Manufactured homes is a pretty large category, so I'll ask you to get a bit more specific.

If you're speaking of Modular homes, where modules are factory built and deliver to the site, then usually there are some financing options available for the home usually through the factory. You will have a few hoops to jump through, such as local inspections and plan approval from the municipality in which you're building if modular is not customary. That said, it's not unlikely you can do it.

As far as the land question goes, you'll likely need to own the land. There are very few financing mechanisms for land purchasing, and they are largely unattractive with costly interest and high downpayments.

After construction, you will likely be able to refinance with a traditional mortgage and go on as normal from there. I am not a lender, so I recommend speaking to one that specializes in what you're trying to do. Start with your local community bank and move on from there. You may want to ask the village that your building in for a list of lenders that have been involved in development in the town.

Another road you may want to try is FHA 203K financing. If I'm not mistaken, you can use 203K financing to purchase a tear down property. As long as you use the existing foundation, you can use FHA funds to rebuild. I'm not sure if they will let you build with modular, but the overall package is very attractive. Low downpayment, lots of upfront planning, six month built in interest reserve, recasting into FHA mortgage upon completion. I know a very good 203K lender who can answer specific questions for you if you need one.

I think Anna raises a very compelling point. In the current market conditions, incredible value can be achieved by purchasing a foreclosure and renovating. Financing and permitting are also simpler and less costly.

Many consumers are attracted to modular construction because of the sustainable environmental features they can offer (less construction waste, high R values, lower construction process carbon footprint, etc). I will submit that it is more sustainable to reuse an existing structure and renovate in a sustainable manner and with energy efficiency in mind.

Whatever you end up doing, all the best.

Feel free to contact me with any questions.

Dear Tawtat,
Foreclosure rate for single family homes is high in Chicagoland, the prices have dropped and it is a good time to buy. Land on the other hand is harder to purchase with a great discount. By the time you purchase a lot, get the water and sewer running, get manufactured home and get it all hooked up and running....well, I think the cost would end up being much higher than a nice home, even if it is in need of some minor repairs or updates.
You also need to look at it as an investment, when you are ready to move and sell your house in few years, how many buyers would be interested in a manufactured home rather than a nice brick?
Good Luck! Anna