Manufactured, Modular and Mobile Home Loans

By Ann Marie Harmony- direct lender and specialist in Manufactured/Mobile Home Loans.

• The stories of successful real estate investments are legion. Some well-known areas for making money in real estate include Foreclosure Homes, Tax Liens, Rental Properties Fixer Upper Homes, Note Investments, Probate Homes and REITs. Most take a heavy investment of your time.

Let me describe for you (for free) a timely, profitable and less well known way to affordable home ownership via factory-built housing. You don't need to be a frugal living aficionado, pinch pennies till they scream, paddle in shark-infested waters or negotiate in a manner distasteful to you. You can invest at a deep discount, while taking a fast path to home affordability, energy efficiency, durability, and safety. You will need a knowledgeable lender, broker/dealer or real estate agent, escrow/title officer, and appraiser. Don't worry- a normal mortgage transaction is "touched" by 20 different people. They get paid when you close your deal.

In the early days of modular housing following the Korean War, the home building industry specialized in small, affordable houses for first-time buyers. While the affordable-housing market remains the major part of the industry, there has been a move to the upscale market as well.. Thanks to today's cost efficient computer-design technology, it is increasingly difficult to tell a modular house from a stick-built one.

About 40% of all houses nationwide are constructed in whole or in part using factory-built components, which can save time and reduce waste. And that means lower construction costs, with savings passed on to buyers. Building the components in a factory reduces the number of on-site workers, which also lowers construction costs. Builders estimate that factory-produced components reduce on-site costs up to 15% during the initial stages of construction.

Factory-built housing refers to homes and dwellings which aren't 'stick-built' (constructed at the site), but which are built off-site (usually in a factory) and trucked to the building lot where they are installed or assembled. Factory-built housing includes modular, panelized, pre-cut, and manufactured homes.

Modular and panelized construction must comply with model or local building codes. Modulars are sometimes referred to by their code, example "BOCA" or "CABO" or "UBC". They have no HUD tags or protection/oversight from that agency. They are constructed to meet or exceed local building codes. They can be built in the same manufactured home factory on a framework of steel I-beams and wheeled out to the site in sections. Modular Homes may look exactly like their sibling Manufactured Home, or they may look like elaborate site built homes.

Manufactured homes are built in accordance with Federal standards known as the HUD Code, which regulates manufactured home design and construction, strength and durability, fire resistance, and energy efficiency. The code also mandates wind resistance of manufactured homes in areas prone to hurricane-force winds.

• In 2001, one out of 7.5 new single-family housing starts was a manufactured home.
• In 2000, 22 million Americans (about 8.0 percent of the U.S. population) lived full-time in 10.0 million manufactured homes.
• The average sales price of a manufactured home was $59,000 in 2004.
• All manufactured homes are built to the 29-year-old federal HUD Code, with each home going through a rigorous inspection process before being certified and sold.

There is no distinction between modular and site built homes as far as appraisal or financing. Banks and lending institutions treat both types of construction the same. Likewise, there is no difference in insuring the modular property. New modular homes can invoice $10-12,000 higher on the average, than comparable manufactured homes from the same manufacturer. Recent changes in the finance and appraisal industries require Manufactured Homes to be appraised against other recent Manufactured Home sales in the area, where a Modular may be appraised against site built homes.

About 175,000 dwellings per year are built in factories, including those categorized as "manufactured" and "modular" housing. Manufactured houses constitute three quarters of factory-built houses and have been associated with "trailer parks" or "mobile home parks," where residents own the units but not the lots. Buried beneath collapsed financing and bottom-dollar interest rates, manufactured home companies are retrenching. Because of the difficulties of getting approval and financing for land-lease communities, manufactured housing is increasingly placed on fee-simple lots.

The typical mortgage payment that California homebuyers committed themselves to paying in November 2004 was $1,755. Buy a lot for $90,000, make site improvements for $45,000, add a factory-built home for $95,000. Your package is a total of $230,000. Financing 80%- $184,000 for 30 years at a fixed 6.5% interest rate is a payment of $1163.01- at least 34% less each month or slightly under a quarter of a million dollars over the life of the loan! Conventional financing for 30 years fixed and ARM, with five percent down is available or 80/20% financing in certain circumstances. No wonder housing manufacturers are backlogged- buyers can order a new home with everything they want, appliances included, occupy quickly, and plan to own it outright in their lifetime!

Manufactured home lenders accounted for a disproportionate share of home purchase denials. I have personally seen manufactured home sellers drop their price well over $100,000 because they did not know where or how to get long-term financing at the higher figure.

Manufactured home loan lenders accounted for 5.4 percent of all conventional home purchase applications but 22.5 percent of conventional home purchase denials. Subprime lenders have higher denial rates than conventional prime lenders. The denial rate for subprime home purchase (home refinance) lenders was 26.7 percent (33.7 percent) compared to 8.7 percent (11.6 percent) for conventional prime home purchase (home refinance) lenders.

Less than two of 10 manufactured homes sold in this country are financed through mortgages.

When a manufactured home is permanently attached to a foundation, the home is eligible for conventional mortgage financing. However, the secondary market has changed their guidelines so often that most mortgage brokers and lenders become quite confused as to rate, term and property eligibility – so they refuse to finance them! FNMA has changed program eligibility guidelines 3 times in the past 18 months.

Although some lenders offer some sort of financing plan for buyers of these homes, many stay away from the market altogether. In a survey conducted by Bankrate. com, seven of the nation's 20 largest lenders didn't make these types of loans while others in that sample only offered a mortgage if a buyer could jump through a few very large hoops.

So most buyers either get financing from sellers or they take out personal loans on their homes, which means they pay a higher interest rate and can't deduct the interest payments, like buyers of site-built homes can.

According to the Manufactured Housing Institute, these borrowers are 83 percent of all manufactured homeowners.

In stick-built construction, everything has to wait while the foundation is being dug and poured. A modular house is built in four to six weeks, while the foundation work is completed.

Once the modular house arrives at the site, it goes up in a day, is closed up in another day, and then is finished in four to eight weeks. By comparison, it takes a minimum of six months for a stick-built house. There are a lot of conditions that determine the length of time for construction - the weather is an obvious one, but if there is a construction backlog, that, too, can cause serious delays.

Before computers, manufacturers needed to employ an acre of draftsmen to customize their houses. Since this was expensive, it tended to discourage changes, and the industry tended to push the buyer to choose from a catalog.

Manufacturers now rarely build the same house twice. Hundreds of models are available, from New England saltboxes to Victorian mansions; the catalogs are merely a starting point.

HUD and UBC Compliant Permanent Foundations

The MANUFACTURED HOUSING GLOBAL NETWORK