How To Buy A Manufactured Home And Land

Interested in buying a manufactured home and the land on which it sits? This isn’t surprising. Manufactured homes, properties that are built in a factory and then shipped to their permanent location, are often more affordable than traditional single-family homes.

But if you need to finance the purchase of a manufactured home and its lot, be ready for some extra work. Qualifying for a mortgage for a manufactured home can be more complicated than obtaining financing for a traditional home.

You can use a single mortgage loan to purchase a manufactured home and the land on which it will sit at the same time.

You can typically do this in one of two ways: If your manufactured home will be permanently connected to its land on a foundation, you can finance the purchase of your home and its land with one mortgage loan. Most commonly, you'll take out a fixed-rate mortgage loan, one in which the interest remains the same throughout the life of the mortgage.

If your home will not be permanently attached to the land or if you’re leasing the land on which the home sits, you won't qualify for a conventional mortgage loan. That's because movable homes are considered personal property and not real estate.

In such cases, you can either apply for financing directly from the home's manufacturer or apply for what is known as a chattel loan, a loan specifically designed to finance the purchase of movable or other types of personal property.

Manufactured Vs. Mobile Homes 

You might think that manufactured and mobile homes are the same, but there is a difference between them: The Department of Housing and Urban Development, better known as HUD, regulates manufactured and mobile homes, and the agency considers a mobile home to be housing manufactured in a factory before June 15, 1976. HUD did not have any construction standards in place for manufactured homes before that date.

The department considers a manufactured home to be one built in a factory after this date. Homes that are built after June 15, 1976, then, must follow HUD’s construction and safety standards for manufactured homes. This helps ensure that today’s manufactured homes are quality structures.

This distinction is important when you want to finance the purchase of a manufactured home. It’s difficult to obtain a mortgage loan for a mobile home built before June 15, 1976. It’s far easier to get one for a manufactured home built after this date.

Both mobile and manufactured homes are usually built in a factory before they’re shipped to the land on which they‘ll sit. Some will have permanent foundations, while others won't.

There is a difference, though, between manufactured, mobile homes and modular homes. Modular homes are also built off-site in a factory and then assembled on the land on which they will sit. The difference, though, is that modular homes must follow the building codes in the state and county where they’ll be installed.

Modular homes also usually come with crawlspaces or basements, while other types of manufactured homes are often built on a metal frame. Modular homes usually look more like traditional single-family homes. 

People often choose manufactured or modular homes because their price tags tend to be lower. But how much can you expect to pay when buying both a manufactured home and the land beneath it?

Land Cost

How much you’ll pay for your land depends on several factors, the most important of which are how much land you want and where it is. Depending on location, you might pay as little as $4,000 for an acre. In high-demand parts of the country, you could pay upward of $100,000 for an acre. The national average cost of land is about $17,570 per acre.

But remember, buying the land is just the beginning. You'll also have to pay for electricity, plumbing and other improvements. You'll also have to figure in the costs of your annual property taxes when buying land and a manufactured home, something that could boost the price of your factory-built dream home.

Manufactured Home Cost

After you purchase your land, you'll have to pay for your manufactured home itself. The price of your home will vary depending on a host of factors, such as its size, style, customizations and add-ons. However, according the U.S. Census Bureau, in August of 2022, the average cost of a manufactured home was $125,700, far lower than the median price of a traditional home, which stood at $359,000 in January of 2023, according to the National Association of REALTORS^® (NAR).

Here are some of the more common factors that will influence the price of your manufactured home:

• Home size: The larger your manufactured home, the more you’ll pay. Earlier this year, Rocket Mortgage^® estimated that the average cost for a single-wide manufactured home ranging from 400 – 1,200 square feet was $86,500, and the average cost for a double-wide home of 700 – 2,200 square feet was $158,800.
• Add-ons and customizations: The more features you add to your manufactured home’s base model, the more you’ll pay. You’ll pay more if you upgrade cabinets and kitchen countertops to higher-quality models or if you add a fireplace or higher-end appliances.
• Foundation: If you want to qualify for a mortgage, your manufactured home will usually need to rest on a foundation. According to HomeAdvisor, a foundation can cost anywhere from $3,500 - $25,000 and cost $7,000 on average.
• Utility hookups: If you need to hook up utilities, you can expect to pay $6,225 – $34,550, according to Angi, with the average cost around $20,400.
• Delivery: Once your home is built in a factory, it will be shipped to your land. This isn't free, either. The size of your home and the distance of the move will impact this price.
• Taxes: Once your home is set up, you’ll have to pay property taxes to your local taxing body each year. The amount you pay will vary depending on where you live and the value of your home.

If you need to finance the purchase of a manufactured home, you will have options: There are several types of manufactured and mobile home loans from which you can choose.

Note that your manufactured home must usually be permanently affixed to its land with a foundation if you want to take out a mortgage loan. If your home is not attached to a foundation, you will need a chattel loan.

Here is a look at some of the financing options for these homes. Keep in mind that not all lenders provide these types of loans and the minimum requirements will vary per lender. For example, Rocket Mortgage does not offer USDA loans or chattel mortgages and also requires a down payment of 5% for manufactured homes.

Conventional Loan

Borrowers can turn to conventional loans to finance the purchase of a manufactured home. These are loans that aren’t insured by a government agency.

• Credit score: The minimum credit score you’ll need for a conventional loan varies, but most lenders will require that your score is at least 620.
• Debt-to-income ratio: Most lenders will require that your monthly debts consume no more than 43% of your gross monthly income.
• Down payment: It is possible to qualify for a conventional loan with a down payment of as little as 3% of your home’s final purchase price. However, many lenders require a higher down payment for a manufactured home. For example, Rocket Mortgage requires a down payment of 5%.

FHA Loan

FHA loans are insured by HUD’s Federal Housing Administration. These can be attractive to borrowers because of the lower credit scores that they require. 

• Credit score: The lowest FICO® Score you can have and still qualify for an FHA loan is 500, with a higher down payment. However, many lenders, including Rocket Mortgage, require a minimum credit score of 580.
• Debt-to-income ratio: Most lenders will want borrowers to have a debt-to-income ratio of 43%
• Down payment: You’ll need a score of 580 to qualify for an FHA loan with a minimum down payment of 3.5% of your manufactured home’s final purchase price. If your score is at least 500, you’ll qualify for an FHA loan with a minimum required down payment of 10% of the purchase price.

VA Loan 

VA loans are only available to members or veterans of the U.S. Armed Forces or their unmarried widowed spouses. They are attractive because you usually don’t need any down payment. This isn’t the case, though, when you are financing the purchase of a manufactured home. 

• Credit score: There is no minimum score, but you’ll typically need a score of at least 620 for a VA loan.
• Debt-to-income ratio: 43%
• Down payment: Unlike with traditional VA loans, you’ll need a down payment of at least 5% of your manufactured home’s purchase price.

USDA Loan

USDA loans, insured by the U.S. Department of Agriculture, are attractive because you won’t need any down payment. You can only qualify for one of these loans, though, by purchasing a home in a designated rural area.

• Credit score: You’ll need a minimum score of 620.
• Debt-to-income ratio: 43%
• Down payment: You won’t need any down payment, even when purchasing a manufactured home, with a USDA loan.

Chattel Mortgage 

A chattel mortgage is a type of loan designed specifically for movable property and vehicles. Unlike with a traditional mortgage, your lender owns the property you are financing until you pay off the loan. In a traditional mortgage, your lender will instead have a lien against your property until you pay off your loan. The ownership stake makes it easier for lenders to claim your manufactured home if you stop making payments on your chattel loan. These loan types tend to come with higher interest rates. 

• Credit score: You can qualify for chattel mortgages if your credit score is on the lower side. Most lenders offering these loans require a minimum score of 575.
• Debt-to-income ratio: This varies by lender, but most will want your monthly debts to equal no more than 43% of your gross monthly income.
• Down payment: You’ll typically need a down payment equal to at least 5% of your manufactured home’s purchase price.

If the home doesn’t already come with the land, the most efficient way to buy a manufactured home is to purchase your land at the same time. Because you’re buying two things at once, this process can get complicated. Here are the steps you can take to make sure this procedure is a smooth one.

1. Choose Your Lot Location 

Choosing the right plot of land for your manufactured home is a key part of the process. You might want to live in a secluded, wooded area. Maybe you want to live alongside a lake. Or maybe you prefer a manufactured home in a suburban area filled with shops, restaurants and entertainment.

Where you want to live will largely determine how much you pay for your land. Land is more expensive in certain states. But if you want to live near your adult children or grandchildren, you might be forced to pay a little more, depending on where your family members live. You might need to pay more, too, if you want to live in a vacation spot or a state with a warm climate.

2. Find Your Manufactured Home 

Once you find a plot of land, it’s time to search for your manufactured home. Again, you’ll face several decisions.

First, how large of a home do you want? You can purchase manufactured homes in all sizes, though the larger your manufactured home, the more you’ll pay. You’ll also need to determine whether you want a manufactured home that is fixed to a foundation or one that is movable. Movable manufactured homes are less expensive, but it’s more challenging to find financing for them.

Finally, you’ll need to decide whether a base model home is right for you or if you want to upgrade your manufactured home with fireplaces, high-end appliances, more efficient heating and cooling systems or other add-ons.

3. Choose And Apply For Financing  

Your next step is to find financing for a manufactured home and choose a lender. You’ll have to decide whether to apply for a conventional loan, government loan or chattel loan. Not all lenders originate loans for manufactured homes. And your choice of lenders will be even narrower if you don’t permanently affix your manufactured home to its land or if you lease your land instead of buy it.

The interest rate attached to your loan will depend largely on the strength of your FICO^® credit score, the term of your loan, how much of a down payment you provide and the amount of debt you face each month.

4. Get Your Land Ready 

The company from which you purchase your manufactured home will work with you to make sure that your lot is ready for your new home. This will include applying for permits and preparing utility hookups.

5. Purchase Homeowners Insurance 

You should also purchase homeowners insurance for your manufactured home. If you’re applying for a government or conventional loan, this type of insurance is required before your lender approves you for a mortgage.

This insurance will protect you if your manufactured home is damaged or destroyed, if someone breaks into your property and steals your items or if someone is injured in your home or on your land and then sues you for medical costs.

Be sure to shop around for the right insurance company. Different insurers charge different rates. The more you shop, the more likely you are to find the right insurance policy at a price that fits in your budget.

6. Have Your Home Delivered And Installed 

After your land is prepared, the company that sold you your manufactured home will deliver it to the site. Make sure when buying your home that the retailer will take care of this step of the process and that the cost of delivery and installation is included in your final price.

The company that sold you your manufactured home might have staff that will complete the installation or it might contract with a separate company to handle this part of the process. Again, make sure that you know how the installation process will work when you sign the contract for your new manufactured home.

Buying a manufactured home can ease the strain on your budget because these residences are almost always less costly than a traditional single-family home. Finding a mortgage for these homes and selecting the right location for them, though, can be challenging. If you are ready to buy a manufactured home, apply online with Rocket Mortgage to explore your financing options.