Mobile homes, also called manufactured homes, are a great affordable alternative for homebuyers who want to get more space for their money since they generally cost less per square foot than most stick-built houses.
The Cost of Mobile Homes in California
The cost of mobile homes varies significantly, from $50K for a single-wide home up to $250K for a triple-wide version. Aside from floor space, the price also depends on additional features like patios and balconies, the location, and the construction materials.
In some cases, the price also includes the transportation cost and the setting up of the mobile homes.
According to a February 2021 survey released by the US Census Bureau, the average price of a single-wide mobile home is $65,400, while a double-wide version is $122,500.
If you’re on a tight budget, you may want to consider buying older mobile homes. Since they are considered personal property and not real estate property, their value drops quickly once they leave the factory.
While older manufactured homes are more affordable than newly built ones, you may have limited financing options if you choose this route because some lenders don’t cover them.
As a homebuyer, make sure that you also consider the current lending market, particularly the average interest and APRs. One of the most common mistakes of people is that they only compute the actual price of the home and forget about other factors such as closing costs, interest rates, and other fees.
If you want to buy a manufactured home in a mobile home community, you should consider the ongoing ground rent and the fees for shared facilities and services like swimming pool, gym, and clubhouse.
Two Financing Options for Mobile Homes: Chattel Loans Vs. Regular Mortgage
There are two ways to finance your mobile home: chattel loans and regular mortgages, which both come with pros and cons.
Unless your manufactured home is secured to the ground, it is considered a personal property instead of real estate property. Hence, your only option is a chattel loan, which applies to any movable assets, not just mobile homes but also tractors and bulldozers.
In contrast, you can only qualify for a regular mortgage loan if your mobile home’s axle and wheels are removed, and so it sits on a permanent site.
Lenders are more likely to finance your mobile homes if you own the land or you’re planning to purchase the site where your home will be permanently installed than if you keep its axle and wheels.
Chattel Loans: Key Takeaways
- It is easier to qualify for chattel loans, making them an excellent option for homebuyers with a relatively low credit score and a higher debt-to-income ratio.
- While they often come with higher interest rates than regular mortgages, some borrowers may qualify for low-interest, government-backed loans.
- They usually have shorter terms (15-20 years) than regular loans.
- This is an excellent financing option if you plan to live in your home and do not own the land it occupies.
Regular Mortgage Loans: Key Takeaways
- This is your best financing option if you own the land where your mobile home will sit because it comes with significantly lower interest rates and APRs.
- Homebuyers who have lower credit scores–i.e., 600 and below–may not qualify for most regular mortgage loans.
- They come with higher maximum loan amounts, sometimes reaching as high as $750K.
- They usually come with a low down payment.
- They have longer payment terms–as long as 30 years. As a result, your monthly mortgage payments are lower.
Your Credit History
Before you submit your mortgage application, request a free copy of your credit scores from the three major credit reporting agencies, namely, TransUnion, Experian, and Equifax.
Make sure that your credit report is accurate. Remember, any error can negatively impact your loan eligibility and the interest rates you have to pay, so if you spot one, immediately notify the credit bureaus.
The good news is that you don’t have to have a stellar credit history. Some chattel loans finance borrowers with scores as low as 500, although it often comes with caveats such as higher interest rates and lower maximum loan amount.
In contrast, borrowers with scores 700 and higher get the lowest interest rates that can help them save thousands of dollars every year.