Manufactured versus Modular

There are many home buyers in the market that are unfamiliar with the differences between a manufactured home and a modular home.  Both property types share a great deal in common with each other, which would explain the confusion home buyers have when trying to determine whether a home is manufactured or modular.  In order to differentiate between the two structure types, we will need to categorize each property type and identify their distinct characteristics.  In the course of doing so we will also be able to examine the benefits and drawbacks in selecting one structure over the other. Let us first define what a manufactured home and a modular home is.

Manufactured homes achieved national popularity in the 1950’s, as a residency alternative for people who were frequently on the move.  These “Mobile Homes” were transported by vehicles from one location to the other at the homeowner’s discretion.  Modular homes came into existence shortly after manufactured homes, and served a similar purpose.  The mobility feature of these homes have drastically dissipated over the years, and have given way to larger recreational vehicles as a way to satisfy this particular market.   Today, most modular and manufactured properties are placed on permanently attached structures, with the intention of never again being moved.  The primary purpose of these homes today is to deliver an inexpensive alternative to real estate markets throughout the U.S.

Over time, manufactured homes and modular homes have seen their fair share of difficulties.  Both property types lack the appreciation strength seen in conventional “stick-built” homes.  They also tend to attract a higher risk borrower, which contributes to the negative perceptions surrounding these properties.  Because of such trends, the homes themselves have had problems locating financial institutions that are willing to collateralize the property for a conventional home loan option.   The financing options available between these two homes are the 1^st notable difference found between a manufactured home and a modular home.

Modular homes are categorized by lenders with a risk rating similar to “stick-built” homes.  This particular rating classification allows modular homes to have a considerable advantage in their financing options over manufactured homes.  These homes are categorized differently because of the differences found in their construction methods.  For example, Modular homes are built to meet local building codes that suit the area in which they will be delivered, whereas manufactured homes do not.  Another major difference is that manufactured homes are built on axels, while modular homes are built on perfectly square jigs.  Most people should be able to identify a modular home from a manufactured home by the way the home is delivered.   Manufactured homes, which are built on axels, are pulled to their locations.  Modular homes, which are built using normal frame structure flooring, will be loaded onto a flat bed truck and delivered, using a crane to set it in place. 

Lender documentation requirements for each of these property types will also vary considerably.  Because modular homes are categorized in the same manner as single family “stick- built” homes, underwriters typically require nothing more than what would normally be required for conventional home loan financing.  On the other hand, manufactured homes attempting to be financed will be examined closely, to ensure that they meet all lender requirements before any home loan financing becomes available. 

For example, an engineering report will be required on all manufactured homes. The engineering report is designed to ensure that the property is properly tied down or secured to the structure, as well as on a permanent foundation.  Failure to meet this requirement will be a certain condition for denial.  Lenders will also require that the title be purged with the county clerk as a permanent structure, located on a parcel of land.  Verifying whether or not a home has been purged on the parcel of land can be a difficult task, especially if it was not done correctly. 

For the majority of us, the simplest way to identify the difference between the two property types is to locate the various types of identification tags that can be found on all preassembled structures.  Manufactured homes will have a red HUD sticker located on the outside of the property; it will also have a HUD plate attached nearby, which will indicate the properties designation.  If the home has a red tag or plate on the outside of the property then it is manufactured.  Modular homes, on the other hand, will have a UBC sticker or plate located inside the home.  Having a UBC (Uniform Building Code) sticker or plate will indicate that the home has met all local and state building standards and can, therefore, be categorized as a modular home.

Both property types have attained a great deal of popularity by providing an alternative solution to conventional “stick-built” homes.   Over the years these homes have served as an affordable housing option for home buyers, and have given more people the opportunity to become homeowners than ever before, particularly those individuals who may have not had the means to buy in the past.