Manufactured housing, including mobile homes and modular homes, are popular options for people searching for a lower cost way to buy a home. These homes are typically assembled in a factory and then moved to the home site in one or more pieces. While the price tag on manufactured homes is considerably less than that of traditional site-built homes, there are a few disadvantages that buyers should consider before investing in one.
A special type of loan is issued when a person finances a manufactured home. These loans are often more like auto loans than traditional mortgages and can be easier to obtain for those with few assets or poor credit.
Manufactured home loans usually have a higher interest rate than traditional mortgages. Since most people purchasing a manufactured home either have lower income or less of a credit rating than those purchasing a stick-built house, these loans become even more expensive to the buyer, according to Loan.com.
According to United American Mortgage, the interest rate on a manufactured home will typically run 2 to 5 per cent higher than the rates offered on a traditional stick-built home.
Debt To Asset Ratio
Buying a home is usually thought of as an investment. If the home depreciates over the years of ownership instead of gaining value, however, then the home loan is simply a debt. Manufactured homes typically lose value over time, according to Loan.com. Even in an unstable housing market, traditionally built homes are believed to gain value over the long term, whereas manufactured housing is considered to depreciate, much like an automobile.
Some manufactured homes are simple house trailers that are not attached to a foundation and are made of weak materials. These factors bring the price down, but they also increase the safety risk significantly to those living in areas prone to hurricanes and tornadoes.
Well-built brick or wooden homes on a sturdy foundation are much more likely to survive a direct hit by a severe storm than a mobile home or some modular homes. Those who choose to live in manufactured housing in severe weather areas should invest in storm shelters that are easily accessible to offset this risk.
Public opinion is one of the biggest disadvantages concerning manufactured housing. While many modular homes are built with equal or near-equal quality standards as site-built homes, many people still feel that modular homes are in the same quality category with mobile homes, since they are all manufactured housing. Even if this is only a myth, it can affect resale value and mean the investment is worth less than it should be.