The difference between modular and manufactured homes largely comes down to how and where they’re constructed, which can affect the types of loans you can use to purchase them.
Knowing the difference between modular and manufactured homes will help you make educated buying decisions, as manufactured homes have different guidelines than a more standard property.
Modular homes and manufactured homes are enjoying bursts of popularity, as they can both be more affordable than site-built homes. So what’s the difference between modular and manufactured homes?
“Modular and manufactured homes are both types of prefabricated (prefab) homes,” says Christina Cason, the co-founder of Texas Family Homebuyers. “This means the construction occurs in a factory and not where the house will ultimately be. The primary difference between the two types is that modular homes are pieced together on-site, while manufactured homes arrive on-site completely built.”
There are important additional differences between the two as well. Here’s a brief rundown.
Differences between modular and manufactured homes
Construction and land ownership
Once the pieces (modules) of a modular home are transported to the home site, they must be assembled on a foundation. The modular home must be assembled on owned land. Modular homes will be permanently on the site, just as a conventional home is.
Manufactured homes, by contrast, are built in the factory on a chassis. Once transported to a site, it can be placed on a foundation or not. Manufactured homes can be moved later; the site is not permanent. The land can be either owned or rented.
The two home types are subject to different codes and regulations. Modular homes must meet all applicable codes and regulations by local authorities, such as the state, county and city. They are subject to the same codes, regulation and zoning as stick-built homes.
Manufactured homes, on the other hand, must follow codes and regulations set forth by the U.S. Department of Housing and Urban Development (HUD) specifically for manufactured homes. These codes and regulations are intended to make manufactured homes safe and stable. The homes must carry a HUD sticker attesting to the fact that the codes have been followed.
Manufactured homes are sometimes known as “mobile homes.” However, all homes constructed according to the HUD guidelines, which went into effect in 1976, are more properly known as manufactured homes. Homes constructed prior to the guidelines are known as mobile homes.
Modular and manufactured homes may also be taxed very differently. Modular home owners are taxed just like the owners of conventional homes in the area. In other words, if stick-built home owners pay state property tax in your area, so do modular home owners, and at the same rate.
Manufactured home owners, on the other hand, may pay property tax in some areas if the home is classified as real property and they own the land. Many manufactured homes, however, are not classified as real property, but rather as personal property. You may pay taxes for personal property just as you would for a car, but not property tax.
Both types of homes are very customizable.
Manufactured homes can have basements, porches and every type of feature, and can look very similar to stick-built homes. Manufactured homes come in standard sizes: single-wide, double-wide and triple-wide homes.
Modular homes are also endlessly customizable. The structure and size chosen is more flexible than that of a manufactured home.
Manufactured homes are one of the cheapest housing options in the U.S. The average cost is $123,000, according to the U.S. Census, versus an average sale price of site-built homes of $507,800 in the first quarter of 2022.
That said, folks interested in a manufactured home need to take into account all the potential costs involved in living in one. You will need to either buy land or rent a site to place the home. If you rent, you will pay a rental cost, usually monthly. Many manufactured home parks also charge a homeowners association (HOA) fee. There are also ancillary costs involved in buying a manufactured home, such as the costs of transporting the home to the site.
Modular homes cost more than manufactured homes, depending on the size and features. Christina Cason observes that “modular homes are much more expensive than manufactured homes, often going for double the price.” The price also depends on the size and materials used, which can vary greatly.
However, modular homes are less expensive than stick-built homes, because homebuyers benefit from the economies of scale involved in factory construction. Factory construction also means that weather-related delays, which can drive up the price of site-built homes, occur less often.
Prospective buyers also need to be aware of the differences in price appreciation between the two types of prefabricated homes.
Modular homes appreciate in line with stick-built homes in the area. Manufactured homes can appreciate in line with site-built homes, but may also appreciate less, depending on the area.
Both types of homes are rising in popularity, driven by their affordability vis-à-vis site-built homes. In March 2022, for example, more than 11,000 new manufactured homes were shipped, compared to roughly 8,000 in March 2021.
Is it easier to get a mortgage for one or the other?
It may be somewhat easier to get a mortgage for a modular home. “Most lenders treat modular homes like site-built homes, so conventional lenders can finance modular homes,” according to Kris Lippi, the chief executive officer of ISoldMyHouse.com and a real estate broker. Most home lenders offer them.
If you finance a new modular home in the process of construction, you may have to get a construction loan from a lender. Construction loans are short-term loans to finance the build. The construction loan can then be converted into a mortgage or paid off, and the homebuyer obtains a new mortgage loan. Mortgage requirements and terms for a modular home are roughly the same as for a stick-built home, Lippi notes.
It can be more complicated to get a mortgage for a manufactured home for several reasons. First, not all lenders offer mortgages for a manufactured home. Second, some lenders may require certain conditions to be met, such as a foundation underneath the home.
Third, the most common loan type is for manufactured homes is known as a chattel loan, rather than a home loan. Chattel loans are on the home itself, rather than the land. They have some drawbacks, such as higher interest rates.
What types of loans can you use for both?
All types of loans can be used for both types of houses. You can get a Conventional loan for both modular and manufactured homes.
You may be eligible for government-backed mortgage programs like those from the Federal Housing Authority (FHA), the U.S. Veterans Administration (VA), and the U.S. Department of Agriculture (USDA), as all offer mortgages for both modular and manufactured homes. All government-backed loans also offer construction loans to qualified borrowers.
Note that some government-backed loans have income requirements. For a USDA loan, the land itself must fall within population guidelines and be rural or suburban in character.
The bottom line on the difference between modular and manufactured homes
Both modular and manufactured homes offer advantages. The advantage to modular homes is their flexibility and customizability and the opportunity to enter the housing market at a lower price point than a site-built home. They appreciate in line with site-built homes. In the future, they will appraise at the same level as a site-built home.
The chief advantage to manufactured homes is their affordability. They are one of the least expensive types of housing, particularly if you rent the site on which the home is placed. Bear in mind that a manufactured home alone will appreciate less than a manufactured home and land together.
While both modular and manufactured homes are built in a factory, they are very different in many ways. Prospective buyers should familiarize themselves with these differences before shopping around.
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