Sometimes, renting an apartment can be cheaper than buying a home. But in many locations throughout the country, rental rates are higher than the monthly mortgage payments on comparable (or even bigger) properties. While many people prefer to rent a place particularly because of the flexibility renting provides, there are a few undeniable advantages associated with owning a home, especially a manufactured home.
To help you make an informed decision about whether you should rent an apartment or buy a manufactured home, we’ve written this blog post that reveals the most important differences between these two alternatives.
According to a report issued by Apartment List, the average national rent in 2019 ranged from $961 for one-bedroom apartments to $1,192 for two-bedrooms. While the average national rent has risen steadily in recent years, the average manufactured home loan interest rate has remained unchanged over the past year. Moreover, interest rates are expected to remain mostly stable in 2020. Therefore, taking out a home loan to finance the purchase of a manufactured home this year might be a better financial decision than renting an apartment.
Here is why: the current sales price of newly manufactured homes ranges from $56,000 for single-wides to $109,000 for double-wides, according to the Census Bureau. Considering a 15-year manufactured home loan, at a *6.5% fixed interest rate, a renter with a median wage of $910.66 per week (47,354 per year) could afford to purchase a $100,000 double-wide manufactured home, with no money down. The monthly loan payment amount would be around $870 (without property taxes and homeowners insurance), which is less than the average rent for one-bedroom apartments.
In our example, the monthly loan payment also doesn’t exceed the 28/36 rule, which states that a borrower should spend a maximum of 36% of his or her gross monthly income on total debt, including manufactured home loans, car loans, etc.
A potential borrower may qualify for a manufactured home loan without down payment requirements only if he or she owns a piece of land free and clear of mortgages, liens and encumbrances of any kind. In this case, the land can be used as collateral in specialized financing programs, such as our LandPlus program.
Conversely, making a 20% down payment on a manufactured home could help a borrower obtain a lower interest rate, which will translate into lower monthly payments. To find out if you qualify for a manufactured home loan and how much home you can actually afford, feel free to contact our friendly professionals today.
One way to get an even better deal is to purchase a pre-owned manufactured home. The sales price of these homes is often lower than the price of new homes, depending on a series of factors, such as the model, age, condition, amenities, features, aftermarket upgrades, and location of the home. Triad Financial Services also makes available financing options for pre-owned manufactured homes.
Should You Purchase or Rent a Lot?
If you don’t own a piece of land on which to install the manufactured home you intend to purchase, you can either buy land and a manufactured home at the same time, and opt for our LandHome program, or install the home on a rented lot in a land-lease community.
If you choose the second option, it’s important to know that the average land rental rate for a manufactured home in land-lease communities is around $200 to $800, depending on location. In most cases, the lot rent includes different utilities and amenities, such as water bills, garbage pickup, cable TV, internet access, snow removal, lawn mowing, infrastructure upgrades, general maintenance on facilities like clubhouses and pools, etc.
Although the land rent adds up to the loan payment, the amount you need to pay each month won’t exceed the median apartment rent if you choose to lease a manufactured home site in a more affordable location. Even if buying a manufactured home ends up costing you more than renting an apartment, remember that you won’t only own the home once the home loan is paid off; you will also build home equity while making your monthly loan payments.
Taking into account all the pros and cons of buying a manufactured home versus renting an apartment, as well as the current interest rates and housing market trends, now is the right time to ditch renting and buy a manufactured home. With manufactured home loan advice from our experienced professionals, you can have the manufactured home and lifestyle you’ve dreamed of, without taking on the burden of a large home loan that you may not be able to repay.
*Interest rate is stated for sample purposes only. Rates vary upon credit approval.