Why is it hard to finance a older manufactured home?

14 years ago

My husband and I have been looking into buying a home. We are wasting our money renting so we decided to try and take the next step. We live in northern humboldt and home prices are rediculus! We have been looking and so far for the price manufactured homes are the way to go. We found a really cute manufactured home in a great park and when I told the realator thats been helping us she said that she was concerned that we wouldn't beable to finance it because it was a 1968 (older) manufactured home. She was going to call someone about it. Why does that matter? The loan people said that we can afford up to 140,000 (tho we only want up to 100,000) and this place is for 55,000 plus we have good credit. my husband has a 720 and i'm like a 690 because i have little credit established. So whats the year of the manufactured home have to do with it? I just don't understand! Please help.

Oh FYI we can't save much money (bills bills bills) for a down payment we are going for 100% financing- but she didn't say that was the problem.

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Comments (21)

paulflyboy
14 years ago
My guess would be because it depreciates in value over time, and its already pretty old. just a guess, I am by no means a pro.
brickeyee
14 years ago
Manufactured homes are not known for increasing in value over time, but decrease.

That increases the risk to the lender, and many will not lend on manufactured homes that are not permanently installed on a foundation.
You could remove the collateral.
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OK, Madeyna, maybe I can help. I think it's possible you are confusing assessed value and appraisal value and market value (aka sale prices). Assessed value is the basis of property tax. In most places it only has an approximate relationship to appraisal and market values. It's main purpose is to establish a fair relative value among all the properties in a given taxing jurisdiction. Since it is often loosely based on sale prices, if all the properties that could sell for the same price have the same assessed value, then the assessed value is accurate. It doesn't matter if the $500K houses are assessed for $5 or $500,000 it only matters that all of the $500K houses have about the same assessed value, at the same time. And for assessment purposes 100 years has, in some jurisdictions, been determined to be the functional end point for judging how much a house's value should be reduced due to age alone. 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The mansard-style roof was originally a tax-dodge as it created valuable finished living space in the untaxed "attic" story. Humans are such clever, creative species when figuring out how to manipulate the rules!) Appraised value is a value set by a qualified appraiser of what a particular property is likely to sell for in the near future (or occasionally for some different end point). It presupposes that each party (both buyer and seller) are equally knowledgeable about real estate matters and that neither is under any undue pressure to complete the sale. The value is derived from a (sometimes complex) comparison between the subject property and recent closed sale prices (data usually gleaned from public records and real estate broker reports). The complexity comes in because rarely are two houses perfectly identical, so a method must be made to note and appropriately weight the different features, locations (distances) and slightly different time frames. Appraisals are about looking at the near past to predict the near future for a particular property, as best as possible. They are used in the process of getting a mortgage to make sure that the lenders weren't lending more money than the house was likely to be worth. (Big OOPs there, as we can see now!) And sometimes appraisals are done for other valuation purposes such as settling an estate. Market value (and its illegitimate, and much more often gossiped about, sibling, asking price) are about what money actually changes hands from buyer to seller at closing. It takes into account not only the actual house, but also the eagerness of each party to do this particular deal, for this particular house, at this particular time. It's those last caveats that are so individually driven which can make market value different from appraised value since they have a lot to with personal factors that have nothing to do with the property itself. Sellers that have finally reached the end of their tether, or are over a barrel financially are highly motivated to cut prices. Buyers who are novices or just ga-ga over a particular house will often pay through the nose. And until recently everybody fancied themselves as real estate sharpies or mini-moguls, so they thought that the sell/buy bigger/sell higher/buy even bigger merry go round could never fail. Another big OOPS! And so there you have it. Just one other comment: I wouldn't count on recouping all the money you put into remodeling an older house. That may have been the theory behind the flipping and fix-up crazes, but I doubt that it really was true in most cases, particularly with medium to really old houses. Money put in to older houses to bring them up to snuff is not usually realizable profit on sale. It's simply the difference between the orginal sale price (generally lower with old houses) and the costs of bringing the house to the living conditions the owner wants to have. Say you buy an old house for $100K, and invest another $25K remodeling, upgrading, etc., you still may not have a house sellable for $125 (disregarding the current plummet), you just have a $100K house that you needed to put another $25K into to live happily in. If you can afford to spend the money, and it gets you more of the features and life-style you really prefer, then it's money well spent, IMO. But only in irrationally appreciating markets (like we've just lived through) does it seem that if you pay $100K for a house, and then put $25K in (and usually a lot of sweat equity, even if only in the inconvenience and time spent dealing with a reno), then you have an asset worth $125K++ down the line. Basically, you still have a $100K house that you spent $25K customizing. If you're lucky some of the costs of customizing (like, say, indoor plumbing where there wasn't any) are likely to be recoup-able on a dollar for dollar basis. But because people often want very different things in old houses, that isn't always true. For instance if someone had spent $25K putting new double-pane, tilt-in windows in my 165 y.o. house there's no way I'd want to pay $25K extra - actually that would be a sale price downgrade, IMO. So, with older houses, many (costly to fix) things will turn out to be just for your own pleasure or comfort, and not for the resale value you can ever hope to get. I'd decide what you need to do for your life (sell or wait it out), and not try too hard to time the market. If all houses in your area are down, then maybe it's better to wait, if you can. But don't kid yourself that waiting has no risk of further across the board price-slides, or even of a weakening in the potential sale prices of older houses as the glut of newer ones (with features many more people want) flood the market as the Great Unwinding unfolds over the next few years. I wish you good luck in whatever you decide to do. L PS: Oh, yeah, I almost forgot. There is also the CMA, or whatever its current name, which is the a figure offered by various realtors to prospective listing (selling) clients to encourage the sellere to list with them. While these can be accurate, there's often some extra windage built in there as an appeal to the seller's greed. Agent agent "A" says, "I'd list the property for $100K"; Agent "B" comes along and says, "I'd list the property for $150K". Neither is really talking about what the deal may close for. Which do you choose, as no one would like to leave $50K on the table unneccessarily,not to mention the effect of the differences on marketing scenarios and timing? The cure for that dilemma is one (or more) private appraisals. Then you have a better idea what the property may sell for, not the initial listing price which is a meaningless number. Sure, appraisals cost a few hundred bucks, but with thousands at stake it seems like a worthwhile investment. Unless of course, you are a real estate sharpie. Then you're good to go!
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terezosa / terriks
14 years ago
Manufactured homes in parks are private property and NOT real estate. It will continue to depreciate, and most likely the park rent will continue to rise. You could end up with a mobile home that you can't sell in a park that you can no longer afford. It is really not a good deal.
logic
14 years ago
There are a variety of reasons. First and foremost, it is essentially a "mobile" home. Consequently it is often considered more like a personal possession than a home. If it is permanently fixed to a foundation, that sometimes makes it easier to get financing. In addition, if you also own the land that the home is on, that makes it easier still.

They also depreciate...not unlike a car....whereas an actual house does not do so unless there is an overall real estate market collapse...such as happened recently. Some states even require you to register them with motor vehicles.

Last but not least, manufactured homes are not built in accordance with local building code, as they are "mobile". Consequently, they are a bigger risk than traditional housing.

As far as I know, FHA financing is only available on those built after 1976 that have a HUD sticker that proves they were at least built to HUD code. The 1968 version of these homes are anybodys guess in terms code, build quality and safety.

Insurance can be pricey on an older MH as well due to the above reasons.

Best bet is to research this purchase VERY thoroughly and then decide if this is indeed the most cost effective option.

Here is a link that might be useful: Alternative Housing-Manufactured Homes
mariend
14 years ago
My kids live in Humbolt county and the one thing you do have to watch is mold. In a moble home you will get alot of this because of the rain. I would be very surprised that you will get any financing because of the year. Another thing unless you have proof of remodeling this there are alot of safety issues. Wiring is one big problem. Where is Humbold will you be located? Like one poster states, insurance will be very expensive.
Yes homes, gasoline, and other things are out of sight. If you are over certain ages, there is a nice moble home community in one city.
Good luck
User
14 years ago
Julk,
if you can't save much money, DON"T BUY.
Stay where you are renting til you can save hundreds of dollars every month for a home on top of your bills.
Ironically, not being able to get financing is actually saving you financially in the end.
creek_side
14 years ago
Like others have said, a mobile home in a park is the worst of both worlds. You have to make payments on a depreciating asset (the mobile home itself), while you continue to pay rent that will surely escalate on the park space.

Despite their name, mobile homes really aren't all that mobile. They can't be moved without great expense. Essentially, owning a mobile home in a mobile home park traps you with mortgage AND rent payments. Finding a buyer if you decide or have to leave will be very difficult.

A 1968 mobile home will probably be a constant maintenance headache. It probably wasn't built all that well in the first place and may be nearing the end of its useful life.

The only way I would buy a mobile home is if it was sitting on a nice piece of land that could support a house some day. Ask your Realtor about a lot with a mobile home on it.
julk_1212
Original Author
14 years ago
Okay! This is all great advise! I appreciate it. Another question... If I did decide to buy a mobile home that was not old (more in the 1990's or earlier) and I could defenently get financing, is it still a real bad idea?

Finding a home that isn't through the roof in a price in this area is just difficult and I am really tired of watching my money go to absolutly no investment. An okay apartment for rent is 700 a month... and it is just not ideal to throw away so much money (FYI 700 for rent in this area is lower end). I could afford a mobile home in a park or a total fixer upper. I can't do a fixer upper because I'm pregnant (3 months left til I have a baby) and I can't have a newborn or a baby in that type of house. I know that people say "oh just wait and save up for a down." I did the math... it would take me... eh... about 15 years to save up for a good enough down payment in this area. I really want to get investing going so that I can resell later and then move into a nicer place. ??? So... is it worth it to go into a newer mobile home in a park? Will I in the end (lets say 5 years) have gained anything? equity? some investment at all?
logic
14 years ago
Once again...mobile homes generally do depreciate, especially those in a MH park, as you don't own any land.
If you don't own the land that the MH is on, you will always be subject to the whim of the parks owner. As you will have to pay rent for the space, if the owner increases the rent, you won't have a choice but to pay the rate hike....which could serve to wipe out any equity that you may gain. If the owner stops maintaining the park properly, that will also affect you adversly.

Bottom line? If you own the land, you would gain land equity. If you don't own the land, chances are you will see minimal equity if at all.
creek_side
14 years ago
Also consider the nightmare scenario of the park closing. This has happened in the past with tenants, often elderly lower income retirees and lower income folks in general, with eviction notices in hand, no place to go, no place to move the mobile home to, and no money to do it, even if they had a place to go.

Any mobile home park located in a desirable area is always a target of developers who want the land for their own purposes. When park owners have large wads of cash waved under their noses, their first thoughts may not be of their poor tenants, but of tropical breezes and drinks at a cabana in Mazatlan.

Some states have put protections in place to mitigate this sort of thing. I don't know if California is one of them, nor how extensive the protections may be, if they exist. You should check, if you insist on doing this foolish thing.

Again, buying a mobile home in a mobile home park is not an investment. It is a money sink.
western_pa_luann
14 years ago
"Will I in the end (lets say 5 years) have gained anything? equity? some investment at all?"

Nope.
The MH will have depreciated even more.
The land... well, you'd still be paying RENT on that, which can be considered throwing money away just as you current rent is.
western_pa_luann
14 years ago
Oh, just thought of something else.

In my area at least, MH owners pay property taxes. Renters do not.
So you will have the added expense of property taxes.

And you will have utilities... are those included in your current rent?
That may also be a extra expense for you!
Billl
14 years ago
Owning a mobile home isn't always a bad idea. In some areas, you can get a really cheap mobile home and really cheap rent. Growing up, I knew several people that lived in mobile homes for a couple of years in order to save up money for a down payment on a permanent home.

However, those people still "lost" money in the mobile home. They depreciate over time just like a car. However, they lost less money on that than they were able to save while they lived there.

In your case though, it doesn't sound like a good idea. If you can get a $700 apartment, you will be better off. That will actually be cheaper than the payment on a mobile home + land rent + taxes + upkeep. In the meantime, you need to look at what expenses you can cut out of your life so you can start saving some money. I don't care what your bills are, everyone can find some places to save.
Nancy in Mich
14 years ago
You are SO lucky to be renting! Imagine that you had saved a bunch of money in a bank, and one day you learned that everybody who had put their money into savings suddenly had a third of it taken away. THAT scenario is what a lot of us homeowners are living through. Imagine my situation. I owe $136,000 on a house that I could sell now for $90,000. I have to earn $46,000 to bring to the bank before I can sell my house. That is after I replaced the furnace, water heater, windows, doors, fence, porch, driveway, bathroom fixtures (except tub), kitchen cabs, floor, ceiling, lighting, electrical panel in the basement, and after repairing the roof, adding vents, adding attic insulation, stripping wallpaper, and re-landscaping. Does owning a house sound like an INVESTMENT? Not to me. You pay $700 a month, and can walk away with one month's notice. That is freedom. I have to earn $46,000 to unload my house, then find a buyer. Right now, I have it rented for $200 less than the monthly cost of owning it. My DH wonders if we will ever buy another house if we ever leave here (we live in and make mortgage payments in a different house than the one I described above.)

If you want to invest money, find a different way. Savings bonds would be a better choice with housing prices still teetering.

Think of a mobile home the same way you do a car. It is never worth again what it was worth the day it drove off the lot. My sis and mom bought one, and I just pray that the mobile home outlives my sis, because she will never have the $ to buy anything else.

Another thing to know about manufactured housing is that it is made with materials that "off-gas." Chipboard and MDF and even plywood are held together by petrochemical glues. I read about 10 years ago that living in a mobile home had the equivalent effect on your lungs as smoking does. I could not spend more than a few hours in my mom's former mobile home without having asthma symptoms. The newer the home, the more chemicals continue to off-gas. We are now more aware of the effects of off-gassing, but I don't believe that the industry has eliminated the risk. Your baby may be healthier in an established building like your apartment than in a mobile home.
Linda
14 years ago
A 1968 mobile home for $55,000 IS RIDICULOUS! Unless its oceanfront, don't do it. I'm sure there is a place online you can check the values. Since you said your rent is around $700 a month, Im going to assume that your area is less expensive than mine because we don't have ANY rentals for $700. That being said, in my area a $55k mobile home would be built in the 90's. RUN RUN RUN.... a 1968 mobile home in a park in my area is priced around $8000. They hold no value at all. If you can buy it cash, and pay the lot fee, this is about the only way you'll save any money to buy something else in 5 years.

There is only 2 places that I know of that will finance mobile homes and neither one of them will finance a mobile home over 20 years old. Have you considered a condo? At least then you would own something and have a chance of building some equity.
brickeyee
14 years ago
"In my area at least, MH owners pay property taxes. Renters do not."

Renters pay property taxes as part of the rent.

As a landlord,it is one more thing that goes into setting the rent since it is a property expense.
Meghane
14 years ago
If you buy even a nice mobile home, it will depreciate over time. In 5 years, let's say the home loses $5k in value (not unreasonable). You end up having to take a loss on the sale, and since you said you would have to 100% finance that means you'd owe the bank $5k after selling the home. Which would significantly eat into the savings you'd supposedly make by owning the home. Unless you can save a LOT of money over the next 5 years by owning the mobile home, you're likely to end up worse than you are now.

Any reason that you MUST buy in your current area? Real estate prices are not insane everywhere. In fact, a lot of areas have very good real estate available. DH and I make really good money, and there is no way we would buy a house near NYC for example because the prices are just stupid.
julk_1212
Original Author
14 years ago
Great! thanks everyone! I have decided to stay away from mobil homes and only look into buying a home. We are looking to buy a home and keep our morgage and taxes similar to what we pay in rent now... its just ganna be hard to find a home for the price we are asking. I have thought about out of the area, but with the new baby comming, I am unsure of if it would be a good idea to adjust to a new home, a new area, and a new born... may be a little too much. But I am thinking about it. My husbands family lives in merced/atwater area. You can buy a home for 55,000 there, if not less. and these are decent. Why would values be sooo much lower in that area? does that mean that there is something wrong?
creek_side
14 years ago
High wages, investment and other forms of income, and a desirable area are all things that drive prices up.

Last I heard, Humboldt County had a lot of that other income.
westranch
14 years ago
The ONLY way I would even consider living in a manufactured home would be if I already had the deed to the land upon which it would sit.
terezosa / terriks
14 years ago
Last I heard, Humboldt County had a lot of that other income.

I heard that the feds just discovered a lot of those plants that other income.

Why is it hard to finance a older manufactured home?

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Why is it hard to finance a older manufactured home?

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