Manufactured homes, also commonly referred to as mobile homes, are homes prefabricated in a factory rather than built on site. A manufactured home costs an average of $85 per square foot — almost half of what a site-built home costs, according to the Manufactured Housing Institute.
Because of that price difference, mobile homes have become an appealing option for homebuyers. If you’re not able to front the cost, however, a personal loan for a mobile home is a viable option.
Compare rates for loans for mobile homes
Types of mobile homes
“Mobile homes” is a term often used to describe the modern manufactured home. But mobile homes, manufactured homes, and modular homes were distinguished from one another in 1976 because of changes in policies set by the Department of Housing and Urban Development (HUD).
There are three main types of “mobile homes,” though there is some overlap between the types.
Mobile home
These were mass-produced after World War II to be more affordable housing options. But in 1974, Congress passed the National Manufactured Housing Construction and Safety Standards Act, which standardized manufactured home construction, and the Housing Act of 1980 subsequently mandated that such homes built after June 15, 1976, be referred to as “manufactured homes” in federal laws and literature.
Mobile homes are relatively small, factory-built houses that were transported to a location and used as a permanent home. There are single-wides, which are a smaller option, or double-wides, a larger option that are formed from two separate pieces and put together on site.
Both options could generally be moved again after their initial assembly, but the ease of such a move depends on factors including the age and condition of the mobile home, how much it weighs, and how far you wish to move it.
Manufactured home
Manufactured homes were previously known as “mobile homes,” but after 1976, they were distinguished from mobile homes with a red certification label placed on each transportable section’s exterior.
Manufactured homes are made in factories and built to comply with HUD code, then moved to a permanent site. However, they can be larger and more customizable than single- or double-wides, and are not usually meant to be moved again after their initial set-up.
Modular home
Modular homes are a type of manufactured home that has parts built in a factory and then assembled and placed on a permanent foundation. They require more on-site construction than manufactured homes and aren’t intended to be moved once installed.
Pros and cons of using a personal loan for a mobile home
A personal loan is a loan that is usually a fixed rate, meaning the interest rate won’t change from month to month, and unsecured, meaning you don’t have to provide collateral to “secure” the loan.
These loans come in a lump sum and you repay them in installments over a period of time. They have few restrictions around their use and are often used to make major purchases, cover emergency expenses, or to consolidate debt.
Pros:
- Less time-consuming process: Most home loans will be backed by the home you’re purchasing, which creates a longer process with many steps. Since personal loans are usually based on your credit score and history rather than the home you’re buying, it’s generally a smoother and faster process.
- Can save on fees: Many home loans may include fees for things such as home inspections, appraisals, and closing costs. Personal loans don’t come with these expenses — though you may see an origination fee or prepayment penalty, depending on the lender.
- Don’t need to own land: Some loan options will require you to own the land where you plan to install your manufactured home. This isn’t the case with personal loans.
- No collateral needed: If you default on your loan, your home won’t be taken, as most personal loans are unsecured and don’t require you to back the loan with something you own, like your home.
Cons:
- May not qualify for a large enough loan: While mobile homes are less expensive than traditional homes, you still may have difficulty qualifying for a personal loan large enough to purchase the one you want. The average cost of a new manufactured home was $125,000 in April 2023, according to the U.S. Census Bureau. Many lenders offer maximum loan amounts of $100,000 for personal loans, and you may not be able to qualify for the maximum amount.
- Might be able to get a lower interest rate with a mortgage: The average fixed-rate mortgage has a 7.31% interest rate, compared to a 12.33% interest rate for a personal loan, according to data from the Federal Reserve.
- Will have to repay quickly and can expect much higher payments: Personal loans have much shorter repayment terms than loans designed to be used to purchase a home, which makes the monthly payments quite high.
Other types of financing for mobile homes
If a personal loan doesn’t sound like the right option for you, here are other ways you can finance your mobile home.
FHA Title 1 loan
The Federal Housing Administration (FHA) works with private lenders to help people buy manufactured homes. This program helps buyers get longer repayment terms and lower interest rates than they might be able to with traditional loan options.
Fannie Mae manufactured housing loan
Another federal program that helps buyers afford manufactured homes, these are mortgages with at least a 5% down payment available to borrowers with credit scores of at least 620. These loans allow purchases of a variety of manufactured homes, and offer temporary interest rate buydowns that help borrowers save on interest.
Fannie Mae also offers another program called MH Advantage. However, these loans can only be used for properties built to certain standards consistent with site-built homes. MH Advantage requires a minimum down payment of 3% and offers higher loan-to-value (LTV) ratios up to 97%.
Freddie Mac mortgage
These are another loan option for low- and middle-income borrowers. These fixed-rate mortgages come with extra paperwork for manufactured homes, however, as these types of loans are considered riskier.
VA loan
These loans, backed by the Department of Veterans Affairs, are available to veterans, service members, and their family members. They are available for up to 95% of the purchase price, and for repayment terms of up to 25 years and 32 days, though the term will be based on the type of manufactured home you buy, such as a single-wide versus a double-wide.
USDA loan
This U.S. Department of Agriculture program helps low- and middle-income borrowers in rural areas buy a single-family home, including manufactured housing. The monthly payments are based on the applicant’s income and can’t be more than 29% of their gross monthly income.
Chattel mortgage
These mortgages are available for movable property, meaning that you won’t have to own the land you plan to live on to take out this kind of mortgage.
These loans tend to come with higher interest rates than other mortgage options. Research from the Consumer Financial Protection Bureau also finds that chattel mortgage borrowers are less likely to refinance, and face high denial rates.
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