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Manufactured homes, not always affordable living!

I hear it many times. " I think I am just going to buy some land and put a manufactured home on it."

People say it like it is as easy as hauling a shed home from Wal- Mart and putting it in your back yard when it is actually quite the opposite.

Financing a manufactured home is not as easy as it is for a conventional stick built home. First, you will be paying more interest since you are financing personal property and that property tends to depreciate unlike stick built homes. The life of a MFH is also shorter. Many people finance the land separately, or pay cash for it, then get a loan for the home. Also, when purchasing a MFH, you will need money down and a higher credit rating than what you would with a stick built home. Many times a buyer can close with no money down if buying a stick built home.

Many cities have zoning restrictions when it comes to manufactured homes and you could be looking at erecting yours outside of the city limits--This makes it highly important that you purchase the land before buying the home.

Another thing to consider is the expense of bringing utilities to the property if needed. Just because the land is in town does not mean it is set up for a home. It could cost you a hefty chunk of change if you have to bring the gas and water lines to your lot, hook up to sewer, or have a septic system put in. If you are putting in a septic system, don't forget to have the land perked!! Here in Lewiston and Clarkston, this is done through the health department. If public water is not available, a well will have to be drilled. Having the land perked and the locating water is done before the land closes and the deal is contingent of the outcome of these tests.

When all is said and done, you could have invested as much money into your abode as you would have if you bought a stick built home. An investment that will hold it's value and in most cases gain value as time passes.

With all of this said, if you are thinking of "Just going to buy some land and put a MFH on it", I hope this will help you decide. As you can probably tell, I am not a big fan of MFH's-the return is just not there, and it costs just as much if not more to purchase one.

Posted by Shari George on 12/16/2006 11:34 PM

Comments (32)

manufactured homes, affordable housing

32 Comments on Manufactured homes, not always affordable living!

DEC

2006

Shari, we do not have manufactured homes here on Oahu. Our zoning doesn't allow it. Great tips for my clients who invest in land on the mainland.

Hey Randy, You also don't have roads to Oahu from Tennessee for easy delivery. ;-)

Shari you can easily invest $5,000 or more in site prep before you pull your doublewide onto the space; it's about 20 bucks a foot to drill a well if public water is not available.

Luckily we don't have a lot of manufactured and mobile homes in Massachusetts. They don't make sense financially. A home will increase in value, a mobile home won't. It is almost like buying a car.

Great post. Besides stick built there also modular constructed homes which people some time confuse with manufactured homes.

Manufactured homes are fairly popular in our neck of the woods. It's not uncommon to find a manufactured home sitting next door to a million dollar home. Very eclectic!

Shari,

Thanks for the post. We have a few trailer parks dotting the stretch of some major highways. Not a very pretty site. Outside of those, it simply is not allowed

Most of ours are in 55+ communities.

Plenty of them around in Arizona - but financing is tricky - there are one or two lenders that specialize in that market.

NOT popular in my market area of Maryland and Northern Virginia. Land is too expensive and most good lots are already under ownership or opton of builders or developers. Permitting is expensive in this area.

I get the inquiries, mostly from folks from out west were land is a lot less expensive then in my area. When they learn the cost of buildable lots around here, they know it won't work.

Texas is so big that we have areas where there is an entire community of these mobile homes/manufactured homes. Your picture of the mobile home is actually quite nice...I don't think I've seen a nice one like that.

We have loan programs just like buying a stick built home for the manufactured homes. I believe it's the way the home is attached to the land that makes the difference.

I don't do mobile homes...I would rather refer it out.

Shari, do you think this applies to "prefab" houses as well. There is a huge movement in this direction and some of the construction and design is truly amazing. They are the result of some great architectural thinking. Here is my favorite site, the FABLIST. I'd love to hear your thoughts.

Thanks for the info on a subject I don't know alot about. We have a number of complexes here of both mobile and manufactured homes. It is a much easier task to get a loan if the home is on a permanent foundation - otherwise it is, essentially, a movable vehicle.

Made me recall an article not too long ago about a mobile home park (pretty sure they were NOT manufactured homes) with killer ocean views in Malibu (direct frontage but across the road on a bluff). The the homes were made permanent, upgraded, and increased in size and were fetching (get this!) over a million dollars. But then again, they are NOT the typical mobile home.

I am surprised at just how many people do not have them at all in their area, makes me think of when a woman from the Tahoe area was buying land here. The kids were going to move here as well and the piece of land she was going to buy had a MFH on it that was quite nice, but all she could imagine was a "trailer" She was pleasantly surprised.

Jim- $5000 is not that much to prepare land, but in my area we have a lot of people who want to get into a home for next to nothing and they rarely have money to come in with.

Rich, In my town there is a huge section referred to as the Orchards, which have a lot of diversity when it comes to homes, meaning extra nice and then a run down place next door or a newer home and then a trailer across the street. The zoning rules have changed in the last 10-15 yrs so now even a new MFH is not permitted. I was watching pubic TV a few days ago and a man was trying to let the counsel allow him to put a MFH on his property close to his house for his ailing parents. I never did see the final outcome...we do have 55+ communities in our area as well.

Jeff- I am not familiar with prefabs, we do not have much, if any here that I know of. I looked at the website-There are some really neat designs. We do not have much artsy homes here. When we do get them, the people here really stand up and notice. It would be really neat if someone was to do that in a subdivision here. I think it would get a lot of attention and people wanting to buy!! Can you get conventional financing? I would think it would be easier to finance than a manufactured.

Jeff- I saw that as well, I think it was on HGTV, or something like that. Fabulous homes.

Wait a minute!

As a home loan expert in an area where very nice manufactured homes need financing every day I want to correct a little misinformation.

The financing for a manufactured home that is built on or after June 15, 1976, has road access, a permanent foundation and is taxed as Real Estate doesn't have a huge rate at all. In fact, it's the exact same interest as a stick-built home with an extra .75 points. That's a very small difference!

The difference with a newly-built is that you may need a personal loan only until it is affixed. Then you can refinance it. And because the cost of the newly improved real estate is probably going to be more than the cost you've put out for the home and the land separately, you can refinance - again into a conventional loan - with no seasoning!

Keep in mind...the risks for a manufactured home are greater because in some of your areas manufactured look more like trailers or mobile homes, so you'll need to have good credit and at least 5% equity (3% for an FHA loan).

In my community there are some that experience Realtors have mistaken for a stick-built!

The site prep is often a cost that many peopole overlook. Water, septic electric...those basic necessities need to be installed. I am not surprised about the many horror stories that are out there when people start this process without doing their homework.

BTW- click HERE to see some incredible factory-built housing...most Realtors wouldn't believe their eyes!

I agree completely.

I don't understand what these people are thinking. Why in the world would you want to put your money into someting that is going to depreciate. I just don't get it.

Joey- I am going to get some information from you. Here, most lenders charge a higher interest rate for manufactured. We have some nice ones as well, there is one a few blocks from my house that I didn't know was manufactured until I was told that it was.

Joey... You could become very popular in our town! We are having extreme difficulty financing mobile homes (older than 1976). Please... do tell me more.

As for the cost of putting up a MFH: I think the dealers lure people in with the small cost (of the actual structure). They don't outline and add up all of the set-up fees until after the buyers are deep into the transaction. My humble opinion.

Shari: excellent blog and a well deserved golden star! woot woot!

Yes, the financing on manufactured homes are very difficult. Being a mortgage professional in Fairfield County, Connecticut and working for Countrywide Home Loans, largest lender in the United States, we do not finance mobile homes but manufactured homes are sometimes possible with some tricks I learned accidentally in the years in the business.

I enjoyed just looking at your profile on Active Rain as well. Good stuff Shari!

Your Mortgage Man,

Nima

also, from what I have read and seen, most manufactured homes do not go up in value, they actually normally decrease in value. The best way to purchase one is to buy one that is 3-5 years old that has already taken the hit.

We have the mobile home salespeople here that tell clients to call agents to get a piece of land to set it on and mislead them as to the cost of that. These people think they are going to get an acre or two for $2000. When you tell them what it's going for they get very upset. If I just had a dollar for everyone who has contacted me trying to get out of a mobile home, too....

If you are buying mobiles personally to sell my understanding is they are called trailers, until you want to sell them, then they are called mobile homes.

Okay more information is in order.

Shari: You picked a great topic! It looks like a lot of people have something to say.

Trailers vs Manufactured Homes vs. Modular, etc

According to Freddie Mac and Fannie Mae, the two largest investors in conventional mortgage notes, the guidelines (and every major lender uses these guidelines, although they may be more restrictive if they don't feel up to underwriting these properly) for manufactured homes are as follows:

Built on or after June 15th, 1976
On it's own land
Have access to roads, utilities
Be taxed as Real Estate
Be on a permanent foundation
The axle has been removed
Be at least a double wide...unless it's in a PUD

What is the difference between a manufactured home, a mobile home and a modular home?

The mobile is built before june 15, 1976. It's that simple. HUD determines it, and every Manufacture Home has a HUD tag (DON'T REMOVE IT EVER!)

FHA is a bit more restrictive...it has to not only have a permanent foundation but also have it recorded (a 433a) and it can NOT be moved after it is place on the land.

The main distinction between modular and manufactured is simply your local codes. Common distinction is the type of chassis it is built on and delivered with. And conventional guidelines treat a modular home EXACTLY THE SAME AS A STICK BUILT.

Don't believe the hype. A well-built manufactured home is sometimes constructed better than a stick-built home, plus it's cheaper. When you build in a factory, there are less injuries, delays because of weather, and cheaper worker's compensation insurance than building on site.

I HIGHLY recommend that you Google Richard Heyn, SRA. He's a sought after expert by the NAR and, for a fee, your association can have him come teach an excellent classz for Realtors.

I only do residential mortgages in California, but any Realtor that has questions is welcome to use me as a resource. Take care!

Oops...a comment on appreciation...

An average manufactured home on a half-acre has gone from about 60k to 260k over the last six years. Perception obviously affects price, and manufactured homes have not appreciated as much (in dollars), but at nearly the same rate as stick-built homes.

Joey,

So they have gone up 56% per year over the past six years! I really find that hard to believe.

It sure hasn't in Indiana, things today are worth about what they were six years ago, any property, whether it was manufactured or normal construction.

I do agree that they are built as well or better then homes on regular foundations...

Here's my differentiation between the three:
Trailers: Old (pre-1976) single wide mobile homes on leased land
Mobile homes: manufactured homes on leased land.
Manufactured homes: manufactured home attached to land

Hi Craig,

Yes that sounds incredible, and perhaps 'an average manufactured home" was a bit strong...or implied hard research. I'll tell you this, appreciation in my area was approximately 36% per year for the last half decade, and that included manufactured homes. When I started in this business, a manufactured home over $100k was unheard of. Now, a man hm on .5 acre under $250k is hard to come by (unless it's run down). Only with the recent softening of the market is it possible to find any decent place in a good neighborhood under $250k. Again...that includes manufactured homes.

You're Indianapolis, right? I have a great friend that just moved to Mooresville. He bought his home around 2002 for $89k, added a couple bedrooms and a bath, and sold it for $289k last summer. It was that crazy out here.

DEC

2006

The problem here is that saying "manufactored home" is about like saying "car" and then giving your reasons for not purchasing a particular class of cars.

There are the traditiona single/double wides that are what most are talking about.

But then you have pre-facbricated homes, and then that is broken down into a couple of other sections as well. During last year's Parade of Homes outside Delaware there was a home that a prefabricated home. It was one of the nicest homes in the show -- and it was cheaper and took less time to erect than any of the others.

So the modular market has become diverse as the traditional housing market.

That said, we've also seen financing restrict on single and double wides. But as has been posted before if a modular has the FHA tag - then it is fine.

Most lenders are shying away from anything within these categories. You might get a lot of land, but your financing of it will kill you if you don't go FHA!

Mobile Homes / manufactured homes are different from modular homes. Not only are they constructed differently they are dealt with differently by lenders.

DEC

2006

Hi Lauren - They really aren't constructed that differently. The major difference is the Chassis. A modular home is built without axles and a manufactured home might have them. The other differences boil down to local codes.

And as far as "dealt with differently by lenders", the difference with a good lender is this....75 points. A modular is priced the same as a stick-built, a manufactured is priced .75 points higher. (NOTE: this is with conventional financing. In other words, at least 5% down and decent credit.)

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