How To Buy A Mobile Home

With home prices increasing across the country, buyers are exploring more affordable pathways to homeownership through manufactured, mobile, and modular homes. These homes can offer a budget-friendly alternative without sacrificing comfort and functionality.

In this article we’ll go over the pros and cons of buying a manufactured home, mobile home, and modular home and explain the key features and characteristics of each. 

Understanding Mobile Vs. Manufactured Vs. Modular Homes

If you’re thinking of buying a manufactured, mobile, or modular home, an important first step is understanding what each term means.

Mobile Homes

Prior to 1976, the term mobile home typically referred to a prefabricated dwelling built on a chassis for mobility, lacking standardized construction and safety regulations. The phrase “mobile home” or “trailer” is an older term used as a catch-all term to describe homes that can be moved and/or aren’t attached to a foundation.

The distinction between mobile and manufactured homes was formalized when Congress enacted the National Manufactured Housing Construction and Safety Standards Act, giving authority to the Department of Housing and Urban Development (HUD) to set construction standards for manufactured homes. This legislation aimed to ensure the quality, safety, and affordability of manufactured homes.

Rocket Mortgage^® now offers financing for manufactured homes on permanent foundations. Rocket Mortgage doesn’t provide financing for true mobile homes (those built before June 15, 1976) or manufactured homes not on permanent foundations.

Buyers who want to purchase a true mobile home and borrow the funds to do so can use a chattel or personal loan.

• Chattel Loan - A chattel loan is a type of financing specifically designed for movable personal property, such as mobile homes not attached to land. Unlike traditional mortgages, chattel loans often come with higher interest rates and shorter terms, typically ranging from 15 to 20 years. The loan is secured by the mobile home itself, not the land it sits on, making it a suitable option for homes located in parks or on leased land.
• Personal Loan - A personal loan for purchasing a mobile home provides a lump sum of money that can be used to buy the home, typically without the need for collateral. Unlike secured loans, personal loans are based on your creditworthiness and income, often resulting in higher interest rates and shorter repayment terms. The application process is usually straightforward, with quick approval times, making it a convenient option for those who may not qualify for traditional mortgage or chattel loans.

Manufactured Homes

A manufactured home, according to HUD, is one that is built to meet the Manufactured Home Construction and Safety Standards in the HUD code. These homes are built in environmentally-controlled plants and then transported to their final destination on a permanent chassis.

Modular Homes

A modular home is another form of a prefab home. These homes have some key features in common with manufactured homes, including being built in environmentally-controlled plants. However, unlike manufactured homes, which are subject to the HUD Code, modular homes are subject to state and local building codes that apply to traditional homes.

Modular homes tend to be more expensive than manufactured homes. They cost an average of $100 – $200 per square foot, on top of the cost of land and any fees that apply.

What Is The Process Of Buying A Manufactured or Modular Home?

Mobile homes often rely on chattel or personal loans for financing, which are designed for movable property and typically have higher interest rates and shorter terms.

In contrast, modular and manufactured homes, when placed on permanent foundations, can qualify for traditional mortgages, offering lower interest rates and longer repayment periods.

The following outlines the process of buying a manufactured or modular home.

1. Review Your Credit History

Before starting the home buying process, it’s important to review your credit and ensure it is mortgage-ready. You should know your credit score, as well as the contents of your credit report. Even if you meet the minimum credit score requirements to buy a home, it’s important to know if there’s anything on your credit report that could prevent you from getting a loan.

You’ll need to meet your lender’s credit requirements to get a loan. However, the lower price of a mobile home can make homeownership more accessible to low- to moderate-income home buyers.

2. Decide If You Want To Buy Land And A Mobile Home

You’ll have a few different options. Just like when you’re building a traditional house, you can buy your own land to place your home on. If you’re looking for something move-in ready, search for existing homes on the market that meet your needs. There’s not necessarily one right answer when it comes to your home buying journey.

3. Pick The Type Of Mobile Home You Want

While the term mobile home usually refers to manufactured homes, it’s often used to refer to modular homes as well.

Modular homes are like manufactured homes in that they are both built indoors and delivered to the site. However, modular homes tend to cost more than manufactured homes because they have more customization options and higher quality standards. Modular homes also depreciate slower than manufactured homes, which means they can retain their value better over time.

4. Choose The Type Of Financing You Want

Once you’ve decided on the type of home you want to buy, it’s time to start thinking about financing.

If the home you’re interested in has been permanently affixed to real property for at least 12 months prior to application, there are several loan options, including conventional loans and government-backed loans like FHA loans, VA loans and USDA loans.

The right type of loan for your situation will depend on several factors, including your credit score, income and the amount of your down payment.

5. Submit Your Loan Application

When you’re ready to apply for a mortgage, you’ll need to submit financial information and supporting documents so your lender can determine your loan eligibility. Once you’ve gone through the underwriting process and gotten final approval, you close on your loan and officially become a homeowner.

Financing A Manufactured or Modular Home: At A Glance

When you’re planning to prefabricated home, there are several loan options available to you. The table below outlines your loan options.

The Federal Housing Administration (FHA) has a loan program for buying just a manufactured home, just a lot or purchasing a lot with the home. Specialized lenders of this financing. Rocket Mortgage offers loans under FHA Title II, where the home is titled with the land.

Conventional Loans

A conventional loan refers to any loan that isn’t backed by the federal government. Conventional loans require down payments as low as 3% and can be an affordable home buying option, but only to borrowers with credit scores of 620 or higher.

There are several different loan programs offered by Fannie Mae and Freddie Mac that can fall under the umbrella of conventional loans.

Fannie Mae’s Standard Manufactured Home Loan

The Fannie Mae Standard Manufactured Home Loan can be used to buy both single-wide and double-wide homes that meet the HUD Code requirements. This loan type allows for a down payment as low as 5%.

Fannie Mae’s Manufactured Home Advantage Loan

The Manufactured Home Advantage is another of Fannie Mae’s home loans designed for manufactured homes. This loan allows a down payment as low as 3%, but it’s only available for double-wide homes, not single-wide homes. Rocket Mortgage doesn’t offer this program.

Freddie Mac’s Home Possible

The Freddie Mac Home Possible^® loan is one of the lender’s most popular loan programs. It’s available only to borrowers with incomes that are no higher than 80% of the area median income (AMI). You can get a Home Possible^® loan with a down payment as low as 5% for a manufactured home.

Freddie Mac’s CHOICEHome^® Mortgage

The Freddie Mac CHOICEHome^® Mortgage is specially designed for factory-built homes that meet the HUD Code requirements. This loan is available with a down payment as low as 3%. These aren’t offered by our friends at Rocket Mortgage.

Government-Backed Loans

The federal government has several mortgage programs that make it easier for people to buy homes, including manufactured and modular homes. The right loan program for you depends on several factors, including your location, credit score, income and more.

FHA Loan

The FHA loan program is offered by private lenders but backed by the federal government. The Title I program allows borrowers to use FHA-backed funds to buy manufactured homes, as well as developed lots on which to place manufactured homes.

FHA Title I loans are available in the following situations and amounts when it comes to single-section manufactured homes:

• Manufactured home: $105,532
• Manufactured home lot: $43,377
• Manufactured home and lot: $148,909

A Title II FHA loan can also be used to finance manufactured homes. However, unlike the Title I loan, this loan requires that the home be in a permanent location that you own. You can’t use a Title II loan for rented land. Rocket Mortgage doesn’t offer Title I loans, but they do offer Title II loans.

VA Loan

A Department of Veterans Affairs (VA) loan is offered by private lenders and backed by the federal government. VA loans are available to current and former service members and qualifying surviving spouses.

To use a VA loan for a mobile home, it must meet the following requirements:

• Must be affixed to a permanent foundation
• Must have at least 200-square-feet of interior floor space
• Must be considered real estate according to state law
• Must meet all local zoning requirements in state law per Chapter 12 of VA Pamphlet 26-7
• Must have a metal identification tag outside the home
• Must have a data plate with information about the house and its specifications

USDA Loan

A U.S. Department of Agriculture (USDA) loan is offered by private lenders and backed by the federal government. To qualify for a USDA loan, you must have an income at or below 115% of the area median while living in an eligible rural area. The home must meet the following requirements.

• Must be built within the last year
• Must be purchased from an approved dealer or contractor
• Single-wide homes must be at least 12 feet wide and at least 400-square-feet
• Double-wide homes must be at least 20-feet-wide
• Must meet all Federal Manufactured Home Construction and Safety Standards (FMHCSS)
• Must be higher than the 100-year flood zone
• Must undergo a home appraisal

Rocket Mortgage doesn’t offer USDA loans at this time. 

Things To Consider When Buying A Manufactured, Modular or Mobile Home

There’s a lot to consider before buying any home, including a mobile home. Here are a few things you’ll have to decide about your new home.

• Size: When looking for any home, the more space a home has, the more you’re likely going to pay for the home.
• Location: You have to decide where you’ll live – will you buy land and build? Or will you find an existing turnkey home that meets your needs?
• New versus used: You can buy a mobile home new or used. You can customize a brand-new home with your preferences but be aware those upgrades will likely cost you. If you’re cost conscious, an existing home on the market could fit your needs and your budget. Whether you purchase new or an existing home on the market, it’s important to get an inspection to ensure its quality.
• Insurance: When you finance your home, you’ll be required to have home insurance. You can shop around for the best policy for your needs. Consider bundling your home insurance policy with your other insurance policies.
• Upkeep: Just like any other home, a mobile home will require upkeep, including maintenance costs. It’s important to establish some savings upfront to be prepared.

Pros And Cons Of Buying A Mobile Home

Buying a prefabricated home comes with certain advantages and disadvantages.

Pros

• Affordability: Manufactured, mobile, and modular homes are more affordable than traditional homes, making them a great option for homeowners on a smaller budget.
• Reliable construction: Today’s prefabricated homes are built to a higher construction standard to ensure they are reliably constructed and safe for the families who purchase them.
• Customization: Despite being factory-built, these homes still offer certain customization options that can help your new house feel like home.

Cons

• Social stigma: Unfortunately, there’s a social stigma attached to living in a prefabricated home, and this can turn some borrowers off from this option.
• May pay rent for land: If you don’t own the land your mobile home sits on, you’ll have to pay rent for your space, which is an added cost, and may cause you to feel less ownership over the space.
• Harder to secure financing: You may find that it’s more challenging to qualify for financing for a mobile home and may have fewer loan options.

FAQs About Buying A Mobile Home

If you’re considering buying a mobile home, be sure to read these frequently asked questions.

Are mobile homes a good investment?

Mobile homes can be a solid choice for homeownership, serving as a more affordable alternative to a traditional home. You should know that whether they tend to appreciate or depreciate depends on whether you own the lot this is to do with land being the scarce resource.

How many acres of land do you need for a mobile home?

One mobile home will need at least a quarter acre of land to accommodate the home and provide enough space to get around it. Many mobile home parks have several homes per acre.

Is it harder to get a mortgage for a prefabricated home?

Lenders may have stricter eligibility requirements, and there are fewer loan options than there are for traditional homes. This is because they tend to depreciate if you don’t own the land.

The Bottom Line

Buying a prefabricated home comes with its own set of pros and cons. On the plus side, these homes are more affordable, built to reliable construction standards, and offer customization options. It’s important to note that there are challenges in securing financing if you don’t own the land. Weighing these factors can help you determine if a prefabricated home is the right choice for you.

If you’re considering buying a manufactured home on a permanent foundation, start the mortgage application process at Rocket Mortgage.