Benefits of FHA Modular Home Loan for First-Time Home Buyers

Modular homes are prefabricated residential buildings that are constructed in a factory and transported to the designated location. Once there, they can be quickly assembled for a home that is ready for you to move into. 

Buying a modular home as a first-time homeowner has many benefits. In today’s buying market, traditional homes are expensive and going quickly. The median price for a home rose every month in 2022 until July, with the highest being $413,800. Modular homes are more cost effective and readily available since they are constructed in a factory. They are a reliable option built with high-quality materials, and include modern amenities that are ready for you to enjoy. 

Can You Buy a Modular Home with an FHA Loan?

Yes, you can buy a modular home with an FHA loan. According to the U.S. Department of Housing and Development (HUD), modular homes are built to the same code as site-built homes, allowing them to qualify for FHA loans, while manufactured homes must be built to the HUD Code and meet certain criteria.

Modular vs. Manufactured: What’s the Difference?

Modular and manufactured homes are similar, but some important factors set them apart and determine how the FHA loan applies. A modular home is constructed in pieces off-site and then transported to the designated location. The pieces or modules are then assembled to form the home, and the home is placed on a permanent foundation. Once on the foundation, a modular home is typically permanent. 

Modular homes are not restricted by building and zoning regulations. Since they are built to meet local and state codes and are viewed as traditional homes, modular homes are included under FHA loans. 

Like modular homes, manufactured homes are constructed off-site. However, unlike modular homes, manufactured homes are delivered on the home’s built-in wheels, giving them mobility and the ability to change locations. Once at a location, manufactured homes can be placed on a slab foundation. 

Manufactured homes are built to meet the HUD codes, but some restrictions might come up when placing the home on private property. Lenders do not always see manufactured homes as “real” property, so finding a private loan can be challenging. However, FHA loans can still be used for manufactured homes that are built to meet HUD Code standards.

Benefits of an FHA Modular Home Loan

Using an FHA loan to buy a modular home combines the benefits of an FHA loan with the benefits of buying modular, including:

  • Lower minimum credit score required: Credit qualifications for FHA loans aren’t as strict as other loan options. FHAs allow for people with lower credit scores to buy a house.
  • Lower down payment options: FHAs require less on the down payment, making them ideal for first-time buyers.
  • Lower interest rates: FHAs have much lower interest rates than conventional loans.
  • Faster turnaround: Because they are constructed off-site in a factory setting, modular homes are faster to build than site-built homes.
  • Lower total cost: The total price of modular homes is generally lower than traditional homes due to increased efficiency during the manufacturing and assembly processes. 

Is an FHA Modular Home Loan Different from a FHA Loan?

The FHA loan is the same whether you intend to use it for a modular home or a traditional, site-built home. However, using your FHA loan for a modular home allows you to gain the benefits of modular construction over traditional construction.

Are Modular Homes Cheaper than Buying a House?

Modular homes are typically more cost effective than traditional homes. Modular homes are built quickly and efficiently in terms of labor and materials. Since modular homes are built in a factory, workers do not have to travel to different locations, lowering the labor cost and improving the quality of construction. 

When it comes to receiving an FHA loan, the terms and benefits are the same regardless of if you buy site-built or modular.

How to Buy a Modular Home as a First-Time Home Buyer

1. Check Your Credit Score

Your credit score is one important factor in determining what kind of loan you qualify for. An FHA loan requires a score of 500; however, many lenders will require a score of 620 or higher. Checking your credit score will prepare you for whether or not you can receive an FHA loan.

2. Apply for Pre-Approval

After checking your credit score, it’s time to apply for pre-approval. Preferred Homes can help connect clients to a bank from our list of preferred vendors; however, we work with customers looking for modular homes regardless of who their bank lender is. The bank will then get the necessary paperwork together to move your application forward. 

3. Determine Where Your Modular Home Will Go

Modular homes can only be assembled on private property, not in a mobile home park. While Preferred does not sell or finance land, we can help connect you to local real estate agents who can assist you.

4. Get Approval for Your FHA Modular Home Loan

The next step is to get confirmation of approval for your FHA home loan. Most first-time home buyers benefit from an FHA, but there are other loans as well that a person can use to buy a modular home if they are not approved for the FHA.

5. Buy Your Modular Home from Preferred Homes

After getting approved for a loan, you can buy your modular home. Preferred Homes offers a variety of styles from top-of-the-line modular home manufacturers. Choose the floor plan and style that works best for you and your family. 

Why First-Time Home Owners Love Modular Homes

First-time homeowners love modular homes for their many advantages, including:

  • Affordability: First-time homeowners can benefit from modular homes as a more cost-effective option since they are cheaper than traditional home purchases.
  • High quality: Despite their lower price, modular homes are high quality since they are produced in a controlled factory setting. 
  • Perfect starter homes: Modular homes offer the perfect, manageable size for first-time homeowners and those who are looking to start a family. 
  • Better than apartment living: Apartment life is convenient, but there are many disadvantages. Whether you’re sick of hearing your neighbors’ loud music or being told what you can and can’t hang on the walls of your own home, buying a modular home gives you all of the benefits of homeownership for a much lower price than a traditional site-built home.

Become a First-Time Modular Home Buyer with Preferred

Ready to become a first-time modular home buyer? Preferred Homes offers affordable, high-quality modular homes for you to choose from and can help you navigate your financing options. Contact us today to get started.

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