Man wondering if he should choose mobile homeownership or renting.
September 9, 2022

Are Mobile Homes a Good Investment in 2022?

With the rising housing prices, many Americans aren’t sure if they will ever be able to buy their dream home. Fortunately, the mobile home industry provides a cost-effective, efficient alternative to traditional, stick-built houses. If you are sick of renting and are ready to own your slice of Texas, an affordable mobile home may be the ideal solution. But are mobile homes a good investment in 2022?

The short answer: yes! But read on to learn more about why investing in a mobile home is a smart choice. 

How are Mobile Homes Different from Traditional Houses?

First, it is important to understand what sets manufactured homes apart from stick-built homes. When you build a house the traditional way, it is constructed on the land where it will ultimately stay. When it comes to manufactured houses, construction occurs in a factory, and the home is then delivered to the land when completed. 

Building a traditional house is subject to unforeseen costs and delays. Because construction takes place outside, the timeline of building a home is subject to the elements. Though you receive a rough timeline of when your home will be complete, the reality is that there is only so much control you have over the building process. 

In contrast, houses built in factories are in a controlled environment. The building process is also more automated, meaning there is less room for error. When you buy a mobile home, you can expect to have your home completed on a more reliable, quicker timeline. Add to the fact that mobile homes are, on average, 10 to 20 percent less expensive than stick-built homes, and you can see why they are an attractive alternative for many homebuyers. 

Financing a Mobile Home

Keeping financing in mind when considering investing in a mobile home is important. Fortunately, there are many options for financing a mobile home in 2022. 

Chattel Loans

Chattel loans are the most common mobile home loans. It is the loan type used when the land the home sits on is not part of the loan package. You will likely need a chattel loan if you don’t own your home’s land. Chattel loans typically have a slightly higher interest rate and a shorter loan period than a mortgage loan, plus some advantages. The shorter payback time reduces the actual dollars paid to the bank as interest; plus, it makes your home free and clear sooner than a more extended loan period.

With a chattel loan, you don’t need to pay for private mortgage insurance (PMI). Finally, you can put your home in a mobile home community that offers more amenities than you may be able to afford if you placed your home on your land (such as a giant swimming pool). Since you are spending less upfront, your down payment will be less (often much less) than if you needed to finance a home and the land, not to mention the freshwater, sewer or septic, electric, and gas connections. The smaller down payment makes it easier for many people to get into homeownership with a chattel loan than other loan types.

Conventional Mortgage 

The lowest interest rates are generally found with a conventional mortgage. This mortgage is going to the bank to finance the mobile home, the land, and the land improvements. The downside to a conventional mortgage is you usually need a larger down payment to get this type of loan. Plan on a down payment of at least 20% for a conventional mortgage. Since the down payment includes the land and land improvements, a typical down payment can run you tens of thousands of dollars, depending on the land and the home you choose. A conventional loan is usually better for people buying their second or third home, where they can apply the equity in their old home toward purchasing a new home.

Land in Lieu Down Payments

Do you have a piece of land you own outright? Good news! You can use the value of the land toward your down payment. Your land will need to appraise high enough to meet the down payment threshold the bank wants, but you may not need to come up with additional cash for your down payment.

Government Loans

USDA, FHA, and VA Government loans, are very similar to conventional loans in that they buy the land and the home together. Government loans usually require a much smaller down payment than commercial loans, and with the VA loan, the down payment may even be $0. The downside of a government loan is there are more requirements and restrictions than commercial loans, plus the interest rate will often be a little higher than a conventional loan. If you put down less than 20% on the home, you will likely have to pay for private mortgage insurance (PMI). Finally, be prepared for the approval process to take a few extra weeks with a government loan.

Choose Your Lender

You can utilize your bank or private lender. Our goal is to make your home buying experience as easy as possible, so we’d love to help you find the mobile home of your dreams, whether you use our lenders or your own. Generally, your lender will be your favorite bank or a friend or family member who wants to personal loan you money. The advantage of using your bank is convenience and that you already have a built-up relationship.

The only disadvantage is if your bank does not typically handle loans for mobile homes, you may find getting approved for the loan harder than with our lenders, higher deposits may be required, and possibly even a higher interest rate may be assigned to your loan. Just watch the details when you go through the borrowing process. Borrowing from a friend or family member is often offered at lower interest rates or smaller down payments.

When borrowing person-to-person, we recommend hiring your attorney to review the documents to ensure the loan arrangement is fair, no matter how much you trust the loan. This can help when the unexpected arises; for example, what happens if the lender passes away? You should also know that loans between friends and family members can change the relationship, so be sure to talk through things like what happens if you lose your job, if there is a late payment, etc. Saving a few dollars is not worth driving a wedge between you and someone you care about. Communication plus a clear understanding of the loan arrangement can go a long way to preserving a healthy relationship.

Cash Deals

When someone is paying for a home and installation with money they already have “in the bank,” we call it a “cash deal” (but please, don’t bring actual cash to the dealership!). We’ve closed on many mobile homes where people just bring us a check to pay for everything.

Do Mobile Homes Appreciate in Value?

It’s a common misconception that affordable mobile homes depreciate after the initial sale, similar to cars. While not every manufactured home will appreciate over time and hold its value. Still, according to a detailed FHFA report, we can see that mobile homes appreciate very similar to stick-built homes. Contrary to popular belief, mobile homes’ values tend to appreciate over time rather than depreciate. 

Are you ready to invest in your mobile home? We would love to help you through the homebuying journey. Contact us today to connect with our Housing Consultants. 

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