Mobile homes can offer more flexibility than traditional homes and come at a much lower cost, but that doesn’t mean they’re a small expense. Mobile homes can cost between $50,000 and $100,000, which is more than many people can pay out of pocket.
If you need some help to buy a mobile home, you’ll want to secure financing. Because mobile homes are not traditional real estate, most lenders will not give you a mortgage to buy a mobile home. You’ll have to use a different type of loan to buy your new home.
What’s the difference between mobile, modular and manufactured homes?
You’ll often hear the terms mobile, modular and manufactured used when discussing similar types of homes. While they are related, there are important differences between them.
Mobile home vs. manufactured home
Mobile homes and manufactured homes share a lot of features. In fact, the primary distinction between the two is when they were manufactured. Homes built before June 15, 1976, are mobile homes. Homes built on or after that date are manufactured homes. These days the terms are mostly used interchangeably.
Beyond that, there is little difference. Each is usually built at a factory before it is brought to a property for setup, and may or may not use metal tie-downs in place of a traditional foundation.
Like mobile and manufactured homes, modular homes are built in a factory and shipped to the land where they will be set up. What sets them apart is that modular homes are more similar to traditional homes. They include crawlspaces and basements and use a traditional foundation. This makes them look similar to traditionally built homes.
Modular homes can also be delivered in two or more pieces that are then put together in the desired arrangement. This feature is where they get their modular name.
Factors to consider when buying a mobile home
When you’re thinking about buying a mobile home, you’ll want to consider a few factors to make sure you choose the right home. Those factors include location, size and whether to buy a new or used mobile home.
Just like traditional homes, mobile homes are all about location. Before you think about anything else, you’ll want to think about where you’re going to install your mobile home, as that will affect almost everything else.
One option is to install the home on a piece of land that you already own or to buy land to put your mobile home on. Just make sure that zoning regulations allow for the installation of mobile homes on the lot that you own. Also, confirm that the lot is suitable for mobile homes and that the local utilities are equipped to connect a mobile home.
The other option is to rent a plot in a mobile home community. This requires less money upfront but adds a monthly rent bill to your housing costs. Check with the manager of the community for restrictions on home features size and to find available plots.
Mobile homes come in a variety of sizes, so you’ll have to decide how large you want your mobile home to be. Larger homes will be more expensive and require larger lots, so you’ll need to borrow more if you want a larger home.
Mobile homes are usually classified by their width. You may see the terms single-wide and double-wide used. Single-wide homes are slightly under 15 feet wide. Double-wide homes are double that width. Both are usually about 70 feet long.
New or used
Mobile homes tend to lose value over time. Contrast that with traditional real estate, which often gains value over time. That means you can get a discount if you buy a used mobile home, but used mobile homes will have signs of age unless they’ve been maintained very well.
You’ll also want to check with the site you’re going to place the mobile home on. Some won’t allow the placement of homes that were produced before a specific date, which limits your options.
Ways to finance a mobile home
Once you’ve figured out the features of the mobile home that you want to buy and where you’re going to put it, it’s time to figure out how to finance it. There are a few options if you need to borrow money to buy your mobile home.
The Department of Housing and Urban Development (HUD) offers loan programs for mobile homes through the Federal Housing Administration (FHA) loan program.
Lenders can offer Title I mobile home loans even if the buyer is not purchasing the land they’ll place their mobile home on. Instead, the borrower must provide a signed lease for a mobile home plot with an initial term of at least three years.
The loan program has other requirements relating to the terms of the loan.
Maximum loan amount:
- Manufactured home only: $69,678.
- Manufactured home lot: $23,226.
- Manufactured home & lot: $92,904.
Maximum loan term
- 20 years for a loan on a manufactured home or on a single-section manufactured home and lot.
- 15 years for a manufactured home lot loan.
- 25 years for a loan on a multi-section manufactured home and lot.
A chattel loan is a special type of personal property loan that can be used to purchase a mobile home. They’re designed for financing expensive vehicles like planes, boats, mobile homes or farm equipment.
Chattel loans differ from traditional mortgages in a few ways.
One important difference is the down payment. Chattel loan down payments can be as low as 5 percent, which is much less than the 20 percent required for a traditional mortgage. However, chattel loans have higher interest rates: often 4 percent or 5 percent higher than mortgage rates. Finally, chattel loans have shorter terms than traditional mortgages do.
Mobile homes are far cheaper than traditional homes, so you may be able to finance your purchase through a personal loan rather than a specialized loan.
Personal loans are flexible loans that you can use for almost any purpose. They have higher interest rates than other types of loans, such as mortgages or auto loans, but you don’t have to provide any collateral and the application process tends to be shorter and involve less paperwork.
Personal lenders usually offer maximum loans of $25,000 to $50,000, though some lenders will let you borrow $100,000 or more. If you see a lender offering a personal loan large enough for you to finance a mobile home, it can be a good way to borrow the money that you need.
Steps to finance a mobile home
When you’re planning to buy a mobile home, there are a few steps you should follow.
- Decide whether you want to buy land and a mobile home or just a mobile home. If you plan to rent a plot for your home, you’ll be eligible for fewer loans than if you plan to purchase the land the home will be placed on.
- Figure out the specifics of the home that you want to purchase. This will affect the loans you can apply for. For example, if you want to buy a double-wide home that costs $100,000 or more, you won’t be eligible for an FHA loan.
- Start looking for financing options. Choose the type of loan (FHA, chattel, personal) that you’ll use and compare different lenders’ offerings. Try to find a loan that has low fees and low interest rates so you can spend as little as possible over the life of the loan.
- Once you’ve chosen a lender, submit your application. Make sure you fill out the application accurately and have a suitable down payment to give yourself the best chance of qualifying for the loan.
Current interest rates
As with any loan, your loan’s interest rate will vary with a number of factors. Your credit score, down payment, the type of home that you’re buying, and whether you’re buying just the mobile home, or land and a mobile home, will affect the amount that you pay.
To get a good interest rate, you’ll want to make sure that your credit score is at least 700. You’ll need a 750 or higher to qualify for the best rates.
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