Is It Bad to Buy a Manufactured Home?

A manufactured home can be a viable housing option, though understanding its unique characteristics and financial considerations is important. This article provides clear information about manufactured homes, their financing, value, and ownership aspects.

Understanding Manufactured Homes

Manufactured homes are built in a factory, adhering to the national HUD Code, established by the U.S. Department of Housing and Urban Development. Implemented on June 15, 1976, this code governs all aspects of construction, including design, structural strength, transportability, fire safety, and energy efficiency. Homes built before this date are called mobile homes, distinct from modern manufactured homes.

Factory construction allows for consistent quality control and inspections throughout production. This controlled setting leads to efficiencies in material use and reduced waste compared to traditional on-site building. Unlike modular homes, which are assembled on permanent foundations, manufactured homes are built on a permanent steel chassis and transported to the site.

Financing Manufactured Homes

Financing a manufactured home depends significantly on whether the home is placed on owned or leased land. If permanently affixed to land owned by the homeowner and classified as real property, it can qualify for traditional mortgages, similar to site-built homes. These include conventional, FHA, or VA loans.

For homes on leased land, such as in a manufactured home community, financing typically involves personal property loans, often called chattel loans. These loans are secured by the home itself rather than the home and land combined. They often have shorter terms and higher interest rates compared to traditional real estate mortgages. FHA Title I loans are specifically designed for manufactured homes, including those on leased land, and may have lower loan limits and shorter terms, such as up to 20 years. VA loans can also be used, often requiring no down payment, but the home must be permanently affixed to a foundation and meet specific property requirements, including a minimum size of 700 square feet.

Value and Resale Considerations

The market value of a manufactured home is influenced by its age, overall condition, location, and whether the land it occupies is owned or leased. Homes on owned land generally hold or appreciate in value more similarly to site-built homes, as the land itself can appreciate. In contrast, manufactured homes on leased land may experience depreciation, akin to vehicles, because the land component, which often appreciates, is not owned.

Appraisals for manufactured homes consider these factors, along with upgrades, size, and aesthetics. While older perceptions suggested consistent depreciation, modern HUD-standard homes, especially on owned land and well-maintained, can retain or even increase their value. Local housing market conditions and the desirability of the home’s location, including proximity to amenities, also play a significant role in determining resale value.

Owning a Manufactured Home

Ownership of a manufactured home involves considering the land on which it is situated. One common scenario is owning both the manufactured home and the land, which allows the home to be classified as real property and potentially qualify for traditional mortgages. The other primary scenario is leasing a lot within a manufactured home community, where the homeowner owns the structure but pays fees for land use.

Maintaining a manufactured home is comparable to a site-built home, requiring routine inspections and upkeep. This includes checking the home’s levelness, maintaining skirting, and regular roof inspections. Insurance for manufactured homes differs from traditional homeowner’s insurance due to their construction and transportability. Policies typically cover the home, personal property, and liability, but may have specialized clauses. Newer homes permanently affixed to a foundation may qualify for more traditional policies.