Is it easy to get a mortgage for a manufactured home?

Posted by on Sunday, April 2nd, 2017 at 10:32am.

  

In a market such as Kelowna – short on inventory, high on prices – there are often opportunities to get into a starter home by purchasing a manufactured home.

Some will gasp at the thought of buying a manufactured home, because they’re also known by a variety of other names.  Modular homes, RTM (Ready-to-Move) Homes and Mobile Homes.  Often, lack of knowledge and preconceived notions of what these types of homes are can prevent a first-time buyer from taking that first step.

What are the Differences Between These Types

A Modular Home:  These types of structures are built in sections indoors, in a building centre or factory.  The sections are then transported to the building site and put together on a permanent foundation.  Once permanently assembled and anchored in place, the exterior is completed.  Once a Modular Home is put in place, you can’t honestly tell that it was assembled on-site as opposed to constructed on-site from the ground up.

Ready-to-Move Home (RTM)

This type of structure is also constructed in a building centre or factory and is hauled to the home site where it is anchored to the foundation.  It’s similar to the modular home but it is built in one piece.  Once the home is firmly set on the foundation, it’s completed with the addition of a heating and cooling system and stairs.

Mobile or Manufactured Home

This type of home is not permanent and isn’t put on a foundation.  It’s a one-storey home constructed on a street frame.  One is referred to as a single-wide home but you can put two structures together so it looks less like a trailer, and is referred to as double-wide.  It has a serial number just like a VIN on a motor vehicle.  It’s taken to the home site and placed on a non-permanent type of foundation such as blocked wood, or a concrete pedestal or steel piles.  One level on the temporary foundation, a skirt is put around the perimeter of the home for insulation purposes and for visual appeal.  The only way one can mortgage a home such as this is if the home is on an owned lot as opposed to a rented spot.

What if You’re Leasing a Lot

The reason why a mortgage is not possible is because there is no real estate involved.  Mortgages are directly linked to land titles.   That’s the different between a mortgage loan and a plain old loan.  That’s not to say you can’t borrow money to purchase a home on leased land.  It’s the same as purchasing a car.  The vehicle can be seized by the lender just as a vehicle can be repossessed.

Beware if you choose to secure a loan for a manufactured/mobile/modular home that you would have loan payments and rent all in one shot.  True if you purchased the lot you would have to pay municipal taxes but they tend to be much less per month than rent to a landlord in the park or community where you’d be renting.

Considerations for Financing a Manufactured Home

When you are purchasing the land as well as the home, you have many different financing options.  These often depend on:

  • The type of foundation you have, i.e., cement basement, concrete footing, wooden blocks.  You may find that lenders are leery of homes that can easily be moved away under the cover of night.
  • The age of the home.  What is the life left in this home?  The newer it is the more likely you will get financing. The lender will want their money back before the house wears out.
  • The way it was constructed.  As per the definitions above, the lender will want to know the materials and methods used to construct the home.
  • The down payment is critical.  If you put less than 20% down your home will be under more scrutiny by Canada Mortgage and Housing.  The higher your down payment, the better.
  • Your lender will most certainly insist on a home inspection and a professional appraisal to ensure your home is worth what you have offered (in the case of a resale home).

If you are purchasing the land, the home has normal services and is in a permanent location and in good condition, often normal lending rules will apply.  Your real estate professional will be able to navigate you through the process.

 

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