Buying a Modular or Manufactured home?
Congratulations on your decision to buy a home. You’ve already discovered the benefits associated with home ownership versus renting, and we are here to try and help you understand the home buying process. Our goal is to make you a better shopper when you are looking for your dream home, to make you better informed about the financial decisions you’ll be tackling and to help you know just what to expect along the way.
Since a home purchase is usually the single largest purchase an individual or family can make, many factors must be considered before joining the home ownership club.
Here are questions all first time homebuyers should ask before they commit to purchase a home.
- Should I rent or buy?The rent vs. buy question generally compares the cost of renting to the after-tax cost of owning a home. Some factors to consider are rent increases and home price appreciation in your area. If you have a nice, inexpensive, rent-controlled apartment, then it may not make sense to buy. However, if you are planning to stay in the same place for a longer period of time and the property values in your area are rising, buying may be a good decision.
- How much house can I afford?Typically, the amount you can afford to spend on a home is based your cash on hand, your salary and your outstanding debt. Below is a mortgage calculator that help you figure out the monthly cost and total expense of buying a home.
- When is the best time to get loan approval?It is ideal to be pre-approved for a home loan before you start shopping so you know where your budget is. Pre-approval simply means working with a lender to determine the maximum loan amount the buyer could qualify for with that lender prior to buying land and selecting a house plan.
We are not a lender. But we are actively working in the market and constantly building relationships with new local lenders who finance factory built homes, and we can share them with you so that you can contact them and choose the best lender for your specific home finance needs.
We are able to build for any customer, to any local or Provincial building code on any lot or land. Depending on where you want to live, your home could be built to a modular code that conforms to local codes and local jurisdiction or to the manufactured housing code conforming to Provincial building codes and to state jurisdiction. Both are built in the same building center using practically all the same materials and quality inspections. One is not necessarily better than the other. It’s just built, inspected and installed differently depending on the needs of the homeowner and where the home is going, and may offer you more flexibility in design.
In many ways there is no difference… only the code they are built to, based on where the home is to be placed. We will help you decide which building method is best for you.
Rural acreage and country land are popular manufactured home sites because land costs are usually lower, lot sizes are larger and construction costs can be considerably less. For example, compare the cost of setting up a manufactured home to the time and money involved in building a home using conventional site-built construction. Where 80 percent of a factory-built home is constructed inside a building center, for a site built home, a general contractor or subcontractor has to transport construction crews and materials to a remote site every day for months on end to do both the site work and then the home construction. The cost savings of a factory built home is significant.
Most manufactured homes are placed on privately owned property. This can be your own property, family land or even a city lot. Land can be owned by you or leased. In any case, you’ll need to find out about zoning laws, restrictive covenants or regulations and access to utilities to the land before making a decision on what type of home to buy. Perhaps there is already a home on your land. If so we may be able to help you relocate it, remove it, or take it in trade for your new dream home.
In some communities, entire subdivisions have been developed where manufactured homeowners purchase or lease a lot to place their homes. As the developers or the partner of these developers we aim to cater to a lifestyle for neighbors with common interests such as young families with children, professionals with busy schedules or retirees who prefer to socialize with people their own age. Please visit our “Developments” page to see what we have on the go now.
As with any home or building project, our housing team will need to inspect your homesite to assure access and to make sure the location is buildable and acceptable for the placement of your new home. A site plan will be developed and reviewed to make sure it will pass all permitting requirements necessary for the construction and completion of your home.
Many options are available when choosing a foundation for a manufactured home. A simple design which meets local or provincial Code for the geographic location for where the home is to be installed is included in your home’s Installation Instructions. It may look simple but a licensed manufactured home installer is not only recommended, but required in most areas.
In comparison, a modular home’s foundation is subject to the governing jurisdiction of the location of the home. A licensed professional engineer or architect may be required to design and submit a foundation for the home.
Other foundations for both manufactured and modular homes may include pier and beam, perimeter stem wall, slab or even a basement or elevated on stilts. If not specified within the home’s installation manual, a licensed professional engineer or architect should be hired to design a foundation for the home. Inspection and approval of the foundation system must be completed before the home is installed.
If every home were the same floor plan, the same square footage, built to the same roof load zone, the same thermal zone and the same wind zone, we might get a general idea of a cost but it indeed would be very general. And if it were built to the same construction code and built on the same stable flat land, we could get even closer to a price. But it’s never the same… given the constraints just noted plus differences in insulation, appliances, carpeting, fixtures, roofing and a host of onsite amenities, this price for each home is a work in process until all the things just mentioned are determined. A site inspection is usually required before a final figure can be obtained.
So how do you know how much to borrow if you want to take out a mortgage? Simple… you find out how much home you can qualify for. Pre-qualification is pretty uncomplicated and does not require a lot of paperwork. A lender simply uses a formula or program that takes in your income sources and your debt owed and determines a “pre-qualification” amount. Credit agencies may be checked to determine the probability of approval and arrive at a financial assessment of creditworthiness. We are not lenders, but we partner with leading financial professionals to help you find the best options available.
The next step is Pre-approval. This is where you have your lender run your credit, verify your employment and sources of income, savings, cash on hand and assets, determine your actual debt and come up with a solid number on what you can afford to pay for a home. It doesn’t guarantee that you will get a loan nor does it obligate you to any lender. It does, however, help you establish a relationship with a lender you like and trust.
Once you are pre-approved, you’re ready for the next step… Determining your budget.
As much as you want a new home, you do not want to find yourself overstretched to your budget. In order to avoid such a predicament, you should approach this process systematically. Here are some steps to ensure you don’t buy too much house.
Each opportunity can be very different. You may be considering a home in a subdivision that already has utilities or easy access to water, electricity and sewer system. Or you may be looking to build on rural acreage where you may have to dig a well, install a septic system and tap in to electricity that is far away.
- Start off conservatively.In determining the price of your home, start with the basic home size and floor plan with little or no amenities. You’ll want to include costs for necessities such as permits, inspections, utility access and hookups, sewer system hookups or septic tank installation, water wells and gas or propane installation if necessary.
- Do a wish list.Have some idea what kind of features you’d like to have for your “target” house. Depending on costs, you may want to include some amenities such as sidewalks or a driveway in the mortgage to be paid off over a long period of time. But you may want to tackle other amenities such as a rear deck, storage buildings or workshops later, after you have moved in and as your finances will allow. Other features you’ll want to consider are upgrades in carpet, appliances, exterior treatments or fixtures. These upgrades, when you buy your new home, will cost less than changing them out later. No sense in paying for them twice.
- Prioritize the features.After compiling the list of home features that are important to you, prioritize them. This will allow you to be able to make tradeoffs later on, if necessary, once you’ve established your budget. Also, this information will be quite helpful to your housing consultant. He or she can help you prioritize and may think of additional items you may not have considered like fireplaces or built-in specialty cabinets. Many items are “packaged” for more savings.
- Peg your down payment.You can start out by answering a few questions like…
“How much cash do I have available for a down payment? And how much should I anticipate for closing costs?” Knowing these answers can help you determine what types of loans you can get. Normally, down payments range from 5 – 20 percent of a home’s purchase price. With some licensed lenders, if you own your own land outright or have a good amount of equity, you may qualify for no down payment. This is particularly helpful for young families just starting out that have access to “family-owned” land.
- Do some math.The standard rule for monthly mortgage payments is that it should be between 25 to 33 percent of your monthly gross income. More specifically, here is the 20/28/36 rule, a useful tool for mortgage affordability: Use a down payment of 20 percent and no more than 28 percent of your gross annual income should go to mortgage, insurance, homeowner’s fees and real estate taxes. No more than 36 percent of your gross annual income should go to mortgage, home and other debt expenses such as credit card debt, car and school loans, etc. *Note that the last two numbers, in this case, 28 and 36, represent debt-to-income ratios, which help you determine your maximum monthly mortgage payment. Requirements change depending on the financial markets and governmental influence on the banking industry. Using the mortgage calculator above should help with some of these numbers, but working with one of our partners will be the best way to get a clear picture of what works for you.
- Get prequalified for a loan.As we discussed earlier, working through your budget will give you a great opportunity to review your finances with a loan professional and truly determine if your home buying plan is feasible. This process doesn’t cost anything and should give you a good idea of how well you’re standing is as a homebuyer in this current market since lender will carefully evaluate your finances for that prequalification.
- Talk to friends and family.Talk to trusted family members and friends who may be able to offer you some opinions, input or even advice on buying or building a new home. At the very least, they can be a sounding board for any ideas you may have. This is just another way to get a different perspective on things, especially with regard to the important decision that’s facing you.
Once you have determined your budget, you’re ready for the next step… The Loan Process – Type, Down Payment & Application covered in the next segments.
A Personal Property Loan or what is sometimes called a Chattel Loan is a Home-Only loan when a manufactured home is purchased separately from its lot or land and financed as personal property. This is similar to loans made on cars, boats and other major purchases. These loans are generally fast to complete eliminating the need for an appraisal, survey or title work. Loan rates may be 1 or 2 percentage points higher than for real property loans. Approvals are usually granted within 24 to 48 hours after the lender receives all the supporting documents. Once the loan conditions are received from the lender, the loan is underwritten and can be closed within a week. If you’re locating your home in a leased community or park, you’d use this type of loan for your home purchase.
A Real Property Loan, or a mortgage, or Land/Home Packaged Loan, as it is sometimes called, all refer to the same type of loan. These loans are available for homes that are permanently located. Homes with land are considered as “real property” and are financed the same as conventional site-built houses. These are the most common types of mortgages used today for all single-family home purchases.
Construction Loans are typically required for land-home packages for multi-disbursement payments. This allows the buyer to pay off the land seller, the home seller and different contractors involved in the various steps of the building process as phases of construction are completed. Unless you specify otherwise, a “construction-to-permanent loan” will be initiated. Basically, you pay closing costs one time on the loan, and the arrangement becomes a traditional mortgage loan when construction is completed and you acquire a certificate of occupancy.
One of the greatest advantages of a construction to permanent loan is that most lenders allow interest only payments while the home is under construction. This gives the homebuyer a low payment option in the beginning while living somewhere else. Once the home is occupied, the mortgage payments are changed to principal and interest payments.
Everyone wants low monthly payments, but this may be more important to some than others. Retirees on a fixed income may prefer to use a large down payment to keep their payments low. First time or young homebuyers may not have the ability to put a lot of money down and, consequently, their payments will be higher. But first time homebuyers may qualify for special programs to help them buy their dream home with little or no money down. Visit our section on First time home buyers to see more information on this.
Down payments and loan terms go hand-in-hand… 5 – 20 percent of the home’s price with loan terms from 10 to 35 years. Most lenders offer programs where you can buy down the interest rate to keep payments low.
If you own your own land outright or have a good amount of equity, you may qualify for no down payment. This is particularly helpful for young families just starting out that have access to “family-owned” land.
Once you have selected your home and know where you are going to live, whether on your own land or leased land, you can proceed to the loan application. This process usually begins with a completed worksheet showing the costs of all items including the home, the land and site improvements, a signed credit application, an application fee that will be applied towards your loan closing costs, verification of employment, sources of income, savings, cash on hand and assets.
Real estate contracts differ slightly in each area. Lenders and Buyers may be required to disclaim or furnish different documents or information regarding your loan application.
Loan approval may take anywhere from a few weeks to several months depending on the lender, the type of loan and the geographic region or state. Real Property or land/home loans take longer for approval than Personal Property or Chattel loans.
The time it takes to process your loan will greatly depend on how quickly you respond to the bank’s request for documents and loan conditions. Most lenders cannot process your loan until ALL of the required documents and conditions are met. Your new dream home will become a reality sooner if you are heavily involved in this part of the process.
Your loan documents have been turned in, your loan is approved and your Dream Home has been ordered from the Building Center. The “I’s” are dotted, all the “T’s” are crossed and everything looks good to go.
Once you determine the model of your new home and the type of foundation required, an assessment for the area where your home will be placed will help us develop a timeline to completion and move-in. Our team will keep you informed of the status of the major milestones during construction and coordinating with the contractors you have selected for the site development.
At times, it may look as if no work is being done on your site. This may be due to permit approval, an inspection by a local official or other jobs that must be scheduled prior to continuing the work.
Some delays are unavoidable, like weather, but that only effects work being done on the job site. Remember, this is only the remaining 20% of the construction. The majority of your home’s construction is being completed inside our building center unaffected by weather.
Protecting your investment is another important step in the home buying process. If you are financing your home purchase, your lender will require you to keep property coverage on the home as long as the loan is in effect. Even if you are paying cash for the home, we highly recommend that you obtain a policy to protect what is most likely your family’s largest investment. Here are a few coverage types included in a policy, whether it is for a manufactured home or a modular home.
- Comprehensive Home Protection covers the home itself against sudden accidental and direct losses to your home and attached structures. Such losses as Fire, Windstorm, Theft, Flood and Earthquake are among the perils that can be insured against loss on a policy. This protection can replace your home in the event of a total loss as well as repairing your home’ damage.
- Comprehensive Personal Effects Coverage protects your belongings in the home. This protects your clothing, furniture, and electronic devices like computers and televisions. Most policies have a set dollar amount included in the premium for the amount of coverage. That amount can be changed as you feel necessary. Optional coverage for special collections like Firearms and Jewelry is also available.
- Comprehensive Personal Liability Protection covers you and your family in the event someone other than your family gets injured while in your home or on your property. For instance, say someone falls down your steps leading out of the home and you are found to be responsible. This coverage would protect you in case the injured person has medical claims or files a lawsuit against you.