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  Dear
Steve,
I am thinking about buying a manufactured home and a lot. Can I
use traditional mortgage financing? Do manufactured homes hold their
value? Are they put together well? How are they different from modular
homes?
-- W.A.
 Dear
W.A.,
For clarification's sake, "manufactured homes" are
produced entirely at the factory under HUD design and construction
codes, with some minor modifications permitted during on-site completion.
Once referred to more commonly as mobile homes, they have gotten
increasingly sophisticated over the years with a wide variety of
floor plans, dimensions and amenities.
What's more, it's the fastest-growing type of housing,
according to the U.S. Census Bureau, which says about 8 percent of
Americans live in them.
"Modular," "panelized" and "pre-cut"
homes, on the other hand, are also factory built but are assembled
on-site, and fall under the auspices of building codes in the municipality
or jurisdiction where the home will be located.
Many traditional lenders shy away from manufactured
homes, so you may find yourself taking out a personal property "chattel"
loan -- rather than a real property loan -- from one of the handful
of major lenders that cater to the manufactured home market.
Because manufactured homes usually aren't considered
real property, the legal protections afforded their owners aren't
as comprehensive as they are for site-built owners. For example,
you wouldn't fall under the protections of the federal Real Estate
Settlement Procedures Act that requires good-faith estimates of
costs by the seller. I say that because there are unsavory operators
in the business -- as there are in other businesses -- who are known
for changing conditions of the loan at closing. Contact the Better
Business Bureau for a report on the company you're dealing with,
and make sure all the terms promised you are the same ones you see
at closing.
Also, realize that your manufactured home may be whisked
away quickly if you default on your loan, unlike the relatively
slow foreclosure process applying to site-built homes.
You also need to determine where your manufactured
home will be welcome. While the majority of communities accommodate
them, some don't. So before you buy the land, be sure to research
your local ordinances, as well as the restrictive covenants and
deed restrictions of your prospective neighborhood. And make sure
your manufactured home is going atop a permanent foundation. Otherwise,
potential buyers of your home in the future may have a tough time
getting financing.
An AARP survey a few years ago found that about three-fourths
of manufactured homeowners reported at least one problem with the
construction, installation or appliances of their new manufactured
homes, with more than half reporting multiple problems. Most common
were issues with interior finish and fit, plumbing, leaks in doors
or windows and construction problems such as cracks or separation
of walls. So make sure your warranty covers these areas and that
the dealer has a history of helping to resolve warranty problems.
Ask very pointed questions before agreeing to a deal.
And unlike their site-built cousins, manufactured
homes can tend to decrease in value if they are not ideally situated
and immaculately maintained. The shortage of traditional financing
for used manufactured homes often reduces demand for resale. Of
course, this can vary greatly according to the desirability of your
market. Manufactured homes in high-growth or resort areas can hold
their values quite well.
As an FYI, some folks end up making higher payments
on their manufactured homes and lots than they would on a traditional
home property, so you might want to explore financing options for
an actual site-built house before going the manufactured route.
Good luck.
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