For clarification's sake, "manufactured homes" are produced entirely at the factory under HUD design and construction codes, with some minor modifications permitted during on-site completion. Once referred to more commonly as mobile homes, they have gotten increasingly sophisticated over the years with a wide variety of floor plans, dimensions and amenities.
What's more, it's the fastest-growing type of housing, according to the U.S. Census Bureau, which says about 8 percent of Americans live in them.
"Modular," "panelized" and "pre-cut" homes, on the other hand, are also factory built but are assembled on-site, and fall under the auspices of building codes in the municipality or jurisdiction where the home will be located.
Many traditional lenders shy away from manufactured homes, so you may find yourself taking out a personal property "chattel" loan -- rather than a real property loan -- from one of the handful of major lenders that cater to the manufactured home market.
Because manufactured homes usually aren't considered real property, the legal protections afforded their owners aren't as comprehensive as they are for site-built owners. For example, you wouldn't fall under the protections of the federal Real Estate Settlement Procedures Act that requires good-faith estimates of costs by the seller. I say that because there are unsavory operators in the business -- as there are in other businesses -- who are known for changing conditions of the loan at closing. Contact the Better Business Bureau for a report on the company you're dealing with, and make sure all the terms promised you are the same ones you see at closing.
Also, realize that your manufactured home may be whisked away quickly if you default on your loan, unlike the relatively slow foreclosure process applying to site-built homes.
You also need to determine where your manufactured home will be welcome. While the majority of communities accommodate them, some don't. So before you buy the land, be sure to research your local ordinances, as well as the restrictive covenants and deed restrictions of your prospective neighborhood. And make sure your manufactured home is going atop a permanent foundation. Otherwise, potential buyers of your home in the future may have a tough time getting financing.
An AARP survey a few years ago found that about three-fourths of manufactured homeowners reported at least one problem with the construction, installation or appliances of their new manufactured homes, with more than half reporting multiple problems. Most common were issues with interior finish and fit, plumbing, leaks in doors or windows and construction problems such as cracks or separation of walls. So make sure your warranty covers these areas and that the dealer has a history of helping to resolve warranty problems. Ask very pointed questions before agreeing to a deal.
And unlike their site-built cousins, manufactured homes can tend to decrease in value if they are not ideally situated and immaculately maintained. The shortage of traditional financing for used manufactured homes often reduces demand for resale. Of course, this can vary greatly according to the desirability of your market. Manufactured homes in high-growth or resort areas can hold their values quite well.
As an FYI, some folks end up making higher payments on their manufactured homes and lots than they would on a traditional home property, so you might want to explore financing options for an actual site-built house before going the manufactured route.
