What do manufactured homes and cell phones have in common? Both started out as boxy and awkward, and then grew up to be sleek and surprisingly functional. Manufactured homes are still experiencing growing pains, however, so take care not to let the joke be on you when it comes to financing them.
Manufactured homes are financed with a traditional mortgage or, more commonly, a personal property loan. A mortgage is usually the more appealing option, because it's less expensive than a personal property loan. Whether or not a lender will offer you a mortgage depends on how closely your situation resembles that of a traditional home buyer. This boils down to two points:
- The manufactured home should be permanently attached to a parcel of land; and
- The financing should be secured by the combined value of the home and land.
You don't have to accept the financing offered by the salesperson. Since mobile home loans aren't exactly formulaic, you could realize significant savings just by checking around with several lenders.
Understand Devaluation Risk
Traditional homes rarely drop in value over a long period of time. For this reason, mortgages can be paid back over 30 years, with little risk of the loan balance outweighing the home's value. Manufactured homes, however, don't hold their value as well as traditional homes. If you're only financing the home and not the land, a shorter loan term is less risky. A longer loan term makes sense when you're financing the manufactured home and land together. Even better, if the land appreciates, your home may increase in value. This may provide equity opportunities like a HELOC or refinance home loan.
Read the Fine Print
Personal loans, in particular, can be subject to hidden fees and harsh penalties for late payments. Avoid surprises later by knowing exactly what leeway your lender has to increase your interest rate or impose additional charges.
There's one other important similarity between cell phones and mobile homes: If you aren't careful, your bill can be shocking. Pursue your financing with your eyes wide open, and you can manufacture an excellent loan.