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A home equity loan is a way to finance a large purchase, complete home renovations, or consolidate high-interest debt by tapping into the equity of your home. Your home secures the loan, and funds are disbursed all at once.

With your home as collateral, lenders have reason to believe you’ll make on-time, full payments, so they offer a lower interest rate than they would on most unsecured loans. Failing to make the monthly payments could result in foreclosure, however.

Yet for borrowers who are confident they can make the payments, a home equity loan is one of the most affordable financing options on the market. Keep reading to learn more about home equity loans and whether or not one makes sense for you.

What Is a Home Equity Loan?

A home equity loan is typically a fixed-rate loan secured by a home in exchange for a lower interest rate.

Repayment terms are typically between five and 30 years.

How Do Home Equity Loans Work?

First, you’ll need to have sufficient home equity, which is the difference between the market value and what you owe. You may have built home equity by paying down your mortgage and by seeing your home appreciate.

You’ll go through an application process, and the lender will likely order a home appraisal to ensure that there’s enough value there to lend against.

You’ll have a lot more paperwork than some other loans and will sign mortgage lien documents that give the lender the right to start proceedings should you fail to make payments.

After closing on the loan, you’ll receive all funds upfront. Repayment starts shortly after.

Homebuyers also occasionally use a home equity loan to avoid PMI on a new home. An 80/10/10 piggyback mortgage, for example, consists of a conventional home loan, a second mortgage like a home equity loan, and a 10% down payment. Such buyers are able to put less than 20% down and avoid paying private mortgage insurance.

Types of Home Equity Loans

When you’re looking to use the equity in your home, there are two types of home equity loans to choose from — a home equity loan and a home equity line of credit (HELOC) — and a cash-out refinance.

•   Home equity loan: The loan is disbursed in one lump sum and paid back over time. The interest rate is typically fixed.

•   HELOC: With a home equity line of credit, money can be taken out as you need it, up to the limit you were approved for. HELOCs have a draw period, often 10 years, when you might pay only interest on money borrowed, followed by a repayment period, when principal and interest payments begin. The interest rate is usually variable.

•   Cash-out refinance: A third way of freeing up equity is cash-out refinancing. This means taking out a new mortgage at a lower rate that will pay off your current mortgage and give you a lump sum.

Home Equity Loan Requirements

Home equity loans are contingent on:

•   The amount of home equity a homeowner has

•   Income

•   Credit history

•   Debt-to-income ratio

How to Calculate Your Home Equity

Home equity requires basic math: Subtract the amount you owe from the market value of your home. If your home is worth $500,000 and you owe $350,000, you have $150,000 in equity.

You usually will not get a loan for the total amount of home equity you have, however. When it comes to how much home equity you can tap, many lenders allow a maximum of 90%, although some allow less, and some, more.

Another way of saying that: Your loan-to-value ratio shouldn’t exceed 90% in many cases.

If you’re taking out a second mortgage like a home equity loan or HELOC, your first mortgage and the equity loan compared with your home value is what is called the combined loan-to-value (CLTV) ratio.

Most lenders will require a CLTV of 90% or less to obtain a home equity loan, although some will allow you to borrow 100% of your home’s value.

combined loan balance ÷ appraised home value = CLTV

Example of a Home Equity Loan Payment

One thing that attracts a lot of borrowers to a home equity loan is the long repayment period, which is also why most homebuyers choose a mortgage term of 30 years.

A longer repayment period can make your monthly payment more manageable. For example, if you were to get a $75,000 home equity loan with a repayment period of 20 years, your monthly payment at 8% interest would be $627.33. If you had to repay that same amount in five years, your payment would be $1,520.73.

Here’s a chart comparing examples of monthly payments with different terms:

Loan amount	Interest rate	Term	Monthly Payment
$75,000	8%	5 years	$1,520.73
$75,000	8%	10 years	$909.96
$75,000	8%	20 years	$627.33

A lot of variables will affect the rate you pay, such as your credit score and how much home equity you have. Also, keep in mind that the longer the loan term, the more interest you’ll pay, despite the more affordable monthly payment.

Difference Between Home Equity Loans and HELOCs

Home equity loans and HELOCs both use your home as collateral on a loan. How they differ is in how you receive and repay the money.

Home equity loan	HELOC
Lump sum loan	Money as you need it
Start repaying immediately	Pay only on the amount you borrowed
Usually a fixed interest rate	Often a variable interest rate
Installment loan	Credit line

Advantages and Drawbacks of Home Equity Loans

Home equity loans have some advantages, but be sure to consider the drawbacks as well.

Advantages	Drawbacks
Large amounts of money can be borrowed	Home is collateral
Low interest rate	Repayment begins immediately
Flexible use	Loan amount is set, so if you need more money, you will need to apply for another loan

Home Equity Loan Quiz

What Can You Use a Home Equity Loan For?

The great thing about a home equity loan is the wide range of things you can use it for. Once the funds flow to your bank account, they’re yours to use for almost any purpose. Some common uses of home equity are:

•   Home renovations

•   Education

•   Medical expenses

•   Consolidation of high-interest revolving debt

•   Recreational vehicles

•   Vacations

•   Weddings

•   Purchase of an investment property

•   Building an ADU

•   Money in retirement

While you can pay for college tuition with a home equity loan, it might be better to find a student loan for that expense. And vacation expenses and wedding costs might be better addressed by saving and planning than by dipping into home equity.

Why? Because other loan types don’t put your home at risk if you’re unable to pay.

How to Apply for a Home Equity Loan

Step One: Assess your situation. Do you have enough equity to make this happen? How much do you need? Would you prefer a home equity loan or a HELOC? Do you have at least a “good” FICO® score?

If you have an idea of what type of loan you want, how much you want to borrow, and how much equity is available to tap, you’ll be able to shop for what you need.

Step Two: Ask multiple lenders for loan estimates. Getting loan estimates from different lenders can help you find the best terms and rates. Compare the APR of one 20-year loan to another, and so on. The APR will include the loan’s interest rate and any points and fees. Some lenders offer to waive or reduce closing costs on the loan.

All hard credit inquiries made within 14 to 45 days will be counted as one.

Step Three: Find a fitting loan and apply. Submit information about your income, current mortgage, insurance, and other details the lender requests. The lender may require an appraisal of your home.

Step Four: Close on your loan. If everything checks out — including your income, credit history on your credit reports, and home value — you may reach the closing table for your home equity loan. The Federal Trade Commission recommends reading the closing documents carefully and negotiating changes or walking away if something doesn’t look as it should.

Step Five: Receive your funds. Funds are disbursed around three business days after closing on the loan. You’ll receive the amount you were approved for.

Step Six: Begin repaying your loan. On a home equity loan when the funds are disbursed upfront and your interest rate is locked, the first payment will be due around 30 days after you close on the loan.

Is It a Good Idea to Take Out a Home Equity Loan?

Taking out a home equity loan is one of the least expensive ways to finance a large purchase. Because your home is used as collateral, lending institutions are willing to offer a relatively low interest rate on the borrowed amount.

For people who want borrowing flexibility and aren’t sure of the exact amount they will need, a HELOC might be a better option.

While a lower interest rate is great, you should always keep in mind that your home is at risk with a home equity loan. If you’re confident you can make the payments and have a need for a large sum, this may be a financing solution you’ll want to look into.

The Takeaway

With a relatively low rate and a repayment period that can be long, a home equity loan is an attractive way to finance a large purchase or consolidate high-interest debt. A home equity line of credit is a good alternative, and more flexible.

SoFi brokers a HELOC that lets homeowners tap up to 90%, or $500,000, of their home equity.

Need cash? Get a big sum, and then some, with a HELOC through SoFi.

FAQ

How much can you borrow with a home equity loan?

Most lenders limit the amount to 90% of your home equity, though that is not always the case. The loan amount also depends on your income, debt, and creditworthiness.

Can you have multiple home equity loans at the same time?

Yes, but you’ll want to consider all your options before getting another loan that puts your home at risk.

Are home equity loans tax deductible?

Interest on home equity loans is tax deductible if the money is used to buy, build, or substantially improve the home that secures the loan.

Are there costs to getting a home equity loan?

Closing costs for a home equity loan are typically 2% to 5%, but some lenders don’t charge any closing costs.

How do you pay back a home equity loan?

Repayment begins shortly after the funds are disbursed, and monthly payments are made until the loan term ends.

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Photo credit: iStock/VioletaStoimenova

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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If you’re thinking about tapping the equity in your home, you’re looking at either a home equity loan or a home equity line of credit, better known as a HELOC. Both may allow you to borrow a large sum at a relatively low interest rate and with lower fees than a mortgage refinance.

Either a home equity loan or a HELOC is a second mortgage, so you’re betting the house: Your home can be foreclosed on if you cannot make payments. But for homeowners who have a secure income, good credit, and a substantial amount of equity, either one can be an excellent way to fund big expenses like renovations and debt consolidation.

When looking at a HELOC vs. a home equity loan side by side, there are differences that mean one type of loan may make more sense than the other to you. Let’s take a deep dive into the two to help you decide.

What’s the Difference Between a HELOC and Home Equity Loan?

A HELOC is a revolving line of credit. You can take out money as you need it, up to your approved limit, during the draw period. You may be able to make interest-only payments on the amount you withdraw during that time, typically 10 years.

After the draw period comes the repayment period, usually 20 years, when you must repay any principal balance with interest.

Most HELOCs have a variable interest rate. Some have a low introductory rate, and some require minimum withdrawal amounts.

A home equity loan is another type of second mortgage that uses your home as collateral, but in this case, the funds are disbursed all at once and repayment starts immediately. It is usually a fixed-rate loan of five to 30 years, and monthly payments remain the same until the loan is paid off.

The main differences between the two are how the money is disbursed, how it is repaid, and how the interest rate works.

Key Differences

	HELOC	Home equity loan
APR	Typically variable	Typically fixed
Repayment	Repay only the amount borrowed, and may have the option to pay interest only in the draw period	Repayment starts immediately at a set monthly payment
When are funds disbursed?	Funds are disbursed as you need them	Funds are disbursed all at once
Loan type	Revolving line of credit	Installment loan

Comparing HELOCs and Home Equity Loans

Homeowners usually will need to have 15% to 20% equity in their home — the home’s market value minus what is owed — to apply for a home equity line of credit or home equity loan.

If you do, then how much home equity can you tap? Most lenders will require your combined loan-to-value ratio — combined loan balance / appraised home value — to be 90% or less, although some will allow you to borrow 100% of your home’s value.

Here’s what to look for when comparing a HELOC with a home equity loan.

Interest Rate

The interest rate for a home equity loan is typically fixed, while the interest rate for a HELOC is usually variable.

HELOC rates tend to be a little higher than home equity loan rates (but keep in mind that you may pay interest only on what you borrow from the credit line). The exception is a low teaser rate that may be offered for six months to a year before converting to a variable rate.

Keep in mind that Federal Reserve decisions affect the rates for both products. The prime rate, the rate given to low-risk borrowers for prime loans, is based on the federal funds rate set by the Fed.

Even as home equity loan rates rise, though, the rate for these secured loans will be lower than that of almost all unsecured personal loans and credit cards.

Recommended: What to Learn From Historical Mortgage Rate Fluctuations

Costs

Closing costs are essentially the same for a HELOC and a home equity loan — 2% to 5% of the total loan amount — but many lenders offer to reduce or waive them.

Lenders may have already baked their costs into your rate quote.

You’ll want to shop for the best deal, comparing rates, upfront costs, closing costs, and fees. Bear in mind that advertised rates are often reserved for well-qualified borrowers, so read the fine print.

Requirements

To qualify for a HELOC or home equity loan, lenders will look at your employment and credit history, income, and the appraised value of your home. In other words, you must:

•   Have enough equity in your home

•   Have enough income to cover the monthly payment on the home equity loan

•   Have a good credit score (typically 680 or over, though many lenders prefer 700-plus)

•   Have a debt-to-income ratio of 36% to 50%

Repayment

When it comes to repayment, HELOCs and home equity loans are very different.

With a home equity loan, the entire loan amount is deposited into your account at once. This also means you’ll start paying on the loan immediately.

With a HELOC, you use funds as you need them, up to the limit, during the draw period. Your payment may be just the interest charge for the amount borrowed. The revolving credit line means you can withdraw money, repay it, and repeat before the repayment period, when the draw period ends and principal and interest payments begin.

Money Disbursement

Funds for a home equity loan are disbursed immediately. Sums from a HELOC are withdrawn as needed.

Payments

Payments on a home equity loan begin immediately. Payments on a HELOC aren’t required until you start borrowing money from your credit line.

HELOC vs Home Equity Loan: Pros and Cons

HELOC Pros and Cons

Pros:

•   Access up to 90% of your home equity and sometimes more

•   Flexible use

•   Only borrow what you need

•   Lower interest rate than most unsecured loans or credit cards

•   Some have low introductory APR offers

•   Loan interest may be tax deductible if the borrowed money was used to buy, build, or substantially improve your primary home (also true of home equity loans)

Cons:

•   May have a slightly higher interest rate than a home equity loan

•   Variable interest rate means your rate and monthly payment can change throughout the repayment period

•   Home is at risk of foreclosure if you’re unable to make payments

•   The repayment period could bring sticker shock

•   Paying off a loan balance early could trigger a prepayment penalty, and closing a credit line within a predetermined period — usually three years — could negate the waiving of closing costs

•   In a small number of cases, a balloon payment could be required at the end of the draw period
May include annual or inactivity fees

Home Equity Loan Pros and Cons

Pros:

•   Access up to 90% of your home equity and sometimes more

•   Funds disbursed at once

•   Fixed interest rate

•   Predictable monthly payments

•   Lower interest rate than unsecured loans

Cons:

•   Home is at risk of foreclosure if you’re unable to make payments

•   No flexibility in the amount of money you get

•   Limited to fixed installment payments

Which Is Better, HELOC or Home Equity Loan?

The better loan is the one that fits your life circumstances. A home equity line or loan can be used to buy a second home or investment property, pay medical bills, pay off higher-interest credit card debt, fund home improvements, and pay for other big-ticket items.

When a HELOC Is a Better Fit

HELOCs are more flexible than home equity loans. If you’re unsure how much money you need, don’t need to borrow immediately, or want flexible repayment options, you might want to think about applying for a HELOC over a home equity loan.

When a Home Equity Loan Is a Better Fit

A home equity loan is great for people who know how much they need to borrow and want the regularity of an installment loan with a fixed interest rate and fixed payments.

The Takeaway

Deciding on a home equity loan vs. a HELOC can depend on what you’re planning to use the money for. If you need a certain amount of money all at once, a home equity loan may be a good fit. If you want the flexibility to take out money as you need it, a HELOC may work better.

A HELOC brokered by SoFi may be just the right thing, right now for your situation. Access up to 90%, or $500,000, of your home equity for almost any need.

Say hello to a HELOC and start funding your dreams.

FAQ

Which is faster, a HELOC or home equity loan?

They’re tied, on average. It could take two to six weeks to get a HELOC or home equity loan.

HELOC or home equity loan for an investment property?

Investors may like the flexibility of a HELOC. A lump-sum home equity loan, however, could also be advantageous for renovating or buying properties.

HELOC or home equity loan for a home remodel?

If you know exactly how much you’re going to be spending on a home remodel and you’d like predictable payments, you can use a home equity loan. If you want more flexibility or are less certain about your costs, you may like the flexibility of a HELOC.

Can you have both a HELOC and home equity loan?

It is rare to have both a HELOC and a home equity loan. One would be a second mortgage and the other would be a third mortgage. Few banks are willing to lend money on a third mortgage, and for any that do, the interest rate would be high.

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Photo credit: iStock/Hispanolistic

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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Many manufactured homes take just a week to build. (Yes, a week!) Manufactured homes can be built so quickly because they’re made in a factory — a controlled environment. All of the materials and tradespeople are on hand, and the standard sizes of manufactured homes make for quick and easy builds.

The time it takes for the manufactured home to be placed on land is much longer, however. In this article, you’ll read about:

•   The basics of new manufactured homes

•   The timeline for building and delivering a manufactured home

•   Factors that affect the building timeline

What Is a Manufactured Home?

A manufactured home is built in a factory according to HUD standards. The home, which usually has one, two, or three sections, is transported to a dealer, plot of land, or manufactured home community.

Manufactured homes average a lower cost and shorter construction timeline than traditional homes, but homebuyers should be aware that manufactured homes may depreciate. Then again, depending on the local housing market and the home’s setting, a manufactured home might appreciate.

How much does a new manufactured home cost? The average price nationwide was $130,400 in late 2022, with a single-wide averaging $95,800 and a double-wide $159,400, according to the Manufactured Housing Survey conducted by the Census Bureau and sponsored by HUD.

That helps to show why manufactured housing is gaining in popularity. A recent National Association of Realtors® report shows that manufactured homes account for 8% of home purchases. It’s the second most popular home type, after detached, single-family homes.

Recommended: What Is a Modular Home?

Timeline for Building a Manufactured Home

How long does it take to get a manufactured home? From placing an order to moving in, it could take two to four months. That compares with 9.4 months for a traditional contractor-built home.

The site can be prepared, if needed, while the manufactured home is being built. If you need to develop raw land (i.e., put in your own utility connections, clear the land, or install a driveway), the process could take much longer.

Process of Building a Manufactured Home

Several factors help determine how long it takes to get a manufactured home, start to finish. Keep in mind that sales centers for manufactured homes may be able to offer help or coordinate the process.

Design, Model, and Floor Plan Selection: 1-3 Weeks

You’ll most likely start your manufactured housing journey by choosing your home model, floor plan, design, finishes, exterior elements, and other details of the home. This process can take a week or more.

It’s a good idea to start here, because you may have to wait until the factory is available to build your home. If you choose a model that has already been built, you can save some time.

Financing: 4-8 Weeks

Before construction can begin on your manufactured home, you’ll need to get approved for a loan for the home and, if applicable, the land. You’ll submit your personal information, your income and employment, specs on your chosen manufactured home, who you’re purchasing the home from, and information about where you’re going to place the home.

Most of the time, mobile home financing options depend on whether the home is real property or personal property.

Some manufactured homes qualify for conventional home loans. An option is a government-backed home loan. In most cases, the home must be permanently attached to a foundation and on land that you own or will own: That makes it real property.

An exception is an FHA Title I loan, for the purchase of a new or used manufactured home on land you do or do not own. There are loan limits.

It’s also possible to finance a manufactured home with a large personal loan.

And a chattel mortgage may be used to finance a home that will not be permanently affixed to the land.

Recommended: Credit Score Needed for Personal Loans

Site Selection: 1-4 Weeks

When it comes to placing your manufactured home, you’ll typically be faced with two options: Lease or buy land. It could take time to find the proper setting.

Lease the land: With leased land, you’ll pay a fee — usually between $100 and $1,000 per month — to place your manufactured home on a lot. Lots are typically close together and include utility connections and some community maintenance. Some may feature community amenities like a swimming pool or park.

Purchase land: Many lenders offer financing for a manufactured home with the land. A lot in a community may already have a paved pad and utility hookups. If you need to install your own utilities, you may need to find a contractor to coordinate the exterior elements. Your manufactured home sales center may also be able to help with some of these details. A land loan on its own could take around a month to secure.

Permitting: 1 Week to Several Months

Setting a manufactured home on land requires a permit. Requirements can be found from your county or city. The permitting process can take a few days or a few months, depending on your locale, but be sure to submit all required documents and plans so you don’t face additional delays.

Site Preparation: 1-4 Weeks

Site preparation for raw land can include tree and rock removal, land grading, a driveway, well or water connection, sewer connection or septic system, and other utilities.

Minimal site prep can be completed in less than a week, while more extensive site prep can take up to a month.

Construction: 1 Week

The factory environment makes for quick construction: a few days to a week. Materials, tools, and craftspeople are located in the same factory to increase efficiency. Standard sizes and finishes also account for the short construction timeline.

The manufacturer tests the mechanical systems, such as electrical or plumbing, as your home nears completion.

Transport and Installation: 1-4 Weeks

After construction is complete, you may be wondering how long it takes to set up a manufactured home. While transporting your manufactured home will likely only take a few days at most, you may have to spend more time on the installation of the home.

Once the home has been transported to your site, it is attached to ground anchors and utilities are connected. Then, if you desire, additional exterior elements such as a porch or a garage can be added. Customizations like this will take several weeks to complete.

Factors That Affect the Building Timeline

Type of Manufactured Home

The size and type of your home will affect the building timeline. A triple-wide manufactured home, for example, will take longer to build and will also require more site development. A larger septic system, for example, would be required for a larger manufactured home.

Features of the Home

Some custom features like French doors will take additional time to build into your home. But manufacturers say these features usually add only a little time to the process.

Backlog

Although the actual construction of your home may only take a week, you may need to wait for months for the manufacturer to begin construction due to a backlog.

The Takeaway

Financing, permitting, and finding and developing land all take much more time than the construction of a manufactured home. It could take two to four months from the time you order a manufactured home to move-in day.

3 Home Loan Tips

1.    Traditionally, mortgage lenders like to see a 20% down payment. But some lenders, such as SoFi, allow mortgages with as little as 3% down for qualifying first-time homebuyers.

2.    Not to be confused with prequalification, preapproval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for preapproval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.

3.    When building a house or buying a non-traditional home (such as a houseboat), you likely won’t be able to get a mortgage. One financing option to consider is a personal loan, which can be faster and easier to secure than a construction loan.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

How do you speed up the process of building your manufactured home?

If you want to build a manufactured home faster, you can shop builders to check on their availability and get your finances in order. Know which loans apply to the home’s setting, leased or owned land, and consider getting preapproved. You can also select a manufactured home that is already built rather than design your own custom home.

Are manufactured homes cheaper?

Manufactured homes are usually cheaper than traditional homes. The average sales price for a new double-wide manufactured home (not including land) was $159,400 in late 2022, compared with the median sales price for a new single-family home, $442,100, around the same time, according to the U.S. Census Bureau and HUD.

Do manufactured homes take a shorter time to build?

Manufactured homes take much less time to build than other forms of housing. Because the homes are built in a controlled environment, manufacturers can avoid weather delays and supply shortages and can schedule trades (like plumbing) more efficiently. Everything is in one spot, and the standard dimensions of manufactured homes make construction efficient.

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Photo credit: iStock/uptonpark

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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If you’re seeking home affordability, you may be looking at the cost to build a manufactured home. A new double-wide sold for an average of $159,400 in late 2022, whereas a new single-family home went for an average of $543,600 around the same time.

With such a gap, it’s easy to see the allure of manufactured homes. Yet the price of a manufactured home doesn’t tell the whole story. The land, site prep, any exterior additions, and financing all add to the cost to build a manufactured home.

If you want to take a serious look at what a manufactured home is really going to cost you, here’s what you should know.

What Is a Manufactured Home?

A manufactured home is built entirely in a factory and attached to a permanent chassis. Once construction is complete, it is moved to a lot of the owner’s choosing. The wheels are removed and the chassis is placed on a foundation; pier and beam is most common.

Assembly is completed by attaching the different sections, connecting utilities, adding any exterior elements, touching up the interior, and installing tie-downs.

Manufactured homes were called mobile homes before June 15, 1976, when Department of Housing and Urban Development (HUD) building standards began. The HUD code regulates home design and construction, strength, durability, fire resistance, and energy efficiency.

Standard dimensions make them easier to mass-produce in factories, resulting in quick construction timelines and lower costs.

Are these modular homes? No. Modular homes are also built in factories, but a modular home must meet the same building codes as a site-built home and has a permanent, standard foundation.

The Cost of Manufactured Homes by Size

Manufactured homes typically come in three sizes: single-wide, double-wide, and triple-wide. Each section is designed to fit down a highway, with the maximum width set at 16 feet, except in Texas, which adds 2 feet. A single-wide runs 66 to 80 feet long.

Here’s what you can expect to pay for a new manufactured home as of September 2022, according to the U.S. Census Bureau and HUD’s Manufactured Housing Survey:

•   Single-wide. New single-wide homes usually range from 400 to 1,200 square feet and have an average price of $95,800.

•   Double-wide. Double-wide manufactured homes typically range from 1,000 to 2,000 square feet and average $159,400.

•   Triple-wide. With 2,000 to 3,000 square feet, these homes start at $200,000.

Anything smaller than 400 square feet may be considered a tiny house or a park model. Both are often classified as recreational vehicles, not meant for full-time living.

Additional Costs to Consider When Building a Manufactured Home

How much a manufactured home costs may look deceptively low. There may be costs beyond the sticker price, especially if you want to place the home on raw land and need a land loan.

In addition to the home, you might have to pay for utility connections, exterior additions, taxes, delivery, and setup.

You’ll also want to pay attention to rates and terms of loans you qualify for. Owning the land, or a plan to do so, almost always opens the door to more attractive financing options.

Related: How Do Construction Loans Work?

Land Expenses

With a manufactured home, you have the option of renting or purchasing the lot.

•   Rent the lot: Expect a monthly rate of $100 to $1,000. This doesn’t include additional fees from the homeowners association.

•   Buy the lot: $0 to $1,000,000. Land costs depend on size and location; if you inherit land, you may have no cost at all. You might buy a small lot in a resident-owned park, but if it’s a co-op, you’re buying a share in the community.

If you’re buying unimproved land, you may also pay for site clearing and prep, a driveway, drainage, and porch, garage, deck, or other exterior additions. These can add quite a bit to the cost to build a manufactured home.

Utility Connections

If you’re thinking of buying or building a house on raw land, you’ll need a way to connect to utilities. Common costs:

•   Water or well: $3,750 to $15,300.

•   Electric: $0 to $10,000. Some power companies can hook you up for free, while in other areas the cost can be $10,000 or more.

•   Septic: $4,500 to $9,000. Manufactured homes in rural areas will need a septic system if there’s no sewer connection.

Delivery and Setup

Most manufactured home dealers include the cost of delivery and setup when you purchase a home. Some, though, leave delivery and installation for the customer to arrange and pay for.

At a minimum, setup for a manufactured home may involve:

•   Hooking up utilities

•   Testing connections

•   Touching up interior elements, such as where two sections meet

•   Adding skirting

Exterior Additions

If you want a garage, porch, deck, or other exterior structure, you’ll need to add these costs as well. Prices are national averages, as per online cost guide service provider Fixr.com.

•   Porch: $15,000 to $35,000, but can be as low as $5,000 or as high as $50,000.

•   Garage: $23,000 to $45,000

•   Deck: $9,000 to $20,000

•   Landscaping: $8,000 to $15,000

•   Driveway: $3,460 to $6,910

Taxes

You may need to pay sales tax on a manufactured home purchased from a dealer.

That is in addition to property tax you will need to pay each year if you own the land your manufactured home sits on.

Should You Build a Manufactured Home?

Proponents of manufactured homes tout their affordability, quality, and quick construction. It’s possible to build a manufactured home that is much less expensive than buying new construction of a traditional home.

The Consumer Financial Protection Bureau points out that whether the homeowner owns the underlying land affects many aspects of the financing “and can have major implications for the homeowner in terms of cost and security of tenure.”

If you plan to lease the land but feel comfortable absorbing any lot rent increases, then a new manufactured home could be a suitable choice. Some communities are downright upscale, offering pools, tennis, pickleball, golf, fitness centers, clubs for every interest, security, and camaraderie.

Do manufactured homes depreciate? Homes that are not high quality or affixed to a permanent foundation often lose value. A depreciating value also means homeowners may not be able to refinance.

But some data shows that well-maintained manufactured homes in attractive locations actually appreciate in value.

You might want to compare the expected total costs of different types of houses — including a townhouse, condo, and detached single-family home — with a used or brand-new manufactured home.

Financing Costs

When financing a manufactured home, you’ll likely run into several options offered at the sales center. Just be aware that mobile home financing may be different from lending for other kinds of homes.

For one, manufactured homes typically have a repayment period of 25 years or less instead of the 30-year loan that you can obtain for a traditional home. This translates into higher monthly payments.

A new manufactured home attached to a foundation on land you own will be treated like a traditional home as far as financing is concerned. Lenders take into consideration how the manufactured home is titled and deeded. If it’s considered personal property, you may need a large personal loan.

A chattel mortgage is another option for personal property.

An FHA Title I loan could be another possibility. These loans are used to purchase a manufactured home, the lot the home will reside on, or both. There are loan limits.

See also: Mortgage Calculator

Dream Home Quiz

The Takeaway

How much does it cost to build a manufactured home? Much less than a traditional home, but be sure you’re looking at all the costs involved. A lot of the total expense of owning a manufactured home will depend on whether or not you own the land.

3 Home Loan Tips

1.    Traditionally, mortgage lenders like to see a 20% down payment. But some lenders, such as SoFi, allow mortgages with as little as 3% down for qualifying first-time homebuyers.

2.    Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.

3.    When building a house or buying a non-traditional home (such as a houseboat), you likely won’t be able to get a mortgage. One financing option to consider is a personal loan, which can be faster and easier to secure than a construction loan.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

How do you cut down on costs for a manufactured home?

Buyers can cut costs by choosing a standard floor plan, requesting less customization, or opting for a manufactured home that is already built.

How do you pay for a manufactured home?

Manufactured homes can be paid for with a personal loan, a chattel mortgage, a conventional mortgage, or a government-backed loan, depending on the homebuyer’s situation.

What are the best customizations for a manufactured home?

Popular custom finishes include coffered ceilings, fireplaces, built-ins, kitchen islands, upgraded appliances and fixtures, rain showerheads, freestanding tubs, and upgraded lighting.

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Photo credit: iStock/Marje

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Despite what the name might suggest, homestead exemptions aren’t some kind of dusty old prospector or settler law. They are statutes that, in a bankruptcy filing, are designed to protect a primary residence from creditors.

If the Smiths file a Chapter 7 bankruptcy, how much equity they can protect with an exemption will be one of the factors determining whether they will be able to keep their home.

In a Chapter 13 bankruptcy, they won’t lose their home, but they will have to pay creditors an amount equal to the value of the property they can’t protect with an exemption, or their disposable income, whichever is more.
Before declaring bankruptcy, it’s best to consider the alternatives.

This guide will provide an overview of homestead exemptions as applied to bankruptcy, state by state.

What Is Homestead Exemption?

If you’re wondering what a homestead exemption is, it’s a provision in a state’s law that can legally protect a home from creditors in situations such as declaring bankruptcy or enduring the death of a homeowner’s spouse.

In these ways, a homestead exemption can both literally provide you with shelter (a roof over your head) and protection financially, possibly avoiding a situation in which you must lose your residence. That said, this exemption will not prevent foreclosure if a homeowner defaults on their mortgage.

You may be curious about what is the Homestead Act and if it’s the same thing as homestead exemption. They are two different things: The Homestead Act was an 1862 law that granted 160 acres of Western land in the U.S. to anyone who promised to farm it. It was designed to settle the West and drive economic growth.

What States Have a Homestead Exemption?

It’s easier to name the states that don’t have a homestead exemption than those that do since the vast majority of them offer this protection.

Currently, the only states without specific homestead exemptions are New Jersey and Pennsylvania. If you live in one of those states, then you know where you stand on potential shields with homestead exemptions.

If you live in any of the other 48 states, know that there are many more asterisks to hunt for, depending on your situation and financial plans.

Even if you live in a state that offers homestead exemptions, you may want to find ways to save money on your mortgage. These strategies can help you weather financial storms, such as considering refinancing a home loan and requesting a new tax assessment.

Recommended: The Pros & Cons of Buying a Starter Home

Which State Has the Best Homestead Exemption?

While there is no literal “best” state to homestead in because there are so many individual factors to weigh in assessing what’s advantageous, it is true that some states are more favorable than others for seeking the exemption.

Before reading the following, an asterisk: Because homestead exemptions are protections for primary residences, you cannot claim an exemption on an investment property or vacation home.

Some states allow bankruptcy filers to use federal bankruptcy exemptions instead of the state exemptions.

The federal homestead exemption amount is calculated every three years. For the period from April 1, 2022, to March 31, 2025, it allows you to protect up to $27,900 of the equity in your home. In cases where you and your spouse file taxes separately, do not live together, maintain separate homesteads, or (according to at least one court) do not have a direct financial connection with each other, each spouse can claim a separate homestead, up to the amount allowed by an individual.

Recommended: Getting Approved for a Personal Loan After Bankruptcy

Also, most states allow a “wildcard” exemption, which allows you to protect any kind of property from bankruptcy proceedings. This can be of particular help if one or more of a debtor’s other exemptions falls short of protecting their equity. A wildcard exemption amount can be divided among multiple items.

As of April 1, 2022, the federal wildcard exemption is $1,475, plus up to $13,950 of any part of the federal homestead exemption that has not been used.

Since there’s so much variability in local, regional, and state codes and how they define the homestead exemption, it’s wise to consult local authorities or websites detailing the law’s specifics when you are in a situation that may trigger these laws.

Recommended: Understanding Bankruptcy: Is It Ever the Right Option?

Here’s a rundown of what you might call homestead states that offer some of the strongest protections via exemptions. “Strongest” here is being interpreted as either affordances for high exemptions or greater flexibilities in the law — but other factors, such as cost of living, should also be a consideration:

1. California. California has two systems for the homestead exemption. Under one system, homeowners can exempt up to $600,000 of equity in a house. In the other system, they can exempt up to $31,950 of home equity. Determining what you can access requires research and/or legal counsel.

2. Florida. Under the Florida exemption system “homeowners may exempt an unlimited amount of value in their home or other property covered by the homestead exemption. However, the property cannot be larger than half an acre in a municipality or 160 acres elsewhere.” The exemption can also be claimed by the spouse or children of a deceased owner.

3. Iowa. An unlimited value in one home or a one-unit apartment can be sought in protection. The property must be in a city or town and is limited to one-half acre or 40 acres elsewhere.

4. Kansas. An unlimited amount of value can be sought in protection, but homeowners are limited in the amount of land they can protect. Homeowners can protect up to 1 acre of property if they live within city limits or up to 160 acres of farmland.

5. Minnesota. You can protect up to $450,000 of equity in your home and land or up to $1,125,000 of equity if your land (up to 160 acres) is used for agricultural purposes.

6. Oklahoma. Residents can exempt the entire value of their homes, but the homestead can’t be larger than a half acre if you live in a city, town, or village or up to 160 acres if you live elsewhere. (If you use more than 25% of the total square footage of your property for business, your exemption is limited to $5,000.)

7. Rhode Island. The exemption applies for up to $500,000 of equity.

8. South Dakota. If your home is less than 1 acre in a town or 160 acres in any other type of area, all of your equity is exempt.

9. Texas. For residences on 10 acres or less in a city, town, or village or 100 acres or less in the country, Texas offers an unlimited homestead exemption.

10. Washington. This state’s generous homestead exemption varies depending on the county the homeowner lives in, from $172,900 in Ferry to $729,600 in King County, where Seattle is.

Recommended: What Is Cost of Living?

Homestead Exemptions in Other States

Here’s all the rest of the states and what homestead exemptions they offer:

1. Alabama. The Alabama Department of Revenue indicates that at the state level, homestead exemptions have a maximum value of $16,450. It only applies on land area that is not more than 160 acres.

2. Alaska. Homeowners may exempt up to $70,200 of their home or other property covered by the homestead exemption.

3. Arizona. Homeowners can exempt up to $150,000 for a house and the land it’s on, a cooperative or condominium, a mobile home and the land it’s on, provided the person lives in the dwelling.

4. Arkansas. You can seek an unlimited amount of equity in 80 rural acres or one-quarter of an urban acre.

5. Colorado. Up to $75,000 of equity in a home or other property, such as a mobile home, is protected. The amount increases to $105,000 if the homeowner, spouse, or dependent is disabled or 60 or older.

6. Connecticut. The state of Connecticut protects up to $75,000 of equity in real property, a co-op, or a manufactured home occupied at the time of filing bankruptcy. The exemption rises to $125,000 if a creditor is collecting for hospital costs.

7. Delaware. Exempts up to $125,000 in real property or a manufactured home that was used as a principal residence.

8. Georgia. Homeowners may exempt up to $21,500 of their home or other property covered by the exemption. They can also apply $10,000 of any unused portion of the exemption to another property they own—a “wildcard” exemption.

9. Hawaii. If you’re the head of a household or over 65, you can exempt up to $30,000 of equity. If you’re not the head of the family, you may protect up to $20,000 of equity in your home.

10. Idaho. A filer can protect up to $175,000 in equity in a home or mobile home.

11. Illinois. Protects up to $15,000 in equity in your home, which includes a farm, mobile home, lot with buildings, condominium, or cooperative.

Recommended: How Often Can You Refinance Your Home?

12. Indiana. A debtor can exempt up to $19,300 in real estate or personal property used as a residence. In addition, if you are married and filing jointly, that figure rises to $38,900.

13. Kentucky. Up to $5,000 of equity can be claimed.

14. Louisiana. Homeowners are allowed to exempt up to $35,000 of home equity, and more if their debts were due to what’s considered a catastrophic or terminal illness or injury.

15. Maine. Up to $80,000 of equity in property used as a residence can be claimed. The amount can be increased to $160,000 in equity if you have a minor dependent residing with you, or if you are 60 or older or disabled.

16. Maryland. Exempts residential property value up to $25,150 (husband and wife may not double).

17. Massachusetts. The state automatically protects up to $125,000 in home equity, and up to $500,000 for those who file and receive the increased exemption (this amount also applies to the elderly or disabled).

18. Michigan. Each homeowner and their dependents can exempt up to $40,475 in a property covered by the homestead exemption. If the homeowner is 65 or older or disabled, the exemption amount increases to $60,725.

19. Mississippi. An exemption of up to $75,000 of equity in the real estate you live in can be claimed, as long as the property is less than 160 acres.

20. Missouri. You can exempt up to $15,000 of equity in the real estate in which you live or will live, and spouses who file a joint bankruptcy can double the exemption.

21. Montana. Up to $350,000 in equity can be protected as applied to up to 320 farm acres, a quarter of a city acre, or one residential acre outside a municipality.

22. Nebraska. Up to $60,000 can be protected on a home, provided the owner is either a head of household, married, or over age 65, and the property does not exceed 160 acres.

Recommended: How Much Does It Cost to Refinance a Mortgage?

23. Nevada. Up to $605,000 in equity in a home can be claimed.

24. New Hampshire. You can protect up to $120,000 in equity.

25. New Mexico. Up to $60,000 of equity in your home can be protected; that increases to $120,000 being available to spouses who co-own property.

26. New York. The homestead exemption amount varies greatly depending on the county. If the property is in the counties of Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, or Putnam, the exemption is $179,950. If the property is in the counties of Dutchess, Albany, Columbia, Orange, Saratoga, or Ulster, the exemption amount is $149,975. For any other county in the state, the exemption amount is $89,975.

27. North Carolina. Homeowners may exempt up to $35,000 of their home or other personal property. Homeowners who are 65 or older whose spouse is deceased may exempt up to $60,000, provided the property was previously owned by the debtor as a tenant by the entirety or as a joint tenant with rights of survivorship.

28. North Dakota. Homeowners can protect up to $100,000 of equity in their home when declaring bankruptcy.

29. Ohio. The state allows for the protection of up to $145,425 of equity as part of the homestead exemption. Spouses who file a joint bankruptcy may double that amount.

30. Oregon. A property owner may be exempt up to $40,000. Married couples, however, may be exempt up to $50,000.

31. South Carolina. The state’s law protects up to $63,250 in equity in a home or real estate used as a residence, with spouses who file a joint bankruptcy being able to double the exemption.

32. Tennessee. Homeowners can exempt up to $5,000 of equity — and that amount goes up to $7,500 for joint owners and $25,000 if there’s at least one minor child who is a dependent. People 62 and older can exempt up to $12,500 of equity in their home—$20,000 if married, and $25,000 if the spouse is also 62 or older.

33. Utah. Homeowners may exempt up to $43,300 to protect their home, provided it is their primary personal residence.

34. Vermont. An exemption up to $125,000 of the equity in a home, condo, or mobile home can be claimed; it can’t be doubled, however, in cases of joint bankruptcy filing.

35. Virginia. This state allows for protection of $5,000 of real estate or personal property as a “wildcard” exemption. That number doubles to $10,000 if the individual is age 65 or older.

36. West Virginia. Homeowners may exempt up to $35,000 of their home or other property. That figure increases to $70,000 if you are married, you and your spouse both own the property, and you file bankruptcy together.

37. Wisconsin. A single person can protect up to $75,000 of equity in a home; spouses can double the amount to $150,000.

38. Wyoming. In this state, up to $20,000 of equity in a home can be shielded from bankruptcy. This can double if you are married, you and your partner own the property together, and you file for bankruptcy jointly.

Still with us? If you don’t see a state listed above, that means it’s one of the two (New Jersey or Pennsylvania) that doesn’t offer any homestead exemptions for use in a bankruptcy filing.

The Takeaway

Homestead exemption rules can help protect your home in instances of a bankruptcy filing and can be very helpful during a difficult time. These guidelines differ greatly by state, but are worth investigating. If you can’t keep your head above financial water, these exemptions may allow you to keep your home.

Refinancing a mortgage may also provide some relief to a struggling homeowner. In addition to offering an array of mortgage loans, SoFi also can help you refinance at competitive rates and with a hassle-free process.

Find out how smart and simple a SoFi mortgage can be.

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SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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