Getting a loan on a manufactured home
About 8 percent of the U.S. population lives in manufactured homes.
Almost one in five new homes sold last year were made in factories
and trucked to their final site.
And more than 90 percent of new manufactured homes were bought
with borrowed money.
Many buyers must finance their manufactured homes
as private property, like a boat. But in some states and under some
conditions, manufactured homes can be financed with conventional
Most buyers finance their manufactured homes through
the dealer that sells it. That's often the best choice, but not
always the only one. You can shop around for a loan, especially
if you're buying a manufactured home to place on your own land or
on a lot with a long-term lease.
Manufactured homes commonly are called "mobile
homes," but they're not so mobile. When put into place, they
are wheelless. Many have asphalt-shingle roofs. They are built upon
foundations -- sometimes on concrete blocks, sometimes on concrete
pads or on masonry. A few manufactured homes even have basements,
with the basement entrance outdoors. From the outside, it can be
hard to tell the difference between a double-wide manufactured home
and a regular single-family house (called a "stick-built home"
by folks in the manufactured-home industry)
Unfortunately for buyers, some taxing authorities see big differences
between manufactured homes and stick-built homes. You can't get
a low-interest mortgage on a manufactured home if your state taxes
it as personal property (like a boat) instead of as real estate
(like a regular house).
If a home is titled and taxed as personal property,
the interest rate on the loan is higher than on a home that is titled
and taxed as real estate. Last year, about 75 percent of newly manufactured
homes were titled as personal property.
States gradually are adopting the view that manufactured
homes are real estate and not personal property. They are prodded
in part by Freddie Mac's entry into the manufactured home lending
market. Freddie Mac, a government-sponsored corporation, buys mortgages,
bundles them together and sells the resulting mortgage-backed securities
to institutional investors. A few years ago, Freddie Mac began buying
loans on manufactured homes that are titled as real estate. That
created a conventional mortgage market for the homes, with rates
comparable to those for stick-built homes.
"For years, you could finance it for 12 or 15 years at a rate
that was 400 to 600 basis points (4 to 6 percentage points) higher
than real-estate loans," says Mike Murphy, spokesman for Cavalier
Homes. The Alabama-based maker of homes has a related lending business,
Then Freddie Mac entered the market. Now, "If
you want to buy a double-wide and you own your own property, you
can probably get a 6 percent, 30-year mortgage if you look and you
make a reasonable down payment," Murphy says.
The competitive mortgage that Murphy refers to would
be available only where the state considers a manufactured home
to be real estate. If the home is considered personal property,
the interest rate is higher -- by 2 or 3 or more percentage points.
People with mediocre credit and making low down payments can expect
to pay double-digit interest rates, especially if the home is titled
as personal property.
Freddie Mac's guidelines require the manufactured
home to be placed on the owner's land or on a lot with a lease that
extends at least five years past the loan's last scheduled payment.
In other words, if you want to get a Freddie Mac-backed loan for
a dwelling in a mobile-home park, the lease has to be for at least
35 years if you get a 30-year loan. You also could get a shorter-term
loan -- for 15 or 20 years, for example -- with a lease extending
at least five years past the loan term.
When looking for a loan, you can ask a mortgage broker
("Brokers are in vogue right now for manufactured homes,"
says a broker in Atlanta) or ask lenders if they do business with
Freddie Mac. But you should first ask about the dealer's loan options
because the dealer is likely to know where to find the money. A
lot of lenders have pulled out of the market or have scaled back
their lending in recent years in reaction to rising numbers of delinquent
loans on manufactured homes.
One such lender is Manu-Fi Acceptance Corp., which
now lends only in Indiana and Arizona. Lending standards for manufactured
homes have become much higher in recent years, says Greg McCrory,
"Not too far in the past, people said, 'I can't
afford a house, so I'll get a mobile home,'" McCrory says.
"Now, it's, 'I can't get a mobile home, so I'll get a house.'"