I posted a video on one of my recently completed house flips that was a manufactured home. I got a lot of comments from viewers who thought it was crazy that I would flip a manufactured home since they are so hard to finance. Many people thought it was a mobile home, which is almost impossible to finance. Some people even thought it did not have its own lot, which would make it even harder to finance. When you are dealing with manufactured, mobile, and modular homes it can be very confusing. I did not know the differences between all of them until a few years ago, and I have been a real estate agent and broker for almost 20 years. If you are an agent, investor, buyer, or seller it is important to know what the differences are and how they affect the value of a property.
What are the differences between a mobile home, manufactured home, or modular?
A stick-built home is a house that is constructed on-site. A foundation is poured, the house is framed, the electric, plumbing, HVAC is installed, the roof is put on, drywall and flooring are put in, and the kitchen and baths are built. A manufactured, mobile, or modular home is built on another site and then moved to its final resting place. There is some assembly required, but most of the home is already built before it is moved.
- Mobile home: A mobile home is built with axles under the house so that it can easily be transported. The axles stay on the home once it is dropped off where people will live in it. The mobile home might have a skirt put on to hide the axels and the fact it has no foundation. Often a mobile home is registered with the DMV and is considered a vehicle.
- Manufactured home: A manufactured home is built on another site and trucked to where it will permanently reside. Manufactured homes do not have axles but sit on the truck. When they are placed in a permanent location they may or may not be installed on a permanent foundation. Manufactured homes have metal frames so that they can be transported easier.
- Modular home: A modular home is built at another site and trucked to its home just like the other properties. The big difference with a modular home is that it has no metal frame: it has a wood frame.
It is important to know whether the land comes with a manufactured, mobile, or modular home
One of the most important things to know about the value of a home is the land. Many mobile, manufactured, or modular homes are placed in “parks” where the homeowner does not own the land. They pay lot rent. The park owner owns the land and has control over the lot and what they charge for rent. Lot rent can be extremely expensive: $300 to $100 a month depending on the location and the amenities. You could see an extremely cheap property, but the reason it is so cheap is that the land does not come with the house. You are only buying the house and could even be forced to move it in the future.
In my area, a mobile home in a mobile home park could be sold for $30,000 or less because the land is not owned. If that mobile home was placed on a lot, the price would be $100,000 or more. Land is very expensive here, as are utilities like water and electric that you need. A manufactured home, a modular, and a mobile home could all come with their own land or be placed in a park with lot rent. It will be almost impossible to finance a property that is located in a park with lot rent.
For more information on the ins and outs of buying houses, check out my book: How to Buy a House: What Everyone Should Know Before They Buy or Sell a Home.
How does the difference between a mobile home, modular home, and manufactured home affect financing?
Financing a property that was built in a different location and then moved to its permanent location can be tricky but not impossible. If you have a mobile home with axles, you will have a hard time finding any bank to finance the property. If you have a manufactured house with a metal frame, you might be able to finance it. You could even finance it using FHA if it meets the following requirements:
- The house was built according to HUD guidelines. Usually, the HUD tags need to be on the house to prove it was built according to HUD, and you need an affidavit showing it qualifies.
- The house must have been moved to its current location when it was new. You cannot move a used manufactured home onto a new lot and get FHA financing.
- The house must be on and attached to a permanent foundation. It is usually called “purging” a house when it is permanently secured to the foundation and approved by the county or state. This cannot be done in a park with lot rent.
- The house must be in good enough shape to meet FHA guidelines.
A modular home is actually much easier to finance. As long as the home is purged and on a permanent foundation, it should be thought of as similar to a stick-built home and financeable.
What do you need to get financing for a manufactured home?
A manufactured home on a permanent foundation can be financed fairly easily, but you need to be able to prove it is a HUD-manufactured home. Not all manufactured homes are built according to HUD guidelines. When we sell manufactured homes, we need to have HUD tags on all sections of the home that prove it was built per HUD guidelines. If you buy a manufactured home, do not lose the HUD tags! We knew we were going to re-side one of our homes, so we actually cut the tag off and kept it in a safe place. In some cases, the HUD tags are on the inside of the home inside kitchen cabinets as well. Even with HUD tags, you may need to get a certification, and if you lost the HUD tags, you will certainly need to get a certification letter. This site can help you obtain the certification.
Some lenders may also want a letter from an engineer stating the home is on a permanent foundation. You can see the video of one of my manufacture house flips below:
It can be tough to finance some manufactured, mobile, or modular homes, but you cannot group them all together. If the property has its own land, is purged with a permanent foundation, and built to HUD guidelines, it should be financeable. Age also plays a factor in financing as the older a home is, the harder it will be to finance it.