New Research Explores Link Between Lack of Financing, Cash Purchases of Manufactured Homes

Manufactured and mobile homes are important sources of affordable housing and make up about 6% of occupied units in the U.S. Manufactured housing, the modern version of mobile homes, is built to a robust federal quality and durability standard that meets or exceeds most requirements for site-built units, but at much lower costs. However, compared with site-built homes, financing is much more difficult to secure for manufactured units: Studies have shown that manufactured home buyers are less likely to be approved for a loan and more likely to buy their homes with cash. But the available research has not examined these findings in depth.

To provide greater insight into the demographics of cash buyers, the types of homes they buy, and how much those choices are related to challenges in obtaining financing, The Pew Charitable Trusts commissioned the University of North Carolina’s Center for Community Capital to analyze home loan denial rates and cash purchases of manufactured homes. The research revealed that lenders denied completed applications—those that included all the information needed for underwriting—for manufactured home loans nearly eight times more often (54%) than for site-built home loans (7%). And that manufactured housing buyers were more than three times as likely to buy with cash than buyers of site-built units (37% vs. 11%, respectively).

The study also found that cash buyers of manufactured homes, compared with buyers who use financing, tend to be older and are more likely to be retired, have smaller household sizes, and not be first-time homebuyers. Further, manufactured home buyers with lower incomes or those living in poverty are more likely than higher-income buyers to use cash. And although lower-income buyers of all home types were more likely to be denied for a loan than those with higher incomes, the discrepancy is more pronounced for prospective buyers of manufactured homes.

Additionally, the type and location of mobile or manufactured homes also are correlated with the likelihood of cash purchases. In particular, manufactured units that are smaller (less than 1,400 square feet), older, not purchased from a dealer, or located in areas where denial rates for manufactured homes are especially high are more likely than other units to be bought with cash. Although the use of cash to buy a home is not inherently problematic, difficulty in obtaining financing may lead some financially stable buyers to settle for older units or those in disrepair that they can afford to buy with cash rather than higher-quality newer models.