6 Key Things You Should Know When Buying a Mobile Home

You’ve decided that a mobile, or manufactured home is what you want to buy. You’re not sure if buying a new home is your best option, so you’re going to look at used homes too. Let’s take a look at buying a new home first. Many of the considerations involved in the purchase of a new manufactured home will also apply to a used home.

The two terms, ‘mobile home’, and ‘manufactured home’ are used interchangeably. In 1976, HUD devised a set of standards for mobile homes. Along with these standards was the new term, ‘manufactured home’.

As far as HUD is concerned, the term ‘mobile home’ now applies to manufactured homes built prior to 1976. Today, however, both terms are used by people to describe the same thing; a home which is manufactured off-site and transported to the homesite.

There are two different types of mobile homes; manufactured and modular. The main difference between these two is the foundation.

MODULAR

A. MODULAR – Modular homes are factory-built homes that are ultimately installed on permanent foundations. Modular homes are also sometimes referred to as ‘kit homes.’ Modular homes are manufactured in sections inside factories with controlled environments. The factory environment eliminates potential problems associated with climactic conditions at construction sites, such as rain, snow, mildew, and wind.

Modular homes have been a popular option for new home buyers for generations. In 1908, Sear and Roebuck Co. began building, selling, and shipping modular homes throughout the United States under the Craftsman brand. Today, thousands of these homes still exist, especially in the Midwest and South, but you’ll also find many out on the West Coast, and as far north as Alaska.

When a modular home arrives, it arrives with instructions, not unlike the instructions you might get with an Ikea product. They might read; “Wall AB lines up against wall CD”, and so forth.

A modular home buyer will first have a contractor come onto his building site and construct the foundation. Then the home is assembled on top of the foundation, very much like a site-built house, except instead of stacks of lumber and roofing material, the owner/assembler will have stacks of wall and ceiling sections.

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MANUFACTURED

B. MANUFACTURED – Manufactured homes are true mobile homes, because they are built and assembled entirely off-site, and then transported to the homesite. While it is inadvisable to attempt to relocate a manufactured home from one homesite to another, they are constructed in a manner that does make relocation feasible. Instead of being placed on a permanent foundation, a manufactured (mobile) home is anchored to the ground upon installation.

While mobile homes are not designed to be placed onto permanent foundations, it is certainly possible to do so. A new owner may opt for a permanent foundation for several reasons:

  1. a) The owner owns his land and sees the home as being a permanent structure, like a site-built home.
  2. b) The owner may want a basement. A basement will provide for a storm shelter. Once finished, a basement can also double the home’s living area.
  3. c) The owner may be concerned about high winds and may feel that his home is more secure on a permanent foundation.
  4. d) If the home is in a flood-prone area, a foundation will allow the structure to be elevated.

1. Quality and Building Standards

Quality and Building Standards

In 1976, HUD established the HUD Code, a set of standards applied to manufactured houses. The HUD Code addresses issues, such as:

  1. a. Construction standards
  2. b. Building material quality
  3. c. Design, including relocation accommodations
  4. d. Strength and durability
  5. e. Transportability
  6. f. Energy efficiency
  7. g. HVAC, electrical, and plumbing codes
  8. h. Fire resistance

Manufactured homes are constructed within environmentally controlled factories by skilled workers who work year-round. Site-built homes are subject to the elements of rain, snow, and wind, and are built by construction crews that often turn over, season to season. Today, manufactured homes rival site-built homes in quality and durability.

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2. Defining Your Home

Defining the Home

The best place to start in buying a home is by asking; “How is it going to be used.”

  1. a) Who is going to live there?
  2. b) How many bedrooms will be needed?
  3. c) How many bathrooms?
  4. d) Are there any special accommodations that are needed?
  5. e) Will a room be needed as an office or nursery?
  6. f) Will any of the rooms have minimum size requirements?

You should also ask yourself, “How long am I likely to live in this house?” If you’re looking at it as a long-term home, then you will want to define the house from that perspective. You will need the house to accommodate your needs and lifestyle today, and also to accommodate your needs and lifestyle in the years ahead.

The process of buying a new manufactured house is very much like the process of buying a new car. In the same way car dealers have an on-hand, ready-to-go inventory, a manufactured home manufacturer has an inventory of homes ready to buy.

However, as long as you’re not in a hurry to have your home delivered, it’s probably best to order from scratch. That way, you have all of the choices available to you which are offered by the manufacturer. A patient mobile home buyer can essentially design his new home, within and without, from the ground up, including room dimensions, and interior and exterior finishes.

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A. SIZE

Mobile homes are typically smaller than conventional homes. Therefore, when considering the question of size, it is good to think in terms of number of rooms, as opposed to room sizes.

However, many manufacturers now offer generous floor plans, especially for double and triple-wide homes. A double wide manufactured home can stretch out to over 2,000 sq. feet, with as many as four bedrooms.

SIZE

 

This double wide floorplan demonstrates the potential flexibility that manufacturers have when a buyer orders from scratch. The basic plan calls for four bedrooms with a family room. However, the plan allows for the option of converting the family room into a fifth bedroom. The plan also shows options pertaining to how the master bedroom and bath are laid out, and another option with an expanded kitchen.

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B. ROOMS

You may need an office or a storage room. This room could simply be a bedroom that is designated for a special purpose. However, if the room is probably never going to be used as a bedroom, then perhaps no closet is needed. If so, this will increase the functional size of the special room.

The size of the living room will depend on the family profile. In general, a family of four can function with one common living space. Once you have five or more, then two are usually needed; living room and family room.

You also need to consider the kitchen. If you have an up-and-coming French chef in the family, you need to have a good-sized, well-equipped kitchen. On the other hand, if you’re the type of family who would rather eat your meals outside the home, then maybe you can cut some corners on the kitchen and opt for a deluxe master bathroom instead.

If family members enjoy congregating in the kitchen, then the kitchen’s size needs to be designed to accommodate that. You may also want to consider a more open floor plan, where the kitchen space flows seamlessly into the living space.

One of the best ways to determine what you need with respect to rooms and room sizes is to evaluate the home you’re currently living in. Are the number of rooms adequate? If not, what do you need? Are all of the rooms large enough? If not, which ones need to be enlarged? Taking the time to consider these questions now might help you avoid regretting your decisions for the next twenty years.

C. FLOORING

You will also have flooring choices, such as carpet, linoleum, laminate, or tile. You can designate a unique floor covering for each room.

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D. INTERIOR

How about a fireplace? A fireplace adds a great look and feel to a room. Most fireplaces in mobile homes are gas fireplaces which are inexpensive to install and easy to maintain.

E. EXTERIOR OPTIONS

A manufactured home company will have a variety of siding options to choose from. Investing in high quality siding will pay off in the long run, with color retention, durability, and a longer life.

You will also have a wind zone option. Mobile homes are all built with a Wind Zone 1 rating, which is comparable to wind ratings for site-built homes. However, if you’re in an area prone to high winds, like Atlantic coastal communities, you may want a higher wind zone rating package. Depending on your area, you may be required to include a high wind zone package.

F. ARCHITECTURAL OPTIONS

You will have different exterior colors to choose from. Combining compatible colors in your exterior design can create an appealing architectural flair. You will also have the opportunity of adding architectural features, such as gables, which will help reduce the boxy look.

3. Your Mobile Home Location

Your Mobile Home Location

Seventeen million Americans live in 6.8 million mobile homes. About half of those mobile homes are located in communities where the homeowners pay a monthly rental fee to lease their lots.

When deciding where to locate your home, you have two basic options:

I. Your land
II. Somebody else’s land

There are advantages and disadvantages to both of these options.

If you have an existing parcel of land that is suitable as a homesite, that may be your best option. It is an even better option if your own the land outright. However, even if you have a mortgage on the parcel, it may still be your best solution.

If no home previously existed on your lot, then you will need to determine precisely where to install the house. The location should be flat. If not, you will need to grade the location. If there are boulders or stumps in the way, they will have to be removed. Consideration should also be given to the structure’s orientation, with respect to sun exposure and views.

If you don’t currently own a suitable parcel, but you want to site your home on your own property, you can go into the market and buy a parcel. That way, you control the land and the costs associated with the land.

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The cost of a small buildable residential lot will vary, market to market. However, in most Midwest markets you can usually buy a small lot for about $60,000. If you were fortunate enough to be able to secure a 100%, 15-year mortgage on the lot at 3.25% (as of August 2020), your monthly payment would be about $420.

By comparison, if you were to site your home in a mobile home community, they will provide a lot for you. In exchange for the use of their lot, you will have to make a monthly rent payment. Lot rentals vary from market to market, and community to community. The nationwide average is about $300 per month.

At first look, the community lot will cost less out of pocket each month, compared to buying your land. However, by mortgaging your own homesite, after fifteen years it will be paid off, and your monthly land cost will then be zero.

Another factor to consider is appreciation. Manufactured homes that are sited in mobile home communities do not appreciate, as a rule. They depreciate, much the same way automobiles depreciate. Even if the value of the land increases, since the homeowner doesn’t own the land, he doesn’t benefit from land appreciation.

However, if the homeowner owns the land under his home, he does benefit from land appreciation. A manufactured homeowner who sites his home on his own land, may not see his home depreciate at all. Depending on its location, his property value could increase over time.

Install costs are also a consideration. If you choose a mobile home community as your site, everything will be ready to go. You’ll have your sewer (septic), electrical, and water connections in place and your install costs will be low. If you site your house on your own land, all of these utility connections will have to be established. This work is likely to cost several thousand dollars, if not more.

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Another consideration is community. Many mobile home communities are becoming popular destinations, especially with seniors. They sometimes have excellent amenities that you can enjoy, including swimming pools, recreational facilities, community center, playgrounds, and social events. If you site your home on your own property, you may or may not have these kinds of amenities readily available.

Moving your house into a mobile home community can carry some land-associated risk.

a) What happens if the landowner decides to sell the property to a developer? Will you have to relocate your home?
b) What happens if your monthly rental rate is increased? Will you still be able to afford it?
c) If you are forced to sell your house, will you be able to find a buyer who is willing to pay the higher rental fees?
d) If you are forced to relocate your home, will you be able to find a suitable community that will accept your house?

Most states have some landlord/tenant statutes which include land-tenant safeguards. But these statutes vary from state to state, with some being more tenant-friendly than others. Fourteen states have no landlord/tenant statutes that address mobile home landownership.

LAND CO-OPS

LAND CO-OPS

One land-protection strategy gaining traction amongst mobile homeowners is the formation of a limited equity housing cooperative. Homeowners form a corporation and pool their funds to purchase the land beneath their homes.

Homeowners still don’t own the land under their homes. The land is now owned by the co-op. What the homeowners own is stock in the resident-controlled corporation that owns the entire mobile home park.

Land co-ops should also impact property values favorably. According to Paul Bradley, president of ROC USA, a consulting firm that helps mobile homeowners establish co-ops:

“Low share value co-ops are the easiest for homeowners to buy into because you don’t have to come up with big money for a share. When the house trades at market value, because there is some contributory value to the house from the land itself, home values will improve over time.” 

So, when the value of the land is taken into account, along with the value of the structure itself, over time, the market value of the entire property should increase, as land values increase.

These co-ops give homeowners control over lot rental rates. They also act as homeowner associations, providing a solution to community upkeep while they neutralize the threat of the loss of their land to redevelopment.

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4. Delivery and Installation

Delivery and Installation

Mobile homes cannot be delivered and installed onto ground, softened by rain or thawing snow. Delivery must wait until the ground sufficiently hardens. Your installation contractor will determine when the ground is ready.

Some homeowners want to attach secondary structures to the home, like sheds. While the home itself will be properly anchored to the ground by the installer, the secondary structure will not. In a high wind, the secondary structure can act like a sail, carrying it, and the entire house, off of its mooring.

5. Mobile Home Financing

Mobile Home Financing

Most mobile home buyers finance their homes. In the eyes of lenders, modular homes are considered equivalent to site-built homes. Mobile home financing is structured the same way conventional home financing is structured, except with higher interest rates. Today, a typical interest rate for financing a manufactured home is between 5.25% and 6.0% (as of August 2020).

Under the Title I program, FHA-approved lenders can make loans on new purchases, or refinances of manufactured homes and/or their lots. FHA insures the lender against loss caused by borrower default. The interest rate, which is negotiated between borrower and lender, must be a rate fixed for the entire term of the loan, which is normally twenty years. The home must also be the principal residence of the borrower.

If a mobile home is to be located within a mobile home community that rents lot spaces to its residents, FHA requires that the borrower obtain a minimum three-year lease on the land.

Maximum FHA Loan Amounts

i. Manufactured home only – $69,678
ii. Manufactured home lot – $23,226
iii. Manufactured home & lot – $92,904

FHA-insured loans can sometimes be obtained with as little as a 5% down payment, although most lenders will require around 20%.

Chattel Loans

A chattel loan is a type of personal property loan that is often used to finance expensive items like boats, airplanes, farm equipment, and manufactured homes. Some chattel loans are FHA insured. Chattel loans often have low down payments, but will typically have a higher rate of interest than a conventional mortgage; 1% to 5% higher.

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6. How to Buy a used Mobile Home?

Buying a Used Mobile Home

We’ve covered just about everything, except buying used. Because manufactured homes, like automobiles, are considered personal property, they almost always depreciate over time. Since a used home will invariably be less expensive to purchase than a new one, it might make sense to buy used. If you’re not sure how long you’re going to be living in the home, buy used.

Okay, so how much will a used manufactured home cost? Prices vary widely. Let’s look at some examples from various markets.

Mobile Home In Minneapolis, Minnesota

  1. a) $185,000 – 3Br, 2Ba, 1725 sq’ double-wide, on private lakeshore lot
  2. b) $115,000 – 3Br, 2Ba, 2176 sq’ double-wide, on private lot with attached garage
  3. c) $59,900 – 3Br, 2Ba, 1,344 sq’ double-wide, detached garage
  4. d) $32,000 – 3Br, 1Ba, 840 sq’ single wide, on private lot

Mobile Home In Chicago, Illinois

  1. a. $89,900 – 3Br, 2Ba, 2500 sq’ triple-wide – located on private city lot
  2. b. $69,900 – 3Br, 2Ba, 1800 sq’ double-wide – located in mobile home community
  3. c. $44,900 – 2Br, 2Ba, 1700 sq’ double-wide – located in 55+ community
  4. d. $14,700 – 3Br, 2Ba, single-wide – fixer

Mobile Home In Phoenix, Arizona

  1. a. $164,900 – 4Br, 2Ba, 1,665 sq’ double-wide – located in good community, owner owns land
  2. b. $119,900 – 1Br, 1.5Ba, 795 sq’ single-wide – located in good community
  3. c. $46,900 – 2Br, 2Ba, 1152 sq’ single-wide – located in good community
  4. d. $19,000 – 2Br, 2Ba, 850 sq’, single-wide – located in community with $600/month lot rent

As you can see, prices are all over the map. The value of a manufactured home is determined by the same factors as other real estate; condition of the property, age of the home, land factors, amenities, and location.

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