This is an informative guide on purchasing a modular home for first-time buyers.
What Is a Modular Home?
A modular home is a prefabricated home, meaning it is built in a factory. Afterward, it’s delivered to the building site as one or more modules where builders assemble it and place it on a foundation.
A modular home usually costs less than its traditional counterpart because of increased efficiencies in the building process, although this can vary depending on where you live.
Modular homes are typically constructed in a controlled, factory-like environment. Moreover, the modular home building process goes as follows:
- A team of experts will assemble the house in the factory using CAD drawings turned into templates for each stage of construction.
- The modular components arrive at the site like giant Lego blocks transported on a flatbed trailer.
- Builders assemble the modules by using cranes to remove them from the trailer and place them on the foundation, where they lock together seamlessly.
Manufactured homes (prefabricated houses) are constructed using panelized sections assembled by workers at a factory before being delivered to the lot.
They’re sometimes smaller overall but have the same space as conventional single-family homes with up to four bedrooms and two bathrooms (though some may only offer two bedrooms). Manufactured homes are built on a steel frame in the factory and then delivered to the building site. The steel frame stays on the house and becomes the support system for the home.
Benefits of Purchasing a Modular Home
You’re likely wondering why purchasing a modular home may serve as a practical alternative to paying for a traditional home. Keep reading to learn the reasons why buying a modular home is a great option.
Good For First Time Buyers
Modular homes are great for homebuyers seeking a new residence, first-time homebuyers, and homebuyers looking to downsize.
They offer affordability, high-quality construction, and modern amenities—all without the wait! That’s because modular homes are shipped to your location on flatbed trailers and then placed on your foundation, so you’re ready to move in right away once it arrives.
However, first, you will need to understand what to know before buying a modular home, which leads us to the cost.
Modular homes cost less because the construction process has reduced overhead. When the home is built in a factory there is a much more efficient use of materials and labor. Because of this, companies can offer them to you at a lower price.
Other benefits of modular homes are that they are built in a factory, which means that the finished product is cleaner and less likely to have any flaws.
Furthermore, modular homes often come with warranties up to 10 years and standard features like stainless steel appliances, granite countertops, and energy-efficient windows.
How Much Do Modular Homes Cost?
Modular homes range from $60,000 to over $100,000 and may even be less expensive than renting a house for three years in some rural areas. You can buy your modular home outright or finance it at the time you purchase it.
How Does Land Factor Into the Cost of a Modular Home?
Land factors into the cost of modular homes because the modular home industry estimates that it saves up to $52,000 on a site-built home since modular homes are built in factories and assembled at the construction site. You can use these extra savings to purchase a better piece of property than you normally might be able to when building a traditional home.
Since manufacturers build the same design repeatedly, it makes them more efficient than builders who have to draw plans for each new house they construct.
Financing a Modular Home
If you want to purchase a modular home, you’ll first need to figure out how you will finance it. Keep reading and explore the best ways to finance a modular home.
What Financing Options Are Available For Modular Homes?
One of the first steps to buying a modular home is how you’ll finance your purchase.
Traditional Construction Loans
The most common financing method for a modular home is securing financing through a lender that provides construction loans. Your modular home manufacturer may have banks they partner with to help make this step easier.
Since modular homes are treated like site built homes, it’s common to receive a construction loan that converts into an end loan once the project is complete. This happens because the home doesn’t exist yet, and cannot have its value appraised for a loan. The construction loan first pays for all the construction costs of your modular home – everything from your home’s foundation, the lot preparation, driveway, and more. Once the home is built and construction is complete, the loan will transform into an end loan or a permanent mortgage.
USDA, VA, or FHA Construction Loans
Government-backed loans are another option to finance your modular home. USDA, VA, and FHA construction loans typically include the same underwriting agreements as a conventional construction loan but feature different options for down payments.
Other Financing Options
If possible, paying cash is another convenient way to pay for your modular home. Without the need to secure financing, cash eliminates interest rates, closing and appraisal costs, and all the paperwork required.
If you lack immediate funds, there may be other ways to get into a new modular-ready house, such as taking out a second mortgage, leasing, or leveraging equity from another property like a rental house or investment property.
What Should My Credit Score Be?
To finance a modular home with a traditional construction loan, it is recommended to have a credit score of 700 or higher.
If financing your home through a VA or other government-backed loan, the minimum range recommended for a credit score is between 580 and 620 – or higher.
Modular Home Timeline Steps
What are the steps to buying a modular home? When setting up your modular home, it would be in your best interest to follow these steps.
Step 1: Find a Location, Get Pre-Approval, and Set a Budget
You should first find a location, get pre-approval from your bank or mortgage company for financing, and set a budget.
Step 2: Search for Homes & Select a Floor Plan
The second step in the modular home process is finding one. There are many ways in which you can find the perfect house for your needs:
- Searching through online listings of local companies and websites that offer homes built by them
- Visiting a manufactured and modular home sales lot. Sales lots offer many homes in one location to view and oftentimes from several different manufacturers.
- Sending out personalized emails or calling modular manufacturers with specific requirements
- Calling up local builders who may have what you need
Once you find a modular home manufacturing company, you can select a floor plan model that works best for you and your needs. This process could take anywhere from an hour—if you’re lucky enough to find something quickly—or several weeks as there’s no telling how long it’ll take before you get replies back. At the time you order your home with a modular home manufacturer is when you can choose your home’s final touches, like paint color and more.
Step 3: Prepare the Lot
The lot should be leveled, well-drained, and cleared of any trees or other obstructions. If you build a house on top of sloping land, beware that your basement may not drain properly. An important step to preparing the lot for a modular home is setting the house’s foundation prior to delivery.
Step 4: Insure Your Home
Prior to arriving at the site, you should insure your modular home. It is recommended to shop around and see what each insurance provider offers to protect your home. Ensure that you get the most value out of the premiums you’re paying.
Step 5: Delivery & Installation or Building of Home
The modular home is delivered to your site on a flatbed trailer. The modules are unloaded from their trailers using a crane and are set on the foundation. Construction crews then bolt them together securely and tie them to the foundation. The construction crews also install any missing siding and shingles.
Step 6: Finish the Home
Once your modular home is set on the foundation and bolted together, it is ready for the finishing touches. Finishing touches on a modular home include:
- Finishing drywall & trim between the modules
- Seaming flooring together
- Connecting and turning on utilities, such as well, septic, electric, heating, cooling, and any other mechanicals
- Adding any extras to the home, like porches, decks, and garages.
Step 7: Move In!
Now it’s time to move in and start enjoying your new living space. Get packing, schedule a moving company, unpack, and find a place for all your belongings.
How Long Does the Modular Home Buying Process Take?
The total process of building a modular home can take anywhere from 4 months and up to 10 months or more if production is backed up or there are supply chain shortages.
View Preferred Homes Modular Floor Plans
The modular home buying process is a lot more straightforward than the traditional one. You also won’t need as much of an investment up front since it’s built off-site. Moreover, there are plenty of financing options available for homeowners who want their own place but can’t afford a typical detached house.