Financing a manufactured home
Getting a loan for a manufactured home
- A manufactured home must meet several criteria to be eligible for a government-insured mortgage.
- Manufactured home retailers can arrange financing but it is wise to compare lenders first.
- Chattel loans, or personal property loans, are another financing option.
Manufactured homes account for 6 percent of all occupied housing in the United States, according to the Consumer Financial Protection Bureau (CFPB). Outside of metropolitan areas, such housing is even more prevalent, accounting for 14 percent of occupied homes.
These homes also are relatively inexpensive to make and can be less than half the cost of site-built homes on a per-square-foot basis. This makes manufactured homes a key piece of many affordable-housing plans.
Figuring out exactly what constitutes a manufactured home — and how to finance it — can be tricky, however.
Defining a manufactured home
The terms "mobile home" and "manufactured home" are interchangeable, although many lenders now prefer to call them manufactured homes.
Manufactured homes are built and assembled at off-site factories before being transported to the site where the home will remain. After a manufactured home is transported, the wheels and axles are removed, and the house is permanently attached to a foundation.
The most common sizes of manufactured homes are single-wide, double-wide and triple-wide. The actual sizes may vary from manufacturer to manufacturer, but a single-wide is typically shipped as one section, a double-wide as two sections and a triple-wide as three sections.
Manufactured homes must be built to Manufactured Home Construction and Safety Standards, a code set by the U.S. Department of Housing and Urban Development (HUD). This code requires that homes be built on a permanent chassis. Each section of the home (for example, two if the home is a double-wide) must have a HUD certification label on its exterior.
Manufactured homes differ from prefabricated housing — also known as modular housing. Modular homes are built on an offsite location to the buyer's specifications — with the buyer perhaps choosing from a number of available plans. Prefabricated homes must be constructed to the same building-code standards as traditional houses built on-site.
According to HUD, the most common way buyers finance their manufactured home "is through a retail installment contract, available through your retailer." Many other lenders, however, will offer government-insured or conventional mortgages for this type of housing — and it is always best to check with several lenders before agreeing to financing from a retailer. Be aware, according to the CFPB, that interest rates are typically higher for manufactured-home mortgages than for loans on site-built homes.
Government-insured loans are available through a variety of agencies, including the Federal Housing Administration (FHA), the Department of Veterans Affairs and the U.S. Department of Agriculture. Each of these types of financing have certain requirements that must be met, including the following:
- Condition. The house must be acceptable and suitable to live in year-round.
- Age. The home must have been built after June 15, 1976.
- Foundation. The home must be attached to a permanent foundation and is not to be moved from its original location.
There are typically many other requirements that must be met for these programs, which can be explained in detail by prospective lenders that offer the programs.
Chattel loans are another option. Otherwise known as personal property loans, these often have lower origination costs and close more quickly than mortgages. Interest rates, however, may be significantly higher than on mortgages, and chattel loans may not have the same consumer protections as mortgages.
Just as with procuring a loan for a site-built home, or for any other large purchase, it is worthwhile to shop around for a manufactured-home loan, and to discuss all of your options with the lenders you consider. Depending on your exact situation, you may find that a government-insured loan program, a chattel loan or another type of financing is best for you.