Please take a moment and consider a hypothetical—but nonetheless possible—scenario.  There are two hopeful borrowers named Brandon and Chris.  Both are planning to invest in factory built homes, but Brandon has picked the modular home route while Chris plans to purchase a manufactured home.  These investors approach the same mortgage lender and, to keep all extraneous variable constant, both have similar documented income, credit scores, etc.  

Here is where it gets interesting: Brandon is quoted for a conventional loan with lower rates than Chris’ quote. 

Why did two borrowers, both of which were planning to buy factory-built homes, experience such very different scenarios?  In order to properly answer this question, you need to pick out a pair of financing glasses and look through the lenses of a mortgage professional. 

While modular and manufactured homes are both primarily constructed in a factory, they have a major difference: modular homes are assembled on site whereas manufactured homes are completed in the factory without a particular site pre-selected. 

This raises a few issues in the eyes of a mortgage lender or broker. 

For one, a modular homeowner typically plans to own the land on which their factory-built home will be assembled, but a manufactured homeowner typically rents the plot their future home will occupy.  Now, rented land--to careful lenders--is not as secure an investment because if the landowner finds a more profitable way to occupy their property they can kick that homeowner and their factory-built home off its current plot. 

Of course, respectable landowners will and must give you notice. 

Rented land equals a higher risk which, in turn, equals a higher interest rate.  But, there is hope for manufactured home investors like Chris.  Federal codes for factory-built homes have come a long way, and because of this increasing quality conventional lenders are recognizing factory-built homes as a viable option. 

These lenders have niche mortgage products, types of conventional loans, which are adapted for factory-built homes.   Typically, borrowers with good credit and who plan to own the plot of land have a better chance at approval and lower rates than those who with poor credit or no plans to purchase property.  So we could speculate that Chris--who was quoted a high interest rate--was dealing with a mortgage broker/lender that did not specialize in this particular niche or, possibly, John was planning to rent the land under his manufactured home instead of opting to purchase it.