What to Consider Before Buying a Modular Home

Buying a modular home can be a great investment for buyers at all stages of their lives, especially if they want a house customized for them. However, there are some things to know before finding out where to buy a modular house.

Explore this handy guide to stay informed when you’re ready to buy a modular home.

What Is a Modular Home?

A modular home is a type of structure built off-site, away from the place where it will stand when assembled. These residences are built in sections called modules in an indoor, climate-controlled factory, where builders assemble them according to strict quality standards. 

The builder then ships each module to the site and assembles them to build the house. Once they finish, the modular house is virtually identical to a newly built one and can have the same design features at a lower cost.

Why Buy a Modular Home

Buying modular offers opportunities for luxury you might not otherwise have. Here are some of the reasons why more and more buyers are choosing to work with a modular home dealer to make their dream a reality:

    • Modular houses cost less: Because they are built in a climate-controlled environment in sections with standard designs, modular homes are less expensive to build.
  • They’re good for first-time home buyers: Modular construction offers affordable, quality designs with modern amenities to first-time home buyers, without having to wait or compete with other buyers in hot markets.
  • They’re more eco-friendly and economical: The manufacturer knows exactly how much material is required to build a modular home, meaning there are fewer wasted materials than with traditional construction.
  • You’ll get a new home faster: Modular construction takes roughly half the time of traditional building methods, reduces the amount of weather delays, and always meets strict building codes.
  • They’re customized and stylish: While manufacturers use standard floor plans to build modular homes, most also offer more features you can add to make it fit your exact needs, including additional windows, appliances, and more.

How Much Does It Cost to Buy a Modular Home?

Buying Land for a Modular Home

If you’re buying land for your modular home, size and location are important. Your lot needs enough space for your house to be set away from neighboring houses.

You’ll also want to look for land that is zoned to accommodate your dream house. Some zoning boards set strict size, shape, and height requirements for residences in the area, as well as requirements for hooking up utilities.

If you’re working with a modular home dealer, your salesperson can help you determine which designs meet the zoning requirements in your area.

Buying a Modular Home on Leased Land

If you can reach an agreement with a land owner who allows you to lease their property and build on the land, it could be a less expensive path to ownership. 

Most landowners in these situations are agreeable and easy to work with when it’s time to renew the lease. However, given that some property owners aren’t as open to negotiating, it may still be better to purchase the land directly, when possible.

Financing a Modular Home

In many cases, since modular homes are virtually the same as traditional housing when completed, they offer similar financing options. However, there are some differences depending on the type of loan you’re trying to secure.

Can You Buy a Modular Home with a Conventional Loan?

Buying a modular home with a conventional private loan is similar to buying a standard one. In both cases, most lenders require a FICO score of 620 and a minimum down payment of 3 percent.

However, because they cost less than site-built houses, you may also be able to buy one with a personal loan. Credit rating requirements can vary depending on the lender, but personal loans typically require even less of a down payment than conventional loans.

Can You Buy a Modular Home with a VA Loan?

If you or your spouse served in any branch of the U.S. Armed Forces, you may qualify for a Veterans Affairs (VA) loan on your modular home. These loans offer lower interest rates and are available to buyers with lower credit scores. 

However, VA loans are subject to eligibility requirements based on how long you served, whether you were an officer, and the circumstances of your discharge. Most modular designs meet VA appraisal and inspection regulations, but it might be helpful to consult a credit union that serves service members, veterans, and their families if you have questions about your specific situation.

Can You Buy a Modular Home with a FHA Loan?

Yes, you can. While these loans have slightly different requirements from VA loans, most houses are FHA-compliant by design.

FHA loans can be a great way to access the American dream of homeownership. These loans typically have fixed interest rates and low down payments, making them ideal for lower-income families and those with lower credit scores. However, you will need to pay for mortgage insurance like you would with a site-built property.

Can You Buy a Modular Home with a USDA Loan?

USDA loans are a great way to build the house of your dreams on rural land. Even those not involved in agricultural work are eligible, provided that they purchase it in an area the USDA considers “rural.”

If you want to put your modular home on rural land and purchase it with the help of a USDA loan, you’re in luck. However, there are a few extra requirements:

  • Age of the house: The modular home must be less than 12 months old and come from an authorized dealer. It also cannot have been installed or occupied in another location.
  • Size of the house: Under USDA regulations, single-wide modular houses must have at least 400 square feet of space and be at least 12 feet wide, while double-wide modular houses must be at least 20 feet wide.
  • Safety requirements: The building has to meet all Federal Manufactured Home Construction and Safety Standards (FMHCSS) and have a permanent foundation. When working with a dealer like Preferred Homes, you should be able to find a floor plan that meets these strict safety and accessibility requirements.
  • Location: The land should be zoned as residential property, needs to be in a USDA-eligible rural area, and must be higher than the nearest 100-year floodplain.
  • Appraisal: Like with a site-built house, USDA loans require an appraisal so it meets appropriate financing standards. This will also assess its current market condition and allow you to ensure you have water access and sewage disposal options.

Can You Buy a Modular Home with Bad Credit?

You can buy a modular home even if you have bad credit. However, it might be challenging to secure a loan with a reputable bank or credit union. You might also have a higher interest rate on your loan payments, in addition to paying for mortgage insurance if you can’t make a down payment of more than 20 percent.

Popular Modular Home Styles

Like a more efficient and cost-effective version of traditional site-built houses, modular homes have many different styles. A few of the most popular ones include:

  • Ranch: These usually have one story and have an open-concept layout, making them an ideal choice for families and those needing less space.
  • Cabin: Meant to invoke the idea of a retreat in the woods, most cabin-style modular houses have two stories and often have log exteriors to complete the look.
  • Farmhouse: American-style farmhouse homes usually have up to two stories, often have a gable at the front, and feature open floor plans.
  • Cottage: These modular homes tend to be smaller than other designs, providing a cozy atmosphere. They also often have an asymmetrical design and are usually single-story.
  • Cape Cod: Traditionally, these homes have a rectangular profile with a side-gabled roof. They can have either one or two stories.
  • Modern: Most modern-style modular homes feature simple, minimalist architectural lines, geometric layouts, and heavy use of windows to let in natural light.

The Process of Buying a Modular Home

Thinking about buying modular? Preferred Homes works with many lenders who are familiar with the process and can meet your unique needs. We recommend securing a loan with one of our lending partners to start the buying process.

Your lender will check your credit score for pre-approval. Most buyers with credit scores at or above 670 will easily move forward with providing documents to your lender. However, you won’t necessarily be denied if your credit score is below that level.

The credit unions and banks we work with know who we are, so your modular home will already be eligible for a loan through them. We also build to meet FHA, USDA, and VA guidelines and standards, if you choose to get a loan through those programs.

Schedule a Tour of Your Future Home

Modular homes are a great, easy way for new owners to settle down and build equity. Have questions before you’re ready to buy? Schedule a tour with us today, and we’ll gladly answer any questions you may have.

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