financing options available for traditional single-family homes are now available for manufactured homes. When financing a manufactured home, you will have some additional requirements that pertain to the home and the land you are financing.
Conventional financing is available for most manufactured homes, with some conditions. For example, to qualify for a conventional mortgage, the manufactured home must be at least 400 square feet and placed on a permanent foundation. In addition, the home must be built after the 1976 safety standards.
Similar to conventional mortgages, many different programs exist through Freddie Mac, Fannie Mae, FHA, VA, and USDA that offer mortgages on manufactured homes, but they require the same conditions. The home must be built after 1976 and must be permanently fixed on a foundation. This even includes park homes where you are not purchasing the land to which the home is secured. However, these loans do come with specific maximum loan amounts, and terms which are typically shorter than conventional loans. If you are purchasing the land for the home, the land amount cannot exceed a certain percentage of the total financed amount. In addition, the home must be in its original setting or placed on a foundation for the first time, straight from the factory.
A chattel loan is a special type of personal property loan that allows you to purchase the home as personal property and not real estate. These loans are common for things like manufactured homes, farm equipment, boats, and planes. They work by using the property as collateral, guaranteeing the loan. These loans have higher interest rates and shorter loan terms than other options.
Because mobile homes tend to be much cheaper than traditional homes, purchasing a home is possible through a personal loan. However, keep in mind that these types of loans often have higher interest rates.
Purchasing mobile homes
When thinking about purchasing a mobile home, there are many things to consider. Will the home be placed in a park setting? Will you be purchasing land to place the home on? Are you buying the home newly manufactured or purchasing an older home already on a foundation? The buying process for a manufactured home is very different than that of a traditional single-family home.
How to buy a mobile home in a park
If you are considering a mobile home in a park setting, there are a few things to consider. In most cases, you will be leasing the land the home is on and the park is likely to have certain rules and regulations when it comes to what is allowed in the park. This can mean everything from pets to how you landscape the yard. Once you establish what the rules are and what the leasing arrangements will be, then you need to consider when the home was built and what type of financing will be available. Other things to consider include:
- Is there a homeowner’s association fee (HOA)?
- What are the land lease terms and how long are they for? (Many financing programs require at least a 3-year term)
- Do they have land spaces for a new mobile home placement?
How to buy a mobile home for private land
If you are looking to place a mobile home on private property, then there are a few things to consider. Do you already own the land? If you do, can you acquire the necessary permits to place a manufactured home on the property and can you get utilities to the home? If you do not own property yet and want to bundle it into one loan, does the cost of the property fall within the allowed percentage in the loan terms? Oftentimes, a manufactured home dealer will help walk you through the steps of home placement, finding a property, and ensuring that it all meets loan requirements.
How to purchase a mobile home with bad credit
If your credit is less than perfect, buying a mobile home can still be an option. In fact, FHA home loans for manufactured homes work well for those with less than perfect credit and often little to no money down.
How much does a mobile home cost?
The U.S. Census Bureau reports that the average manufactured home price in 2021 was $111,900. However, these prices can go up or down depending on the type of manufactured home you choose, such as a single-wide or a double-wide, and the amenities you choose in your home. Now, compared to the national median home sales price of $346,900, this is a lot cheaper. Keep in mind, however, that there are additional costs with a manufactured home. This is strictly the price of the home and does not include the land, be it purchasing or leasing in a park.
Considerations before buying a mobile home
Before you jump onto the mobile home bandwagon, there are some things to consider. It is a good idea to do some research into different mobile home manufacturers and what home styles and amenities they have to offer. In most cases, mobile homes come in three basic sizes: single-wide, double-wide, and triple-wide. These different sizes come in a wide range of floor plans and can accommodate families of all sizes.
During the purchasing process, work with the dealer and your lender to ensure that you are covering all the potential costs in your financing. This can include the transportation and set-up of your home, the connection to utilities, and other additional costs.
Finding the perfect mobile home for you
Mobile and manufactured homes offer a unique alternative to home buyers looking to purchase a home that offers more space for the price. However, the home buying process is slightly different and can be intimidating and confusing. At Hero Home Programs, we are committed to helping home buyers secure their homes with the best financing options available. To learn how our team can help you find and finance the perfect mobile home, schedule a call with us today.