5 Things to Know About Buying a Modular Home

Written by Ashley Sutphin Posted On Tuesday, 27 February 2024 00:00

Modular homes are prefabricated, which means they’re built in a factory. After the home is built, it’s delivered to a building site, and then it’s assembled and put on a foundation. Some people decide to buy modular homes because they can be less expensive than a traditionally built home, usually because the process of building modular homes is more efficient.

The following are five things to know before you invest in a modular home.

1. The Basics

A modular home is built by section in factories. These factors are giant facilities that assemble homes based on the International Residential Code or IRC. Under the IRC, these facilities are required to make sure they’re assembling homes that comply with state and local building regulations.

IRC has similarities to HUD because both have standards for safety and quality. HUD requires manufactured homes to have an attached steel chassis that helps with transport. Homes constructed to IRC specifications are on a permanent foundation, like a site-built home.

Once a modular home is fabricated, the sections are then taken by truck to a building site. Using a crane, they can be assembled on the poured foundation.

Once the home is assembled, the process is like a conventionally-built home. The home is hooked up to utilities, and the interior is fitted with things like flooring and cabinetry.

A modular home isn’t the same as a manufactured home. Modular homes do conform to HUD standards. The difference is that manufactured homes are also known as mobile homes or trailers, and they’re built on a steel chassis, unlike a modular home that has a foundation. Modular homes aren’t mobile once they’re assembled, but manufactured homes are.

2. What Does a Modular Home Look Like?

Modular homes look a lot different than they did even a decade ago. The quality is much higher than in the past, and they can be nearly, if not entirely equal, to a site-built home.

A modular home can look like whatever the buyer wants. For example, they can be designed in different aesthetic styles, such as rustic or traditional. They’re very customizable, so you may be able to adapt the floor plan to your needs.

3. Financing a Modular home

A modular home can be preferable for some people because they tend to be less expensive than traditionally-built homes. The average modular home can be anywhere from $120,000 to $270,000. The median sales price for a traditionally built home is much higher. With that being said, the cost of building a modular home doesn’t include the cost of purchasing land and preparing it to put the home on it.

Most banks and lenders do finance modular homes.

You can use a conventional loan, which is any loan the federal government isn’t backing. These are conforming or nonconforming loans. Conventional loans require that you have a good credit score to qualify for competitive interest rates and terms.

You can also use an FHA loan to buy a modular home. FHA loans are backed by the Federal Housing Administration, and they’re easier to qualify for. If you have less-than-perfect credit, FHA Loans can be a good option for you. You’ll need at least 3.5% for your down payment, and you can’t have a debt-to-income ratio higher than 50%.

The Department of Veterans Affairs backs VA loans, and you can use them to buy a modular home and the land you plan to build the home on.

4. The Advantages

There are a lot of benefits of modular homes, including:

  • It’s faster to complete them. These houses are fabricated indoors, so you don’t have to worry that the construction process will be held up by bad weather. Modular homes can be built year-round, and the components can be finished in weeks instead of months.
  • Modular homes tend to consistently be high-quality. They aren’t exposed to the elements during construction.
  • You can get a lot of value for your money with modular homes. The manufacturers of modular homes buy materials in bulk, and they can pass their lower overhead onto buyers.
  • They’re environmentally friendly, and they operate more efficiently than site-built homes, so you can save on your heating and cooling bills. You can even customize your modular home to be off-the-grid.

5. The Disadvantages

There are some downsides you need to weigh before buying a modular home too.

One is the stigma. You may have personal concerns about a modular home, but if you can learn more about the difference between modular and mobile homes, this might help you realize that a modular home can actually be a good option.

If you buy an existing modular home, you may need to renovate it because cosmetically, the older modular homes weren’t nearly as aesthetically high-end as they are now.

You are also going to have to factor in the cost of buying land as part of your budget. Not all areas are zoned for modular homes because of the assembly process, so before you choose a piece of land and make an offer, you need to make sure that you know the local zoning ordinances or any HOA covenants.

Finally, modular homes aren’t all-inclusive. You still have to pay for pouring your foundation and your plumbing, electrical, and ductwork.

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