How to Finance a Mobile or Manufactured Home

Photo to accompany story about buying a mobile home.
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The median sale price of a new home in the United States is $313,200, a price tag that puts home ownership out of reach for many Americans. 

The average price for manufactured homes — commonly and often too narrowly referred to as mobile homes — is closer to $50,000 or $100,000, depending on the type, according to the Manufactured Housing Institute (MHI). 

In many cases, the reality of a manufactured or mobile home is far different than the perceptions some people have, and in fact it can sometimes be difficult to tell the difference between a new manufactured and site-built home. 

Especially for some manufactured and prefabricated homes, “It’s not grandma’s trailer that we’re talking about,” says Lesli Gooch, chief executive officer of the MHI. 

The process to purchase a manufactured home is a bit different than getting a classic mortgage. Know the basics before you start: 

What Is a Manufactured Home?

There are subtle differences between different types of homes that aren’t built on site, which describes conventional single-family homes built in place on a given property. Mobile, manufactured, and modular homes are all structures built in a factory for long-term residential use. 

Mobile Home: A term for manufactured homes produced before the implementation of The Federal Manufactured Home Construction and Safety Standards in 1976. Before 1976, manufactured homes weren’t regulated for things like quality or safety. 

Manufactured Home: Refers to homes that have been built since those standards in 1976 went into effect. They are built entirely in a factory, transported to the site, and installed under federal building code, according to the MHI. The federal standards regulate things like construction, strength, fire resistance, energy efficiency, and quality. Modular homes are a type of manufactured home, but there are several other types of non site-built houses to be aware of. 

Modular Homes: Modular homes are built in a factory, but to the state or regional code where the home will be located. The only difference between a modular and traditional manufactured home is the code it’s built to comply with — a state or regional standard on top of the national code.

Panelized Homes: Like manufactured homes, they are built in factories, but panels of the house (think: a whole wall including windows, doors, and siding) are transported to the site for assembly. 

Pre-Cut Homes: Factory-built homes where the materials are cut to a design specification, then transported to the build site to be assembled. These can include home kits, if you wanted to build the home yourself.

All of these types fall under the umbrella category of prefabricated, or prefab, homes, which indicates that some or all of the house has been constructed in a factory and delivered to the site for installation.

Financing Options for Manufactured Homes

Financing options for manufactured homes depend on whether or not you want to purchase the property your mobile home is on.

Chattel Loans

A chattel loan, otherwise known as a personal property loan, is what you would get if you don’t own the land your manufactured home sits on, or if you already own the land and just want to finance the cost of the manufactured home. 

Generally, a manufactured home is regarded as a vehicle, personal property, or chattel, and will be conveyed by a bill of sale or vehicle title endorsement, according to Charles Gallagher, a real estate attorney in St. Petersburg, Florida. And since most new manufactured homes (76%) are titled as personal property, or chattel, according to the MHI, most use this type of financing.

Oftentimes with mobile home parks you’ll just get lease rights, or use rights, to the land, says Gallagher. While that grants you rights to the land, the chattel loan is how you finance and pay for the home itself.

A manufactured housing community can come with a Homeowners Association and perks like swimming pools, playgrounds, and recreation centers, says Gooch. But know “you will likely pay some monthly assessment to the mobile home park as well,” says Gallagher. 

Make no mistake, a chattel loan is a type of home mortgage, and you’ll have to go through the same issuing process as you would with a traditional mortgage. The main difference is the loan term, which is a bit shorter than a traditional home mortgage — usually 23 or 25 years with a down payment of 5%.

While you’ll have to go through the same process as a traditional mortgage, you’re more likely to qualify for a chattel loan even if you don’t have great credit or payment history. “We have programs that will lend to borrowers with credit that would not otherwise qualify for traditional site-built houses,” says  Cody Pearce, chairman of the financial services division at MHI. 

Some lenders offer mortgage and chattel loans specifically for manufactured houses, including the U.S. Department of Veteran Affairs (VA), the Federal Housing Administration (FHA), and Rural Housing Services (RHS).

Mortgage Loans

If you’re buying and financing the land as well as the manufactured home, then you’ll need a mortgage for the property. Preapproval can help start the process so you’ll know exactly what mortgage terms you qualify for when you begin the homebuying process.

In some cases, you might actually have two loans to finance a manufactured or mobile home. “If you are buying the vehicle and the land, you may have a loan on the mobile home and mortgage on the land,” says Gallagher. 

And depending on where and how you buy your manufactured home, there may be an opportunity to purchase under an all-inclusive transaction, where the mobile home and land “are considered one. Once a mobile home is affixed to the land, that can occur, with a deed under a traditional real statute sale,” says Gallagher. 

FHA Loans

FHA title I loans can be used to buy the manufactured home, the lot, or a combination of the two. There are maximum loan amounts for each of these scenarios:

  • Manufactured home only —  $69,678
  • Manufactured home lot — $23,226
  • Manufactured home and lot — $92,904

To qualify for the FHA loan, borrowers must have sufficient funds to make the minimum required down payment (the amount required will depend on your lender), be able to demonstrate that they have adequate funds to make the payments, intend to occupy the manufactured home as their principal residence, and have a site on which to place the manufactured home.  

Bottom Line

Whether you are financing through a chattel loan or a traditional mortgage, “it is vital to have a written contract in connection with the purchase that spells out what you are buying, owning, or leasing,” says Gallagher.

You should also make sure you understand and have a plan for the tax implications, Gallagher says. Will you be paying property tax on the land you own, a vehicle registration tax, or both?

If you are buying a manufactured home, do all of the due diligence you would if you were purchasing a site-built house, like getting an inspection. Buying a home — manufactured or otherwise — is a big investment, so it’s important to know what you’re getting into first.