How to finance a mobile or prefabricated house

The average sales price for a new home in the United States is $ 313,200, a price that makes home ownership out of reach for many Americans.

According to the Manufactured Housing Institute (MHI), the average price for prefabricated houses – generally and often too narrowly referred to as mobile homes – is closer to USD 50,000 or USD 100,000, depending on the type.

In many cases, the reality of a prefabricated house or RV is very different from the perception some people have, and in fact, sometimes it can be difficult to tell the difference between a new prefabricated house and a house built on site.

Especially with some prefabricated and prefabricated houses: “We’re not talking about grandma’s caravan here,” says Lesli Gooch, Managing Director of the MHI.

The buying process for a prefabricated house is a little different from that of a classic mortgage. Before you begin, familiarize yourself with the basics:

What is a prefabricated house?

There are subtle differences between different types of homes that are not built on site, which describes conventional single family homes that are built on a particular piece of land. Mobile, prefabricated, and modular homes are all structures that are built in a factory for long-term residential use.

Caravan: A term used for prefabricated homes made before the Federal Manufactured Home Construction and Safety Standards were implemented in 1976. Before 1976, prefabricated houses weren’t regulated for things like quality or safety.

Made home: Refers to Homes built since these standards came into effect in 1976. They are completely built in a factory, transported to the construction site and, according to MHI, installed in accordance with federal building regulations. The federal standards regulate things like construction, strength, fire resistance, energy efficiency and quality. Modular homes are a type of prefabricated home, but there are several other types of off-site built homes to look out for.

Modular houses: Modular houses are built in a factory, but according to the state or regional code in which the house will be located. The only difference between a modular and a traditionally made house is the code to which it conforms – a state or regional standard in addition to the national code.

Panelized houses: Like prefabricated houses, they are built in factories, but panels of the house (think: an entire wall including windows, doors and siding) are shipped to the construction site for assembly.

Pre-cut houses: Factory built homes where the materials are cut to a design specification and then transported to the construction site for assembly. These can include house kits if you want to build the house yourself.

All of these types fall under the umbrella category of prefabricated houses or prefabricated houses, which indicates that part or all of the house was built in a factory and shipped to the construction site for installation.

Financing options for prefabricated houses

Financing options for prefabricated homes depend on whether or not you want to purchase the property your RV is on.

Home loan

A home loan, also known as a private property loan, is available if you do not own the land your prefabricated house is on or if you already own the land and just want to finance the cost of the prefabricated house.

Generally, a prefabricated house is considered a vehicle, personal property, or movable property and is transferred through a sales contract or confirmation of vehicle title, according to Charles Gallagher, a St. Petersburg, Florida real estate attorney. And since most new builds (76%) are classified as personal property according to MHI, most use this type of financing.

With RV parks, you often only get lease or use rights for the land, says Gallagher. While this gives you rights to the land, you finance and pay for the house yourself with the moveable loan.

An industrially manufactured shared apartment can come with a homeowners association and perks like swimming pools, playgrounds, and recreation centers, Gooch says. But you know, “You will likely pay a monthly RV park fee as well,” says Gallagher.

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

While you will have to go through the same process as a traditional mortgage, even if you don’t have a good credit or payment history, you are more likely to qualify for a mobile loan. “We have programs that provide loans to borrowers who would otherwise not qualify for traditional, locally built homes,” said Cody Pearce, chairman of financial services at MHI.

Some lenders offer mortgage and charter loans specifically for prefabricated homes, including the US Department of Veteran Affairs (VA), the Federal Housing Administration (FHA), and Rural Housing Services (RHS).

Mortgage loan

If you are going to buy and finance both the land and the prefabricated house, you will need a mortgage on the property. Pre-approval can help start the process so that you know exactly what mortgage terms you will qualify for when you begin the home buying process.

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In some cases, you might even have two loans to help finance a prefabricated house or an RV. “When you buy the vehicle and the property, you may have a loan for the RV and a mortgage for the property,” says Gallagher.

And depending on where and how you buy your prefabricated home, there may be an option to buy as part of an all-inclusive transaction where the mobile home and the property are “considered as one. Once a mobile home is attached to the property, it can be done with a deed as part of a traditional property sale, ”says Gallagher.

FHA loan

FHA Title I loans can be used to purchase the prefabricated home, land, or a combination of both. There are maximum loan amounts for each of these scenarios:

  • Do-it-yourself only – $ 69,678
  • Prefab Land – $ 23,226
  • Prefab and Land – $ 92,904

To qualify for the FHA loan, borrowers must have sufficient funds to make the minimum down payment required (the amount required depends on your lender), can demonstrate that they have sufficient funds to make the payments, intend to have the constructed house as their primary residence and have a location on which the constructed house can be placed.

Bottom line

Whether you are financing with a home loan or a traditional mortgage, “It is important to have a written contract related to the purchase that specifies what you will buy, own, or lease,” says Gallagher.

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

When buying a prefabricated home, you are doing all of the necessary due diligence that you would do if you were buying a house built on site, such as: B. an inspection. Buying a home – manufactured or otherwise – is a big investment, so knowing what you are getting into first is important.