Collins: Are mobile homes a viable option for first-time home buyers?

First-time home buyers often gravitate toward condos and single-family homes, but another option to consider is a mobile home.

Purchasing a mobile home is quite different than purchasing real property, so essentially you hire a professional to guide you through the process. Lawrence Gillen, a mobile home expert and realtor with BRG Real Estate, said you need to look at things a little differently when purchasing a mobile home.

“It’s not an investment so much as it is purchasing a roof over your head,” he said, noting you are really buying housing security at a slightly discounted price from a condo or single-family home.

So let’s look at the difference between these two purchases. For comparison, I will focus on condos versus mobile homes.

The first major difference is that a condo is real property and a mobile home is personal property. Simply put, real property is tied to physical land, and when purchasing personal property like a mobile home, you are buying the structure and renting the land.

Another big difference is that a mobile home does not share a wall with a neighbor and does not have a neighbor above or below it. Most mobile homes also come with a porch plus a decent green space for gardening. In addition, most mobile homes come with space to park two cars right next to the unit, whereas parking for a condo may not be nearly as convenient.

Now let’s examine affordability and financing in greater depth by comparing mobile homes and condos. While purchasing a mobile home generally requires a lower initial investment than a condo, the financing landscape differs significantly.

Unlike condo buyers, mobile home purchasers face limited lending options, with fewer institutions offering financing and interest rates that tend to be approximately 2% higher than those of traditional mortgages. Furthermore, first-time homebuyer assistance programs are typically unavailable for mobile home purchases, whereas such programs are more accessible to condo buyers and can reduce entry barriers.

In addition to these differences, qualifying for residency in a mobile home park often necessitates meeting strict income requirements, with most parks stipulating that monthly household income must be at least three times the combined cost of space rent and loan payments. In contrast, condo ownership generally involves qualifying for a mortgage and meeting any homeowners association requirements, but seldom includes ongoing income verification at the community level. This comparison highlights not only the lower cost of entry to mobile homes, but also the distinct and sometimes more restrictive financial and qualification structures associated with them.

Gillen ran a few numbers for comparison. There are many other factors that could impact the purchase, but this will give you a good sense of the differences.

The purchase of a three-bedroom, three-bath mobile home of approximately 1,731 square feet that sells for $595,000 might look something like this: a 20% down payment of $119,000, with a $476,000 25-year loan, property tax of $200 a month, insurance of $150 a month and a monthly space rent of $1,244. All in, you would have a financial commitment of $5,752.

Conversely, that same size condo would have a purchase price of $900,000, and at 20% your down payment would now need to be $180,000. Assuming you could get a 30-year fixed mortgage at 7.5%, your monthly payment would be $5,035. Property tax would be slightly higher, probably about $750 a month, and you can figure on about $850 per month for HOA fees. Insurance should also be able to be purchased for about $150 a month. So, with purchasing a condo, your monthly burden would be $1,000 more, and conceivably you would have to put down an additional $61,000 as a down payment.

Please note that the numerical examples provided above are for illustrative purposes only. Real-world properties, prices, interest rates, down payment requirements and loan terms may vary based on specific location and market conditions.

While a mobile home may not be the right choice for everyone, it’s important to know that it may be the right option for some. Lowering your monthly payment while still providing yourself with housing security may be a tradeoff worth exploring. Mobile homes do offer some appreciation opportunities, but not at the same rate typically as real property. San Jose has many beautiful and well-maintained mobile parks to choose from with a variety of amenities.

San José Spotlight columnist Neil Collins is CEO of the Santa Clara County Association of Realtors, a trade association representing more than 6,000 real estate professionals in Santa Clara County and surrounding areas. Contact Neil at [email protected].