What About Factory-Built Homes?
In the early part of the twentieth century, Sears Roebuck and Co. literally sold homes by mail — in literally thousands of pieces. In neighborhoods throughout the United States, many of these homes still stand. Collo-quially referred to as kit homes and more officially referred to today as factory-built homes, these homes also provide unusual financing situations. According to the Federal Reserve Bank of Richmond, Virginia, financing such homes has much to do with whether the structure as well as the land beneath it are being purchased with a loan at the same time.
First, what are factory-built homes? They are homes that are built or aggregated within factories then shipped in pieces to the recipient. Most people view mobile homes as purely manufactured homes because they are delivered complete, with structure, electric wiring, and plumbing in one piece. Other varieties are assembled in modular pieces and delivered. Some are also called site-built homes because those pieces are delivered to the site and assembled there.
According to the Manufactured Housing Institute, here, besides mobile homes, are other more precise definitions of factory-built housing:
Panelized homes: These are made of prefabricated panels — literally the walls, siding and interior electrical wiring of the structure — that are built inside the factory.
Modular homes: These homes are delivered about 80 to 90 percent done, and contractors on the building site typically add the extras that the buyer wants.
Manufactured homes: These homes are nearly 100 percent complete when delivered to the home site. They have a special description within the U.S. Department of Housing and Urban Development stating performance standards for their structural integrity, trans-portability, energy efficiency, and fire resistance.
Now, back to financing. As mentioned, to the extent that these structures are placed on permanent foundations, they can be classified as real property, and they are therefore eligible for conventional mortgage financing. In all other cases — and this is most frequent in the case of mobile homes that rent their land space — the structures can be purchased with a personal property loan generally issued by the manufacturers. And these can be more expensive than conventional home financing.
Property trends dictate lending trends. Given the high rates of development for nontraditional properties in all kinds of markets, it makes sense for a borrower to check out the complexity of the lending process.
Most American homebuyers gravitate to conventional loans for conventional properties. But for borrowers who might not be able to afford conventional housing, there's a need to look at alternatives in structures and financing.
