I don't understand the lending/age limits for mobile/manufactured housing

[Mr. Green]

This is an area of real estate that is relatively new to me and I'm struggling to get all the details in place to know if this is something for us.

Unfortunately, in our area any relatively new neighborhoods require stick built homes to be 1800 square feet of heated living space or larger. My wife and I simply don't need that. Because this area was predominantly rural, and poorer, 20+ years ago, many of the alternatives here end up being manufactured housing of some kind.

For the sake of this topic, let's stick to double wides, since I know single wides are not considered real property unless they've been built on a true foundation and most banks will not lend for a single wide.

We've been calling around to lenders about a double wide we're going to look at today and we're learning that basically all your typical lenders won't lend for a double wide more than 25 years old. In addition to that age cut off, when they do an appraisal the inspector will determine the "usable life" left of the manufactured home and the bank will not lend for a term greater than that determination.

I'm not quite sure I understand why the "useful life remaining" is a thing. It seems like all the newer double wides I've looked at pictures of use mostly the same materials as a stick built house. Vinyl siding, 2x4 framing, asphalt shingles, standard double pane windows. The only real exception I find is the sheetrock material that is used. It's typically thinner and not mudded. Instead a finishing strip is applied over the seams where each sheet meets.

I suppose my big concern here is am I potentially buying a depreciating asset rather than an appreciating one? If I buy a 20 year old double wide that looks almost indistinguishable from a regular house, with the exception of it's shape, and then own it for 20 years am I going to find it almost impossible for the next buyer to get a loan because of the home's age? With proper upkeep I don't understand why a 40 year old double wide would be any different than a 40 year old house.

Does anyone have experience in this area and can clue me in on the reasoning behind some of this stuff?

[Uturn]

I might be completely off base, but here is how I see it.

Banks don't go looking for reasons to NOT lend money.  They hire a team of people to look at large sets of data and determine if, in general, they can make money lending in a specific area.  You are looking at it from how you would take care of a mobile home, not how mobile homes are taken care of in general.  When someone who makes their living lending money says it's a bad idea, it usually is.

[Aegishjalmur]

Former UW here:

Just a side point, many people(including fannie mae/freddie mac) use manufactured home/Mobile home interchangeably and they are not the same. Manufactured homes/modular homes are assembled in sections in a factory and are assembled on site on a permanent foundation. Man homes are required to meet the same building code requirements as the stick built homes, and so from a lenders perspective are treated the exact same way. Mobile homes are your single/double wides which are/were on wheels, and are towed in and ut on either blocks or a permanent foundation are just built to meet mobile home guidelines which are significantly less stringent than most building codes.

Part of it is the codes for mobile homes are not equivalent to stick built. Many of the older ones(not all) have/had knob and tube wiring. Lenders have found it easier to issue a across the board 'we will not lend' versus a case by case, as the only way to prove that it is not would be to strip the walls.

The remaining life is that due to the construction of the walls/flooring and general being set at mobile home building code levels, which are generally less than stick built code levels, it does not retain it's value(it's a vehicle that has been reclassified as real property), and the materials are such that it is really only expected to be livable for a certain amount of time. due to the way they are built it is also significantly harder to make structural repairs. The remaining life is the lender wanting to insure if the loan defaults and they have to reclaim the property, they can resell it. This is why they older mobile homes will have an issue getting approved, their durability is not the best and they are already so old that the expected lifespan is shortened. If a property has 10 years estimated remaining life, it does not make sense from a lenders perspective to allow a 30 year mortgage, as if it defaults they will have a harder time offloading it. It is also for this reason that lenders cap the LTV(loan to value) at significantly lower than stick built. Many only will lend 65%-75% of the value versus 80%-97% on stick built.
Hell, even if you just put a deck on the mobile home you need to get a structural engineers report stating that it did not impact the structural integrity of the home, so that should give you an idea of how little the lenders trust the quality of the builds.


Part of the issue is that these guidelines are set by Fannie Mae and Freddie Mac, not the lender, the lender just has to meet them if they plan on selling the loan as a portfolio. Some smaller credit unions might allow more loose guidelines as they are more likely to hold the loans in house vs selling as a portfolio.


http://www.freddiemac.com/learn/pdfs/uw/manuf_home.pdf

https://singlefamily.fanniemae.com/originating-underwriting/mortgage-products/manufactured-housing-product-matrix
https://singlefamily.fanniemae.com/media/8391/display

[ysette9]

It was well said above. I’ll just add that in a previous life we lived down the street from a manufactured home showroom, so one day we went to check it out. The salesperson explained how after some year (can’t remember when ) the regulations changed. Prior to that year mobile homes really were junk, poorly made. After that hear they were required to meet the same standards as stick-built permanent homes and so the quality was much better. Indeed the homes we toured did feel pretty solid, though clearly anything on temporary jacks in a parking lot isn’t going to feel as solid as something on a foundation.

We didn’t end up going down that route for hosing but it was an interesting educational experience all the same.

[Dicey]

Background: My sister & her family, experienced DIYers, bought a foreclosed home during the great recession. It seems the previous owner put a doublewide next to their stick-built home on five acres to accommodate a relative. While they were using their house as a HELOC cash cow, they put in a pool, too. They eventually got in over their heads and lost the house to foreclosure. Oh, they were bitter. They stripped and vandalized the house and late model double wide. (After my sis & family bought the house,  the previous owner knocked on the door, and tried to sell them some of the stuff he'd removed from the home, like the pool fencing. BIL sent him packing.)

When Sis & Fam. bought the house, they knew they had the skills to repair it. The double wide was a total loss. I helped them with some of the renovations. When we looked through the double wide, it was shocking how flimsily constructed it was. So much cardboard! My sister's son is a licensed building contractor. She told him he could have anything he wanted out of it in exchange for helping to tear it down. He was only able to get a couple of windows that he intended to use in a shed, not a house, plus the boards that had been used to build a stick-built deck on the DW, and the trailer the damn thing was built on. That's it.

Moral of the story, based on one person's experience: they're easily destroyed and not readily fixable. They are built using completely different techniques, often with materials that are not easily obtained by anyone who's not a manufacturer buying in bulk.

@Aegishjalmur provided a good overview, my sister's story is a concrete example.

[Mr. Green]

Background: My sister & her family, experienced DIYers, bought a foreclosed home during the great recession. It seems the previous owner put a doublewide next to their stick-built home on five acres to accommodate a relative. While they were using their house as a HELOC cash cow, they put in a pool, too. They eventually got in over their heads and lost the house to foreclosure. Oh, they were bitter. They stripped and vandalized the house and late model double wide. (After my sis & family bought the house,  the previous owner knocked on the door, and tried to sell them some of the stuff he'd removed from the home, like the pool fencing. BIL sent him packing.)

When Sis & Fam. bought the house, they knew they had the skills to repair it. The double wide was a total loss. I helped them with some of the renovations. When we looked through the double wide, it was shocking how flimsily constructed it was. So much cardboard! My sister's son is a licensed building contractor. She told him he could have anything he wanted out of it in exchange for helping to tear it down. He was only able to get a couple of windows that he intended to use in a shed, not a house, plus the boards that had been used to build a stick-built deck on the DW, and the trailer the damn thing was built on. That's it.

Moral of the story, based on one person's experience: they're easily destroyed and not readily fixable. They are built using completely different techniques, often with materials that are not easily obtained by anyone who's not a manufacturer buying in bulk.

@Aegishjalmur provided a good overview, my sister's story is a concrete example.

That's a very interesting example. Thank you for sharing that!

[Dicey]

Background: My sister & her family, experienced DIYers, bought a foreclosed home during the great recession. It seems the previous owner put a doublewide next to their stick-built home on five acres to accommodate a relative. While they were using their house as a HELOC cash cow, they put in a pool, too. They eventually got in over their heads and lost the house to foreclosure. Oh, they were bitter. They stripped and vandalized the house and late model double wide. (After my sis & family bought the house,  the previous owner knocked on the door, and tried to sell them some of the stuff he'd removed from the home, like the pool fencing. BIL sent him packing.)

When Sis & Fam. bought the house, they knew they had the skills to repair it. The double wide was a total loss. I helped them with some of the renovations. When we looked through the double wide, it was shocking how flimsily constructed it was. So much cardboard! My sister's son is a licensed building contractor. She told him he could have anything he wanted out of it in exchange for helping to tear it down. He was only able to get a couple of windows that he intended to use in a shed, not a house, plus the boards that had been used to build a stick-built deck on the DW, and the trailer the damn thing was built on. That's it.

Moral of the story, based on one person's experience: they're easily destroyed and not readily fixable. They are built using completely different techniques, often with materials that are not easily obtained by anyone who's not a manufacturer buying in bulk.

@Aegishjalmur provided a good overview, my sister's story is a concrete example.

That's a very interesting example. Thank you for sharing that!

You're welcome. In my previous post, I failed to mention that the previous owners put the DW between the house and their amazing sunset vista views. It was sad that so much money was wasted, but great to restore the views.

[Sibley]

I don't know much about mobile homes - but when people in a mobile home are advised to leave go to what seems like anywhere else when a tornado hits, that tells me something.

https://weather.com/safety/tornado/news/what-to-do-in-storm-mobile-home-tornado

It seems manufactured housing is different. I would do some extensive research before buying one, just in case. (which you should do with pretty much any house honestly)

[Mr. Green]

Based on @Dicey 's description and what we've seen already in mobile homes I think we are not going to pursue them further. It seems like the long term value is too questionable.

[SwordGuy]

I can't speak for manufactured home construction robustness, but there's NO WAY IN HELL I would live in a mobile home along the NC coast if I had another choice.

[Padonak]

I can't speak for manufactured home construction robustness, but there's NO WAY IN HELL I would live in a mobile home along the NC coast if I had another choice.

Why is that?

[Paul der Krake]

I can't speak for manufactured home construction robustness, but there's NO WAY IN HELL I would live in a mobile home along the NC coast if I had another choice.

Why is that?

It rhymes with cocaine and really blows.

[Cb1234567]

Former UW here:

Just a side point, many people(including fannie mae/freddie mac) use manufactured home/Mobile home interchangeably and they are not the same. Manufactured homes/modular homes are assembled in sections in a factory and are assembled on site on a permanent foundation. Man homes are required to meet the same building code requirements as the stick built homes, and so from a lenders perspective are treated the exact same way. Mobile homes are your single/double wides which are/were on wheels, and are towed in and ut on either blocks or a permanent foundation are just built to meet mobile home guidelines which are significantly less stringent than most building codes.

Part of it is the codes for mobile homes are not equivalent to stick built. Many of the older ones(not all) have/had knob and tube wiring. Lenders have found it easier to issue a across the board 'we will not lend' versus a case by case, as the only way to prove that it is not would be to strip the walls.

The remaining life is that due to the construction of the walls/flooring and general being set at mobile home building code levels, which are generally less than stick built code levels, it does not retain it's value(it's a vehicle that has been reclassified as real property), and the materials are such that it is really only expected to be livable for a certain amount of time. due to the way they are built it is also significantly harder to make structural repairs. The remaining life is the lender wanting to insure if the loan defaults and they have to reclaim the property, they can resell it. This is why they older mobile homes will have an issue getting approved, their durability is not the best and they are already so old that the expected lifespan is shortened. If a property has 10 years estimated remaining life, it does not make sense from a lenders perspective to allow a 30 year mortgage, as if it defaults they will have a harder time offloading it. It is also for this reason that lenders cap the LTV(loan to value) at significantly lower than stick built. Many only will lend 65%-75% of the value versus 80%-97% on stick built.
Hell, even if you just put a deck on the mobile home you need to get a structural engineers report stating that it did not impact the structural integrity of the home, so that should give you an idea of how little the lenders trust the quality of the builds.
...

Thank you for this summary! Very helpful to hear from an underwriter, and best explanation I’ve heard in ages!
For the OP: there are several kinds of builds known as “manufactured homes”, varying from buildings formerly known as “trailers” -  to modular homes where “box” entire sections of a home are built in a warehouse (walls and all) and placed onsite with a crane - to panels built in a warehouse (I.e. stud walls, roof rafter sections) to be put up onsite with plumbing/electric added onsite.

From MMM perspective:
1. The ones that follow lesser building codes are depreciating assets. Double-wides would be on the list.
2. You could ignore any safety issues or social stigma and go with a super cheap older trailer, pay cash, and hoard your dollars to invest. We know a man who did this and saved a ton of money, bought what he wanted later. ETA: sold trailer home for the same he paid...it was already depreciated, which means about $7K to buy...not a lot of people making his income would put up with it.
3. Plenty of people live in these types of homes...just don’t expect it to behave like a condo, townhouse or single family home for insurance or fair market value.

[Cb1234567]

I forgot to say: take what a vendor tells you about the safety/quality of their trailers’ (so to speak) construction with a grain of salt. As the underwriter said, the building codes really are different.

[SwordGuy]

I can't speak for manufactured home construction robustness, but there's NO WAY IN HELL I would live in a mobile home along the NC coast if I had another choice.

Why is that?

It rhymes with cocaine and really blows.

:)

[Fishindude]

Part of it is the codes for mobile homes are not equivalent to stick built. Many of the older ones(not all) have/had knob and tube wiring. Lenders have found it easier to issue a across the board 'we will not lend' versus a case by case, as the only way to prove that it is not would be to strip the walls.

A agree with the majority of your post, but this is dead wrong.
Knob and tube wiring was pretty much done by the 1930's, mobile homes didn't get going strong until after WW2.

[Aegishjalmur]

Glad my explanation was helpful. I have been contemplating  writing a basic 'Underwriting for Non-mortgage People' to just give an overview of what they look for and why.

[Car Jack]

It is possible to get killer deals on trailers during downturns.  My mom moved to Florida around 08-09 and bought a bank forclosed double wide with new carpet and all new appliances for $20k.  She sold it a couple years ago to live full time up north for $70k.  After a winter back in the north, she decided that she didn't want to do that again and bought another used double wide....this time from a 90 year old man whose wife had recently passed away.  It was furnished (meaning even plates and silverware were there along with a couple big screen tvs) for $65k.  I can't see her finding a house in Orlando for $65k....forget about fully furnished.  If in 5 years she decides to leave, it could literally be given away and still be cheap compared with a real house.  I've been there and the park is nice enough and gated and kept up.

[Padonak]

It is possible to get killer deals on trailers during downturns.  My mom moved to Florida around 08-09 and bought a bank forclosed double wide with new carpet and all new appliances for $20k.  She sold it a couple years ago to live full time up north for $70k.  After a winter back in the north, she decided that she didn't want to do that again and bought another used double wide....this time from a 90 year old man whose wife had recently passed away.  It was furnished (meaning even plates and silverware were there along with a couple big screen tvs) for $65k.  I can't see her finding a house in Orlando for $65k....forget about fully furnished.  If in 5 years she decides to leave, it could literally be given away and still be cheap compared with a real house.  I've been there and the park is nice enough and gated and kept up.

Any particular areas, towns, zip codes you would recommend to shop around for the upcoming downturn? Safe. Not too far inland (doesn't have to be right on the beach either). Quality of schools doesn't matter.

[Dicey]

It is possible to get killer deals on trailers during downturns.  My mom moved to Florida around 08-09 and bought a bank forclosed double wide with new carpet and all new appliances for $20k.  She sold it a couple years ago to live full time up north for $70k.  After a winter back in the north, she decided that she didn't want to do that again and bought another used double wide....this time from a 90 year old man whose wife had recently passed away.  It was furnished (meaning even plates and silverware were there along with a couple big screen tvs) for $65k.  I can't see her finding a house in Orlando for $65k....forget about fully furnished.  If in 5 years she decides to leave, it could literally be given away and still be cheap compared with a real house.  I've been there and the park is nice enough and gated and kept up.

What is she paying per month in space rental fees? Those type of parks typically aren't cheap..