Alright, so you’re considering a mobile or manufactured home—good on you for looking into an affordable path to homeownership. But let’s break this down in detail because financing a manufactured home is a little different than your typical house purchase.
Financing options for mobile or manufactured homes
Mobile and manufactured homes aren’t typically eligible for standard mortgage loans (i.e., conventional loans) because they’re often considered personal property (like a car) unless they’re permanently attached to land. So, what are your options?
- FHA Loans (Title I and Title II): If your home is on leased land (like in a mobile home park), FHA Title I loans might be your best bet. Title II is for homes on land you own, and it works more like a traditional mortgage.
- Chattel loans: A chattel loan is specifically for mobile homes not permanently attached to land. Think of it like a car loan but with less favorable terms—higher interest rates and shorter terms.
- Personal loans: If you don’t qualify for an FHA or chattel loan, a personal loan could work, but be prepared for higher interest rates and lower loan amounts.
- VA loans: If you’re a veteran, you might qualify for a VA loan. The catch? It must be on land you own, and the home needs to be affixed to a foundation. So, if your home is on leased land, a VA loan probably won’t fly.
Land lease or buy?
Once you’ve figured out how to finance the home itself, the next question is: Are you buying the land, or just leasing it? This is where things get a little complicated.
- Leasing the land: In many mobile home parks or communities, leasing the land is your only option. You’ll own the home, but you’ll have to pay a monthly rent (often between $200 to $1,000 depending on the location) to keep it on the property. Leasing can be cheaper upfront since you don’t need to shell out for land, but there’s a downside—you’ll always have that rent payment hanging over your head, even after the home is paid off. And, if the park owner sells the land or closes the park, you might be forced to move your home, which is expensive and sometimes not even possible.
- That being said, when you lease the land you may be getting amenities included such as a community center, water access or recreational facilities.
- Buying the land: In some cases, you can buy the land where your home sits, but this is less common—usually in rural areas or subdivisions designed for manufactured homes. When you own the land, you can get more favorable financing (like a traditional mortgage) and you build equity in both the home and the land. This option helps with wealth-building since land tends to appreciate over time, unlike mobile homes, which often lose value. But be prepared—buying land upfront can be pricey, especially in desirable areas.
So, is a manufactured home really cheaper than a traditional home?
Yes and no. It might seem like a good deal upfront, but when you factor in the long-term costs and benefits, things start to shift. Let’s compare:
| Feature | Manufactured Home | Traditional Home |
|---|---|---|
| Home price | $250,000 | $375,000 |
| Land lease (monthly) | $500 | $0 (you own the land) |
| Monthly mortgage payment | ~ $1,347 (at 6% for 30 years) | ~ $2,247 (at 6% for 30 years) |
| Total monthly payment | ~ $1,847 (including lease) | ~ $2,247 |
| Maintenance costs | Generally lower, fewer long-term investments | Higher upfront, but home appreciates more |
| Appreciation potential | Tends to depreciate or stay flat | Appreciates over time |
| Longevity | Around 30-55 years | 50+ years, can last much longer with care |
The bottom line? While a manufactured home might save you money upfront, over time, you could end up paying more due to the land lease and lower appreciation. The real difference comes when you consider building equity—a manufactured home on leased land simply doesn’t appreciate the same way a traditional home does.
Downsides of buying a manufactured home
Let’s be real: there are some downsides to buying a manufactured home, especially if you’re leasing the land. Here’s what you need to keep in mind:
- Depreciation: Manufactured homes generally lose value over time, especially if they’re not on land you own.
- Resale value: Selling a manufactured home can be tough. The whole land-lease thing makes potential buyers hesitate because they’re not just buying a home—they’re essentially agreeing to pay rent on land.
- Financing struggles: As mentioned, financing can be tricky. Chattel loans can have high interest rates, and conventional loans often aren’t an option.
- Moving costs: If you’re leasing the land and something changes, moving a manufactured home can cost tens of thousands of dollars. And it’s not like moving a couch—these homes are not designed to be moved easily once they’re set up.
Homeownership and wealth building
Let’s not forget the bigger picture: homeownership is one of the best ways to build wealth and equity. It’s not just about having a place to live—it’s about securing your financial future. As the value of your home grows, you’re climbing the real estate wealth-building ladder. This is crucial because homeownership accounts for about 60% of the average American’s wealth, according to the Census Bureau.
In contrast, owning a manufactured home on leased land doesn’t provide the same equity-building potential. A traditional single-family home, a townhouse, or even a condo offers far more in terms of long-term financial growth because the land appreciates, not just the structure.
Should you buy a manufactured home?
It really depends on your situation. If you’re looking for something affordable and you’re okay with the land lease, a manufactured home could be a good stepping stone into homeownership. However, if you’re planning to stay long-term and want to build serious equity and financial stability, you might want to consider saving up for a traditional home, townhouse, or condo, especially given that often once you add in the land lease cost, the price between a manufactured home is not that far off from these other options. You’ll be moving up the wealth-building ladder a lot faster with something that appreciates in value and doesn’t come with a monthly land lease hanging over your head.
If you’re ready to start your journey to homeownership, get pre approved with Tomo Mortgage today.
