Everything You Need to Know about Modular Homes


BY The Lenders Network

5 minute read

If you’re thinking about buying a new home, you may want to look into a modular home.

But what is a modular home an how are they different from a more traditional home?

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What is a Modular Home?

A modular home is one that is manufactured in a factory, indoors, away from the harsh elements of mother nature.

Modular homes usually come in set floor plans and models, however, there are custom modular builders that allow you to customized your home.

They are very similar to a traditional home with full size bathrooms, bedrooms, kitchens, and even yards. Modular homes are becoming more popular due to their lower price per square footage.

Mobile vs Manufactured vs Prefab vs Modular Homes

Mobile Homes

picture of mobile home

Prior to 1976 a mobile home did not have to meet any type of minimum building standards as they do today. Technically, a mobile home and manufactured home are the same thing.

Manufactured homes built before 1976 are called mobile homes. After 1976 the terms changed to manufactured homes but they are essential the same thing.

Manufactured Homes

manufactured home vs modular

In 1976 the U.S. Department of Housing and Urban Development instituted a code governing the quality and minimum building standards of manufactured homes.

Mobile homes no longer exist, the correct phrase is manufactured homes. The terminology has changed since the building codes were instituted, greatly improving the quality.

Manufactured homes are built under the Federal Manufactured Home Construction and Safety Standard Act code standard set by HUD. They are built completely at the manufactures location and then transported to the customers desired location.

Manufactured homes usually have between 600-1500 square feet. There a several different sizes and models to choose from. The sizes are called, sgbnle wide, double wide, and triple wide.

They are able to be moved to a new location at any time, making them “mobile” homes.

Modular Homes

what is a modular home

Modular houses are produced in sections and then transported to a location to be assembled and customized.

Modular homes are more similar to a traditional single-family home. A manufactured home is mobile and sits on top of the ground. In comparison, a modular home is usually set on a concrete foundation or basement and have driveways, yards, and fences. They cannot be moved once assembled.

Typically, you will find modular homes in a planned community with different pre-set models to choose from. You can add custom details, such as fixtures, flooring, paint, stone, etc.

A benefit is that the style and standard of living are quite similar to a traditional wood and brick built built home but for a lower cost per square foot. In some cases you cannot even tell if it’s a modular or a traditional stick built home, you can even find two-story modular homes.

Average Modular Home Prices per Square Foot

  • Base price (no add-ons or customizations) $50 per sq ft
  • Custom home price (with upgrades finishes and fixtures) $60 per sq ft
  • Home price delivered (having home secured on-site, not including foundation or attaching utilities) $65 per sq ft
  • Modular home final price (includes foundation, drive-way, porch, utilities) $110 per sq ft

Top Modular Home Manufactures

Irontown Homes

Blu Homes

Modular Direct

Champion Homes

American Homes

Beracah Homes

PreFab Homes

prefab homes

A prefab house is one that comes to your location for an on-site installation. These homes are mobile so you can move them anywhere. They are also completely self-sufficient allowing you to literally move it to any location, such as a beach or mountain top.

Pros and Cons of Modular Homes

A modular home is a great option for homebuyers wanting to become a homeowner on a budget. However, while there are some great benefits of modular homes, there are also a few drawbacks to consider.

Pros

  • Move-in quick: Construction is much quicker than a stick built home
  • Cheaper: Lower cost when compared to a traditional home
  • More financing options: In some cases you can finance a modular home through the builder
  • Resell value: Modular homes keep their value more than a manufactured home

Cons

  • Few customizations: Most modular home builders allow fewer customizations than other builders
  • Harder to finance: Financing a modular home is more difficult and some lenders cannot approved them. You may need a construction loan if the builder requires you to pay in full, or at certain stages to complete the build.
  • Buying land: The cost usually doesn’t include the cost of purchasing the land the home will be on. Depending on the costs of land in your area it could greatly increase the price.
  • Harder to sell: While a pre fabricated home presents a great value, not everyone see it that way and may be turned off by the idea.

Financing a Modular Home

Not many lenders or loan officers are experienced in dealing with modular homes. You will want to find a mortgage lender that is familiar with the processes.

FHA loans are popular because of their low credit score and down payment requirements.

First-time home buyers are especially fond of them because you may qualify with a 500 credit score and 10% down. If you have at least a 580 credit score you can qualify with just a 3.5% down payment.

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Rules for FHA Manufactured and Modular Home Loans

A modular home must meet the minimum property standard set in place by the U.S. Department of Housing and Urban Development, HUD. Here are some of the FHA guidelines.

  • Must be built after 1976
  • 400 square footage is the minimum size that qualifies
  • Must be secured on a foundation
  • Only for owner-occupied borrowers, not available to real estate investors
  • Must meet the HUD standards for manufactured home installation