Mobile homes can offer more flexibility than traditional homes and come at a much lower cost. However, that doesn’t mean they’re a small expense. Mobile homes often cost between $50,000 and $100,000, which is more than many people can pay out of pocket.
If you need help buying a mobile home, you’ll want to secure financing. Because mobile homes are not traditional real estate, financing one can be a challenge. Most lenders will not give you a mortgage to buy a mobile home, so you’ll likely 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 these three terms.
A mobile home is built at a factory before it is brought to a property for setup. It may or may not use metal tie-downs in place of a traditional foundation. However, this explanation can actually apply to manufactured homes as well. So, what’s the difference?
Whether or not a dwelling is considered to be a mobile home depends on when it was made. Homes built in a factory before June 15, 1976, are known as mobile homes. That is the date the National Manufactured Housing Construction and Safety Standards Act went into effect. The federal law required manufacturers to follow new safety standards designed to protect people who purchased mobile homes. Mobile homes built before this date did not have to comply with the safety standards.
Like mobile homes, manufactured homes are also built not on site, but at a separate building facility. The homes can be set up at their permanent location on blocks, metal piers or a permanent foundation. A factory-built home that was constructed on or after June 15, 1976, is considered a manufactured home. Manufactured homes must meet a number of safety standards outlined in the National Housing Construction and Safety Standards Act. Companies that construct these homes must get their designs approved by a Design Approval Primary Inspection Agency, approved by HUD, whose job it is to make sure that the plans are safe for consumers and comply with the law.
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 often include crawlspaces and basements and use a traditional foundation.
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. A local contractor will typically manage the process of joining these multiple pieces together to complete the construction of the home.
Factors to consider when buying a mobile home
If you’re thinking about buying a mobile home, you’ll want to consider a few factors to make sure you select the option that is best for you, including 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 figure out where you’re going to install your mobile home. The location you choose will have a big impact on the rest of the process.
One option is to install the home on a piece of land that you already own. You may also opt to buy the land where your mobile home will be located. Just make sure that zoning regulations allow for the installation of mobile homes on the lot that you own or wish to purchase. Also, you should confirm that the lot is suitable for mobile homes and that the local utilities are equipped to connect a mobile home.
Another option you can consider is renting a plot of land in a mobile home community. This requires less money upfront but adds a monthly lot rent bill to your housing costs. Check with the manager of the community for restrictions on home features and size and to find available plots.
Mobile homes come in a variety of sizes, so you’ll need to decide how large you want your mobile home to be in advance. Larger homes are more expensive and require larger lots. As a result, you’ll most likely 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, and double-wide homes are double that width. Both are usually about 70 feet long.
New or used
Unlike traditional real estate, mobile homes tend to lose value over time. That means you can get a discount if you buy a used mobile home. The trade-off is that used mobile homes will often have signs of age unless they’ve been maintained very well.
You’ll also want to do some upfront research about the site where you plan to place the mobile home. Some locations 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 figure 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 to consider 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 doesn’t own or is not purchasing the land where the mobile home will be located. If the borrower doesn’t own (or isn’t buying) the land, they 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 and 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.
Some lenders offer Fannie Mae mortgages to borrowers who wish to finance a manufactured home through the MH Advantage program. To qualify, you will need to satisfy a number of eligibility criteria, including owning the land on which you intend to place the home. You will also need to agree to title the land you loan with the home as collateral for the financing you receive.
The loans come with 30-year financing, and you may be able to secure them with a down payment as low as 3 percent. As an added benefit, interest rates on MH Advantage mortgages tend to be lower than those of most traditional loans for manufactured homes.
Borrowers who prefer conventional financing may also be able to obtain it for a manufactured home through the Freddie Mac Home Possible mortgage program. To qualify for financing, the manufactured home must be titled as real property. Generally, this means that the manufactured home has to be permanently affixed to the land on which it sits. The loan must be secured by the home and the land on which it is located.
Qualified borrowers may be able to choose between fixed-rate mortgages (15, 20 and 30 years) along with 7/1 and 10/1 adjustable rate mortgages. You may be able to secure a loan with as little as 5 percent down and, in some cases, you can use gift or grant money to help cover your down payment.
A chattel loan is a special type of personal property loan that can be used to purchase a mobile home. These loans are designed for financing expensive vehicles like planes, boats, mobile homes or farm equipment. Even if you don’t own the land on which your home will be located, you might be able to secure financing with a chattel loan. As a result, they are a popular loan option for buyers who plan to rent a lot in a manufactured home community.
Some lenders offer chattel loans for manufactured home purchases that are insured by the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA) and the Rural Housing Services (RHS) through the U.S. Department of Agriculture. Yet although you may be able to find lenders that offer both chattel loans and traditional mortgages, the two types of loans differ in a few ways.
One important difference between the two types of loan is the down payment requirement. Chattel loan down payments can be as low as 5 percent, which is much less than the 20 percent sometimes required for a traditional mortgage. However, chattel loans typically have higher interest rates — 1 to 5 percentage points higher on average than traditional mortgage rates.
Chattel loans have shorter terms than traditional mortgages do, which can translate to higher monthly payments but could also help you to pay off your debt sooner. On the plus side, the closing process is usually faster and less restrictive with chattel loans than the closing process you would experience with a traditional mortgage.
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 might be a good way to borrow the money that you need.
Steps to finance a mobile home
There are a few steps you should follow before you choose your mobile home financing.
- Check your credit reports. Whenever you apply for any type of financing, a lender will consider your credit as part of your loan application. Clean credit histories and solid credit scores make it easier to secure loans and receive better rates and terms from lenders. If you find mistakes when you check your credit reports, you can dispute them with the appropriate credit bureau — Experian, TransUnion or Equifax.
- 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 may be eligible to receive. For example, if you want to buy a double-wide manufactured 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, conventional, chattel, personal) that you’ll use and compare different lenders’ offerings. Rates and fees can vary widely between lenders, so take the time to shop around. 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 found the best financing deal for your situation, submit your loan application. Make sure you complete the form 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, your down payment size, the type of home and whether you’re buying land in addition to the 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 at least a 750 or higher to qualify for the best rates available.
|Type of loan||Typical rates||Typical minimum credit score||Typical terms|
|FHA||3.40%||500||15 – 30 years|
|Fannie Mae||Varies||620||Up to 30 years|
|Freddie Mac||Varies||720||10 – 30 years|
|Chattel||7.75% – 10.5%||575||15 – 20 years|
|Personal||5% – 36%||600||1 – 7 years|