Over the years, there has been a rise in population, and an increasing cost of living has been rising, causing an increase in rent and other essential services. These effects have created a demand for affordable housing. As a result, many new home owners looking for affordable housing have begun to consider buying a manufactured home.
Moreover, there has been an increase in access to loans and credit; hence more people can purchase assets and liabilities, including manufactured homes. These trends have increased the growth of the manufactured homes industry by a small but significant percentage. Today there are many options specifically designed to help buyers with manufactured home financing and these loans are far from the predatory practices we may have seen in the past. Today's lenders are more familiar with the concept of manufactured homes and understand that they are far from just a "trailer" or mobile home. As a result, the industry has developed manufactured home loans designed specifically for this niche of the housing market.
In this new era, manufactured homes have made progress in innovation, and there are emerging trends of new designs and size options. The era of simply being mobile homes in a trailer park are over!
Differences between Modular, Mobile and Manufactured Homes
All three types of homes are built in a factory setting and delivered to the home site. The main differences boil down to how they're constructed and where they can ultimately be placed. Additionally,
another critical difference is that while Manufactured Homes and Modular Homes are designed to be positioned on a perminant foundation the way a traditional site built home would be, a Mobile Home is by definition mobile and can be repositioned from one mobile home community to another if needed.
All three types can be considered factory built homes each has it's own unique strengths and weaknesses.
Modular Homes:
Modular homes are built in sections inside a climate-controlled environment. These sections are then transported to the build site and assembled by a certified contractor. Because modular construction takes place indoors, the building process is not weather dependent.
Manufactured Homes
Manufactured homes are also built completely inside a factory but differ from mobile homes in that they're built on a permanent chassis. This means that once the home is delivered to its forever home site, it cannot be moved.
While there are manufactured home communities, not all manufactured homes appear different than a comparably sized site-built home. This means that there's no stigma compared to owning traditional homes.
Mobile Homes
Mobile homes (also known as trailers) are built completely inside a factory. Once construction is complete, the home is then hauled to its forever home site on a flatbed truck. One of the benefits of a mobile home is that it can be moved if the owner decides to relocate to a different mobile home park.
While all three types of homes are factory-built, there are some distinct differences between them. It's important to do your research and figure out which type of home is right for you and your family before making any decisions.
How to Buy a Manufactured Home
Buying a manufactured home can be a good option for people who no longer want to pay rent and would want to settle in a place of their own. Once you have your manufactured home loan approved, the next step for most prospective buyers would be to look online at manufactured home retailer websites or visit with local companies to see what manufactured home development looks like in person.
When buying a manufactured home:
- Establish the size of the home you would like. It will inform your decision on how much money is required.
- If you have limited resources, evaluate the financing options available and decide on which one to exploit.
- Acquaint yourself with the housing and urban specification and follow the set guidelines for laying the foundation
- Make a down payment and sign the required documents.
- Finally, ensure that you ensure that you get both home and the loan insured.
Lot and Foundation for a Manufactured Home
When thinking about buying a manufactured home, first prepare the land where the home will be placed. The manufacturer needs a foundation to lay the home. Most manufacturers do not offer home with the land as a bundle but they can often recommend a real estate agent or real property broker who can help you identify a suitable piece of property. Consider buying a piece of land if the savings you have can make a land purchase. Homeowners who do not own land can choose to lease land.
When choosing or laying a foundation, ensure that the drainage system is fixed away from the building to avoid damage caused by overland flow and moisture. The foundation to use is dependent on the train of the land and the homeowner's preference.
The type of foundation the homeowner chooses also determines the space of land used. For a home to last long and be strong, you need to choose a good foundation. There are different foundations in the manufactured home industry.
Pier and beam foundation
In the pier and beam foundation, anchors are set into the ground. The straps are then connected to the anchors to make them firm. Anchors and straps prevent damage from strong winds. At times, the anchor and straps have stabilizer plates that prevent the top of the anchor from sinking when the house's weight is placed on them.
The pier and beam foundation is preferred because it is affordable, takes less time to install. It is suitable for areas with heavy flooding and frost.
Slab Foundation
Slab Foundation is popular and the most installed foundation. To begin setting a slab Foundation, concrete is spread on the ground a few inches from beneath the finish grade. Footers and layers of concrete blocks are then laid, and the internal pipes are fixed. Filler rocks are then added, and a final layer of concrete is added.
Slab foundations are preferred as they are easy to maintain and can be constructed within a homeowner's budget. That said, slab foundations may not always be the best option as they cannot protect the home from storms. They are also expensive to repair once they begin to chip.
Crawlspace Foundation
This type of foundation is slightly lifted above the ground. Footholds from concrete are made and later set to accommodate the weight of the house. Footings are mostly used to prevent the homes from sinking and settling deep in the ground. Each home has a unique design, and therefore crawlspaces are set depending on the home.
The crawlspace foundation incorporates the use of piers and a perimeter wall to provide solid support. The benefits of choosing this foundation include affordability, wind resistance, and stability.
Basement Foundation
This type of permanent foundation takes time to construct and is expensive. However, it is wind resistant and provides a large amount of extra space.
Cost of a Manufactured Home
Several factors will influence the cost of your manufactured home. Some things to think about when figuring out the cost of mobile home construction include:
Time Of Year Affects Ability To Assemble Homes:
During winter, for instance, it is cheaper to buy a manufactured home than in summer in the Western Region. In New York, a median home will cost $669,500 compared to $99,000 in West Virginia.
Location Of Your Lot And Position To Place Your Home:
The location determines site preparation cost, transport cost, permit fees, sales tax and land development tax. Dependent on taste and preference, the more customizations are done on the original design, the more exorbitant the price will be.
Size Of Your Home:
The size of your home will matter since the price per square foot is multiplied by your desired square footage to arrive at the final cost. The cost of a manufactured home ranges from $180,000 - $240,000. This living space is something that you need to take into consideration but also plan for other areas of the property as well when it comes to pricing a manufactured home by square feet.
Financing a Manufactured Home vs. Mortgage
Getting access to financing for some manufactured home types such as mobile homes and modular homes since some mortgage brokers will make the argument they sit on rented land and are movable. This makes them a higher risk and in the past, manufacturing quality was also an issue compared to a site built home that might last a century or longer. The risk associated with manufactured homes makes lenders charge very high-interest rates as personal property rather than real property. Traditional mortgages are long term relationships between you and the bank so even things like buying land vs placing your home on a leased lot in a manufactured home community will make a big difference in your ability to secure good loan terms from the bank.
Additionally, a manufactured home loan will be easier to secure if your house is placed on a permanent foundation.
However, luckily for prospective home owners, it can be easier to secure financing to make their manufactured home purchase because the size of loans for manufactured homes is considerably smaller than a traditional mortgage, essentially because you are not buying the land. For instance, a median size loan is $72,000 for a manufactured home while that of a single-family home is $199,000.
In either situation though, buyers will need to have their finances in order including a solid minimum credit score that makes them appealing to lenders.
Conventional financing of manufactured homes takes different approaches; however, the most common are chattel loans, personal loans, and the FHA Title loans program.
Additionally, military borrowers can finance manufactured homes with VA loans through lenders that are approved by Veterans Affairs.
Chattel Mortgage Loans
A chattel mortgage is a loan arrangement in which the movable personal item acts as the loan's collateral. In this case, the home behaves like security. In some cases, you might require to put down at least a 20% down payment, and the interest rates may be 1 to 5 percentage points higher than the standard mortgage.
Personal Loans
The use of personal loans is another way to finance manufactured homes. A personal loan is flexible and is used for nearly any purpose. The application process is faster with little paperwork, and usually, there is no need for any collateral. The lender has no control over your home since the home is not used to guarantee the loan.
FHA Loans
The Federal Housing Administration has insured these loans with relatively lower down payments, relaxed credit score demands, and low monthly mortgage insurance. However, the buyer must identify and approach the FHA-approved lender and work out the terms. There are two programs that a home buyer needs to consider, the FHA Title I or the FHA Title II loans.
The FHA Title I is a loan for personal property, and it is not a must to purchase the land on which the home sits. A down payment might be as low as 5%. Nonetheless, they will attract fixed and relatively higher interest rates than the standard mortgage.
The FHA Title II requires that the homeowner purchase the home and the land altogether as real property loans. The homebuyer is required to erect a permanent foundation system on the land. The loan has longer duration terms up to 30 years and as low as a 3.5% down payment.
Disadvantages of Owning a Manufactured Home
They are mostly located in mobile home parks. It implies that you have to pay the monthly rental space fee to property management. Also, since you must comply with the park rule, the management may decide to evict you, leaving you with no option but to sell or move your mobile home.
They are likely to be more prone to damage in the event of a natural disaster since they do not have permanent foundations. The temporal foundation makes mobile homes more susceptible to calamities, such as earthquakes and storms.
The home is personal property, and unlike real property that appreciates, manufactured housing will often depreciate. For the same reason, personal properties have higher interest rates and shorter terms of loans than a standard mortgage. This is not always true with newer manufactured homes but historically modular home and mobile home values depreciate quickly compared to site built homes on private land.
Mobile homes also have negative assumptions that low cost may mean lower quality, cheaper building methods, and materials. Since they solve limited capital to buy, the perception of inability to pay for repairs and routine maintenance crops up. In fact, the US Housing and Urban Development even has a specific "Office of Manufactured Housing Programs" to help protect the health and safety of those living in manufactured home properties. While this and other government housing programs referencing manufactured homes are doing so with a focus on cheaply built mobile homes, the industry is changing.
For instance, in California, once a manufactured home is placed on a permanent foundation it is taxed as real estate the same way site built homes are.
Organizations like the Manufactured Housing Institute are working hard to educate home owners and local government regulators as well as real estate agents on things like the factory building process that these homes go through as well as safety standards and other benefits of this unique home construction process.
Buying A Manufactured Home Is A Great Opportunity For Home Ownership
Manufactured homes have become popular and widely accepted over the past few decades and some concepts such as "Tiny Homes" have even become chic.
This new generation of manufactured housing is changing the definition of what the industry is all about. Instead of factory built homes being considered second-rate - today's have walk in closets, and quality electrical systems, plumbing, and quality as traditional real estate.
Manufactured homes are affordable and provide an opportunity for the homeowner to enjoy private space and create memories with family. It is a good escape from the demanding bills and can be easily customized to suit your preference.
