Financing a modular home isn't that different from financing a conventionally constructed dwelling. Most modular home buyers are eligible for the standard mortgages available for any house built on a single-family lot. Your mortgage might be a bit lower than for a traditionally built home, though. Although similar in quality, modular homes are generally less expensive than conventional residences.
The Modular Home
It's important to know the legal definition of a modular home for financing purposes. It is not a mobile home -- those are properly referred to as "manufactured homes." A modular home must adhere to the same building codes as a site-built house. Unlike the site-built, or "stick-built" home, a modular home arrives at the lot preassembled, requiring installation on a permanent foundation. Your modular home is also known as a prefabricated or panelized home.
If you finance a modular home through a conventional mortgage lender, the process differs in only a few aspects from site-built home financing. For best results, always get a pre-qualification estimate.
Find a lender familiar with modular home financing. That way, you're dealing with a lender who knows the housing type and the industry.
- Find a site for your home and choose a specific modular home design. At around the same time, submit a formal mortgage application. You must provide proof of income, current bank statements, tax returns and other financial information required by the lender.
- If your lender approves your application, you receive a formal letter of commitment. At that point, send your lender the modular home blueprints and a statement from your general contractor estimating labor costs.
- Create a disbursement schedule for the money going to each vendor involved in your modular home's construction. As each step is completed -- such as land clearing or modular delivery -- you must receive approval from the local building inspector stating the work is done correctly. If all work is done properly, the lender pays each vendor.
- Once disbursements are complete, the formal mortgage closing occurs. You must make sure all local building permits are issued before actual building of the modular home can begin. Because of the nature of modular housing, construction is generally completed within two months. Your construction loan is usually good for one year.
Other Loan Options
It's likely the manufacturer of your modular home will offer financing options. The U.S. Department of Housing and Urban Development also insures financing for modular housing.
Construction Loan to Mortgage Loan
Once your modular home is built, your construction loan becomes a mortgage loan, after your lender inspects and approves the dwelling. The length of your mortgage loan depends on its terms, such as 15 or 30 years.
A graduate of New York University, Jane Meggitt's work has appeared in dozens of publications, including Sapling, Zack's, Financial Advisor, nj.com, LegalZoom and The Nest.