Mobile Home Insurance

Buying a Mobile Home: What You Need to Know

Mobile Homes in USA

There are more than 8 million mobile homes in the United States. Mobile homes are popular because they are less expensive than traditional site-built houses. The U.S. Census Bureau reports the average cost of buying a mobile in 2021 is $88,200. The average price of a new traditional single-family home was $390,000. Homebuyers trying to make more budget-friendly choices for their families need to arm themselves with information before entering the home buyers market.

Mobile home prices are a major benefit to someone who wants to buy a home. Mobile or manufactured home sales companies offer a wide selection of options, such as single wide, double wide, and even triple wide homes to meet your need for space. Owners of a mobile home may find a higher value per square foot due to the better use of space found in the factory-built homes when compared to those built on site. When buying a mobile home, homebuyers can choose from plenty of floor plans and design elements to suit the needs of their families. Single-family homes seldom provide the available personalization that the mobile home offers. When buying a home, the value of a mobile home cannot be ignored.

Manufactured homes, modular homes, and mobile homes – What’s the difference?

Buying a mobile home is easier when you know the terms associated with the mobile home industry; it gives you an advantage in understanding the home financing options available. You have probably noticed multiple terms used to refer to mobile homes. However, the words mean different things to finance companies and insurance companies alike.

A mobile or manufactured home is built in a factory and placed on a permanent chassis, which allows them to be easily moved. The placement on a chassis is what defines the construction as a mobile home. Homes with a permanent chassis built before 1976 are mobile homes, while those built after 1976 are manufactured homes.

What changed? In 1976, the Department of Housing and Urban Development (HUD) implemented construction standards for manufactured/mobile homes in 1976. These standards brought about a HUD document known as the Certification Label and the Data Plate. These certificates are red and must be visible inside the home. Removing them is against the law. The HUD Label is important when you buy, sell, finance, and insure a mobile or manufactured home. If you don’t have a HUD Label, it won’t be easy to obtain financing. If you are considering a used mobile home, make sure you locate the HUD label before entering a contract.

Don’t confuse manufactured homes with modular or prefab homes. Modular homes are also built in a factory and constructed with a permanent or a removable chassis. A modular with a removable chassis is an “off-frame” construction. Like a traditional single-family home, these mobile homes are generally transported to private land and assembled on site.

Loans for buying a mobile home or manufactured home

Investigate lenders, and see about getting pre-approved for the loan you need before you start shopping. A pre-approved loan goes a long way in the negotiation process of any major purchase.

Lenders will need proof of employment, salary, work history, tax returns, proof of your identity, and bank statements. Lenders may ask for additional documents on a case by case basis. These documents and your credit score determine the types of loans available to you and your interest rate. Your credit score is a significant factor when applying for a loan. Most lenders consider a credit score of 700 and higher as good; a score of 650-699 as average, and 600-649 as poor. (Source) Lower credit scores result in higher interest rates, increased down payment, or can disqualify you from obtaining a loan.

Financing a manufactured home vs. a traditional home mortgage

When financing a mobile home, the most important consideration is whether you own the land where it is (or will be) placed. Mobile homes are frequently located on leased land (mobile home parks). Owning your land may help you get a conventional mortgage, but there are several options to finance your new home, even if you are renting your land. The U.S. Federal Housing Authority (FHA) and the U.S. Department of Veterans Affairs (VA) both guarantee loans for manufactured houses and lots.

FHA loans

FHA Title I loans do not require land ownership. However, the borrower must lease the same land for three years, minimum, to qualify for an FHA loan.

The borrowing requirements for FHA loans are easier to qualify for than most conventional mortgages. Down payments can be as low as 3.5% of the purchase price. If you have poor credit (credit score of 550 or less), you may still be able to get an FHA loan. You can qualify for an FHA loan even with a past bankruptcy, unlike with most conventional mortgages. The FHA is not a direct lender. The FHA insures loans, which makes them more attractive to lenders because they bear less risk in loan default.

One of the advantages of working with a mobile homes sales company is they can assist you in locating a bank or credit union that will service your loan needs. Homeowners may have success in the search for real estate by working with the mobile home sales company as some companies have established mobile home parks allowing people to move into a community of fellow mobile homeowners.

FHA Considerations

Loan terms for FHA loans are shorter than a conventional mortgage. Most FHA loans for mobile homes are limited to 20-year terms. In addition to term limitations, FHA imposes loan limits. As of 2017, the limit for a manufactured home is $69,678. If you only want to buy the lot, the limit is $23.226. The limit is $92,904 for both the manufactured home and the property. (Source) An FHA loan is only an option if the mobile home is your primary residence.

VA loans

The U.S. Department of Veterans Affairs (VA) guarantees loans by insuring them against default. The VA doesn’t make loans. You need to find a lending institution that issues VA loans. Members of the military, veterans, and their spouses are all eligible for VA loans. The VA provides guarantees for lots and manufactured homes. Before you begin the VA loan process, you will need a certificate of eligibility (COE). The certification proves to lenders that you are eligible for a VA-backed loan. Check here for COE requirements.

If you’re looking for a VA loan, start with Quicken Loans.

Quicken Loans

Quicken Loans is the largest online retail mortgage lender and the second VA loan lender by volume. We like its simple, fast, and 100 percent online application process.

Quicken Loans is the largest online retail mortgage lender and the second VA loans lender by volume. We like its simple, fast, and 100 percent online application process.

Veterans United Home Loans

Veterans United Home Loans is the largest VA home purchase lender in the United States.

USAA

USAA is the third VA loans lender by volume and only deals with members of the armed forces. So, you can be confident they understand how to work with VA requirements.

Chattel loans

A chattel loan is a loan for a mobile home that is not attached to the property through a deed or title; an option for homebuyers who do not own property. The interest rate for this type of loan are higher than mortgages, and having poor credit can push rates as high as 10 percent. Loan terms typically range from 10 to 15 years.

Land loans

If you know the area you want to live in, buying the land would make you eligible for a mortgage or FHA loan. If you qualify for a VA loan, you can finance both the land and a manufactured home. Most major banks shy away from land loans. A local bank or credit union is your best bet when looking for a lender. Read this article to learn more about how to finance land.

Remember to include the cost of land rental or land purchase in your calculations for your housing budget.

Tiny mobile homes

The tiny house is an increasingly popular option for housing. Homes can be as low as $20,000, making them attractive to those who are just starting out, retirees, and anyone wanting to save on housing costs.

Tiny homes range from 160 square feet to 600 square feet, with the option of being mobile or built on a foundation. You may be able to find leased space in a mobile home park; however, many locations are not zoned for houses of this size. (Check with the park owner for specifics regarding limitations on sizes and requirements for tie-downs to meet community standards.) Tiny struct on a foundation, they are essentially the same as conventional homes, just smaller. These houses are typically treated as personal property and not real estate.

What you need to know about mobile tiny homes, lending is in its infancy. Just as financing has not caught up with the tiny home movement, zoning and building codes limit the property options for where you will place your home, leaving homeowners searching for options. Homebuilders will need to determine where they will place their house in advance. Check all regulations and rules thoroughly in the area where you plan to live before financing a tiny home or a mobile home. Though tiny structures can be economical, the cost of lot rent or real estate will need to be calculated into the homeownership cost.

Personal loans are one option to consider for a tiny home buyer. Because the costs can be much lower than for a conventional home, a personal loan may be enough to cover the costs. However, different personal loans come with different rates, fees, and requirements, so check out the best personal loans to ensure that you choose the best option for you. As personal property, the tiny house may be required collateral for a personal loan. Make your search easier by reading about additional tiny home financing options here.

Is buying a mobile home a good idea?

As with any housing option, there are pros and cons to consider. One advantage mobile homes offer is they are usually cheaper. In this regard, mobile homes can make homeownership easier to achieve. And since mobile homes are cheaper per square foot, you can get more space for your money.

A serious concern to keep in mind when buying a mobile home is whether you own the land or if the home will be on a mobile home park. If you don’t own the land, you will still have a landlord even if you “own” the home. This means you will still have to pay rent and follow park rules. The landlord can also decide to evict you, which would force you to move or sell your mobile home.

Whether you rent a piece of land, decide to buy a mobile home in a mobile home park, or purchase your own real estate, buying a mobile home opens homeownership to many people who wouldn’t qualify for a conventional single-family home. New mobile home designs featuring single wide, double wide, and triple wide floor plans give buyers flexibility when shopping for a mobile home that meets their housing needs.

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