Financing makes mobile homes a tough sell

Published 5:27 pm Friday, December 17, 2010

Question: I’m interested in buying a mobile home in a park. I’d like to know the advantages and disadvantages.

Answer: Even in today’s soft housing market, not everybody can afford to buy a traditional stick built house. Manufactured housing is an affordable alternative, but you need to know exactly what you are buying.

First, you need to understand the lingo. Manufactured housing covers a wide range of housing styles — everything from mobile homes to sophisticated factory-built wood frame houses. It sounds like you’re talking about an old-fashioned, metal-sided park model home. That type of mobile home is not real estate, it is personal property — like a car. And like cars, mobile homes generally depreciate in value.

Most mobile home parks don’t sell their pads outright, so you’d be paying rent each month for the privilege of parking your home. And there’s no guarantee that you’ll be able to stay there as long as you’d like. Many mobile home parks are being re-developed out of existence because the land they sit on has become very valuable.

If you purchase your own lot, state law allows manufactured homes, including mobile homes, to become real property when they are permanently affixed to the land. The law requires the owner to apply for what’s called elimination of title. Once the manufactured home title has been eliminated, notice of the elimination is recorded in the county records department and the home is treated as real property, just as if it were a site-built structure. This makes it easier and less expensive for the owner to obtain financing and title insurance on the property.

Applications for elimination of title can be obtained from your local vehicle registration agency.

Frankly, I would recommend against purchasing a park model mobile home. Focus instead on buying a wood-framed manufactured home that you can place on a lot you own. The well-built factory homes are practically indistinguishable from site-built homes.

I recommend staying away from domes and other highly unusual home designs. There’s nothing inherently wrong with them, but you’re limiting your potential resale market because most buyers want a normal home. Log homes are popular in some areas, but make sure they fit in with the character of your neighborhood. For example, a log home would look out of place in downtown Everett and would be a very tough sell.

Finally consider the difficulty of obtaining financing. A critical factor is whether the home ever had wheels. If you have a factory-built wooden home that is delivered by truck and assembled on site, that is different than a traditional mobile home which has wheels until they are removed and the home is placed on a permanent foundation. Lenders tend to discriminate against mobile homes and charge higher interest rates with stricter underwriting guidelines if the home was originally on wheels. If you have a manufactured home, there is still some discrimination on the part of mortgage lenders, but not quite as much. Either way, you can expect to have a much harder time getting financing than you would if you purchased a stick built house.

Most banks and mortgage companies have stopped making manufactured home loans of any kind. Only a small handful of lenders remain in the game. So your mortgage options will be extremely limited.

Because of the financing problems with manufactured homes, I think you would be much better off trying to find a traditional home you can afford. But if that is totally out of the question, keep my suggestions in mind.

Mail your real estate questions to Steve Tytler, The Herald, P.O. Box, Everett, WA 98206, or e-mail him at economy@heraldnet.com.