Is the cost of a mobile home worth it? Pros and cons

If you're on a budget, mobile homes can offer an affordable path to homeownership. And if you're pondering this option, you're not alone. Approximately 22 million people live in mobile homes across the country.

While the price tag for a mobile home can be significantly lower than a standard home – we're looking at an average of $124,000 versus $410,000 for a traditional one – owning a mobile home includes both upfront expenses to purchase it, plus ongoing monthly costs.

We’ll look at how much mobile homes cost, the difference between mobile homes and manufactured ones, and the advantages and disadvantages of owning one.

What’s the difference between a mobile home and a manufactured home?

Mobile homes are prefabricated, factory-built homes originally designed to be movable. They can have permanent or fixed foundations and are usually moved to a permanent site. The term refers to homes built before 1976.

“Manufactured home” is the standard term for factory-built housing made after 1976 that follows Department of Housing and Urban Development (HUD) regulations. They’re made on a permanent chassis and are on a permanent foundation system. These homes are built to meet HUD safety, plumbing, electrical, and thermal standards.

The terms “mobile homes” and “manufactured homes” are commonly used interchangeably, though it’s important to remember that a mobile home may not meet the same standards as a manufactured home.

You may have also heard the term modular home. These homes are different from manufactured or mobile homes. Instead of being held to HUD Code, modular homes are held to the same state, local, and regional building codes as on-site, stick-built homes. They are built in sections, or modules, and then put together on a site on a permanent foundation.

Is a trailer home a mobile home?

While the term “trailer home” and “mobile home” are commonly used interchangeably and thought of as one and the same thing, they’re not the same thing. Trailer homes are made to be portable by towing with a hitch and in turn can be lighter, while mobile homes are built for long-term living. They're built in a factory, then usually transported into different sections and put together on a permanent foundation.

How much do mobile homes cost?

Here's the average price tag for different types of manufactured homes:

• Single-wide average cost: $88,500
• Double-wide average cost: $152,900

It may add to your costs if you need to incorporate a foundation:

• Pier and beam foundation: A pier and beam foundation typically costs between $1,000 and $8,000. Anchors hold your home down with steel straps to the frame.
• Slab foundation: A slab foundation usually costs approximately $4,000 to $9,000, and forms a slab of poured concrete with anchors.
• Basement foundation: Basement foundations cost about $12,000 to $25,000, and offer larger living spaces for occupants.
• Pit/crawl space foundation: Pit foundations typically cost $6,000 to $15,000, and refer to digging a pit out of the ground underneath your mobile home to make a crawl space.

When budgeting for your mobile home, you'll want to factor in potential repairs or upgrades so you’re prepared for the cost.

Pros and cons of mobile homes

To help you decide whether mobile homes are a good fit for you, you'll need to look at both the pluses and minuses. Here are some of the advantages and disadvantages of buying a manufactured home.

Pros of manufactured homes

• Affordability. Due to their factory-built standardization, their labor and material costs may be lower.
• Customization options. Just because a manufactured home was built in a factory doesn't mean that you can't make it yours. You may be able to customize floor plans, your kitchen, porches, and siding.
• Faster construction. Manufactured homes can be constructed in just days to a few weeks, with total movie-in from the time of the order being around 2 to 4 months from the time of the initial order. Traditional, stick-built homes can take around 7 to 12 months or longer, depending on the home.
• Up to HUD standards. Because manufactured homes need to adhere to HUD standards, they ensure safety, energy efficiency, and structural quality.
• Appreciate at the same rate as site-built homes. This has been a recent shift and, it turns out that manufactured homes appreciate at around the same rate in value as site-built ones.
  

Cons of manufactured homes

• Need a permanent foundation. Manufactured homes need to be built on a permanent chassis that is built on a permanent foundation. 
• HOA fees. If you live in a community, you might have HOA fees, which can range from around $200 to $800.
• Negative perceptions. Some folks might have negative perceptions of manufactured homes. For example, they might be of lower quality or don't have long-term value.
• Financing challenges. When you are planning on buying a home that's not permanently affixed, you might have fewer financing options or a higher interest rate and shorter terms.

Is it harder to get loans for manufactured homes?

While financing a mobile home might mean more added challenges and hurdles than a traditional mortgage, options do exist. This includes Fannie Mae MH Advantage, Freddie Mac conventional loans, chattel mortgages, and government-backed Federal Housing Administration (FHA) Title I and Title II loans.

What you're eligible for depends on whether your home is permanently affixed and classified as real property. Let's look at some loan options for manufactured homes. 

Fannie Mae Standard MH

• Financing with 5% down and up to 30-year terms.
• Must be a multi-width manufactured home.
• May be able to have lower interest rates for the first few years. This is a temporary interest rate buydown of up to 3%. The maximum rate increase per year is 1%,

Fannie Mae MH Advantage

• Financing with 3% down¹ and up to 30-year terms.
• The home must be at least 400-square-feet and 12 feet wide living area requirement and restrictions on leased land.
• \This might feature lower interest rates compared to traditional loans. This type of loan also has a temporary interest rate buydown. This is when upfront funds can help lower the interest rate of the home loan for the first few years.

Freddie Mac

If you're looking to buy a manufactured home that's permanently affixed and considered real property, then conventional loans are available for a manufactured home. To qualify, the home generally needs to be a minimum of 400 square feet.

To qualify for a conventional loan from Freddie Mac, you'll usually need a minimum credit score of at least 620 with a minimum down payment of 3% and a maximum debt-to-income ratio of 43%.

Chattel mortgages

Chattel mortgages are loans that are used for movable manufactured homes. They can also be used to finance a movable piece of personal property, such as a vehicle or piece of machinery.

Chattel mortgages cover movable manufactured homes, and the home serves as collateral. However, the loan doesn't include the land, so the land can't serve as collateral.

Chattel mortgages usually are easier to qualify for than traditional mortgages. They also require a minimum down payment of 5%, which can be lower than other types of traditional mortgages.

However, chattel mortgages usually have far higher interest rates and fewer protections for the consumer. Plus, they usually have smaller loan amounts and shorter terms and usually have terms up to 25 years. As a result, expect higher monthly payments.

Government-backed loans

If you're wondering if you can get an FHA loan on a mobile home, the answer is yes. Government-backed loans designed for manufactured homes, such as FHA Title l Manufactured Home Loan Program, can be used to finance a manufactured home, the land that it sits on, or both.

While FHA Title I loans don't require you to own the land, if the land or lot is leased, HUD requires that you lease it for at least three years.

To qualify, you'll generally need to meet FHA eligibility, such as a 580 minimum credit score and 3.5% down payment. You may be able to qualify with a minimum credit score of 500 if you can offer a 10% down payment.

You might also be able to use an FHA Title II loan for your mobile home, but the home needs to be permanently affixed to the land in order to be considered real property instead of personal property.

Whether a manufactured home is "real property" or "personal property" can impact financing, interest rates, and the potential value appreciation. For example, lenders usually need a home to be considered "real property" to offer a mortgage.

How do lenders classify manufactured homes?

Lenders generally classify manufactured homes as either real property or personal property. If the home is on a temporary foundation, they're classified as personal property. If they are permanently affixed to the land, similar to a site-built home, but with wheels and towing mechanisms removed, then they fall under real property.

Do mobile homes hold their value?

Note that manufactured homes may depreciate or appreciate less than traditional homes. However, according to the Urban Institute, in recent years manufactured homes have increased in value at the same rate as traditional, "stick built" ones when they are attached to a permanent foundation.

If you own the land that the mobile home sits on, land value usually appreciates, which can boost the overall value of your property. Other factors that can affect the value of your home include the age, condition of the home, market conditions, supply and demand, community, neighborhood, and maintenance.

FAQ

Interested in learning more? Here are some frequently asked questions about manufactured homes.

How can you buy a mobile home?

You can buy a mobile home through a dealer or in a manufactured home park, and you may also place one on your own land if zoning allows.

Are mobile homes ever a good idea?

Yes, mobile homes can be affordable, customizable, and offer a strong community feel. Depending on your personal situation, they may meet your needs.

Why don’t mobile homes hold value?

A mobile home's value depends on the housing market, age, maintenance, and other factors, and they typically don’t appreciate like traditional homes. While they don’t typically appreciate like traditional homes, those attached to a permanent foundation may experience a greater increase in value over time.

The bottom line: Mobile homes can be a good path to owning a home

Mobile homes can be an affordable option to having a place you call your own. To make sure it's the right choice for you, you'll want to weigh the pros and cons, assess costs, and explore loan options.

If you’re considering the purchase of a manufactured home or another type of home, you can reach out to Rocket Mortgage to apply for a mortgage.

¹ The 3% down payment option is only available on certain conventional loan products and is not available in all states. Additional terms and conditions may apply.