An increasing number of purchasers are middle-class retirees living in cities and suburban areas who own their own land. It is estimated that about two-thirds of all purchasers today are landowners.

The quality of manufactured housing, including the quality of installations, is also improving. In 2000, Congress passed the Manufactured Housing Improvement Act (MHIA), which provided an improved system for keeping the Department of Housing and Urban Development (HUD) building code up to date and required states to improve the quality of installation and to set up dispute resolution programs.

Yet hazards remain for the unwary. Here are some guidelines for avoiding them: Do not buy a package of home, installation, site and financing. Tempting as it may be, one-stop shopping in this market is a sure-fire recipe for over-paying and not getting what you want. Take it one step at a time. It is easiest to compare the houses offered by different dealers if the price applies only to the house. Bundling muddies the waters.

Find the site first. Before I did anything else, I would decide where I want my house and whether on rented or owned land. If your credit is good and you have enough cash to buy your own plot, you will be eligible for mainstream mortgage financing. The savings in financing costs and in rent, if converted into a "present value," will probably be well in excess of the cost of the land.

If you rent because you can't find a plot or don't have the cash to buy one, but your credit is good, you may still be eligible for mainstream financing. This requires that you obtain a proper lease, which is one that has a term of at least five years and provides the other legal protections required by lenders.

Freddie Mac will buy mortgages on manufactured houses secured by leaseholds in certain states—the list is on www.mtgprofessor.com. Freddie's requirements are complicated and you may need a lawyer to determine whether any particular lease is in compliance.

If you can't purchase a plot or obtain an eligible lease, you will be obliged to settle for personal loan-type financing, paying 2-3 percent more. Even so, you will want to pay careful attention to the lease terms, which can vary widely. If you accept a monthly term, or the landlord's right to approve a purchaser, you will be at the landlord's mercy. Before you sign, talk to residents of the park about their experience.

Get a warranty on installation: Installation of manufactured houses remains trouble-prone. The dealer may want to include installation in the price. That is one type of bundling that makes sense, provided the dealer assumes responsibility with a strong warranty. If the dealer includes installation in the price but will not provide an adequate warranty, either ask for a price without installation, or walk.

If you buy the house without installation, you have to hire an installer yourself. This is no small matter, which is why so few buyers do it. The MHIA requires states to develop installation programs that include installation standards, training and licensing of installers and inspections, but compliance has been spotty. Check your own state from the spreadsheet attached to this article on www.mtgprofessor.com. In addition, ask local owners for recommendations, ask installers for references, and make sure they are insured.

Arrange your own financing: The dealer will try to package financing into the deal. He can get you approved fast and easy, which is an attractive lure. If you can qualify for mainstream financing, however, you will do better to find your own loan. If you don't qualify, it might not matter.

The writer is Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.

Copyright 2003 Jack Guttentag