Modular Home Loans: What to Know About Financing a Modular Home

With home prices in the U.S. still high, many people feel like owning a house is out of reach. One way to make homeownership more possible is to consider different types of homes, like modular homes, especially if you have a tight budget.
 

What Is a Modular Home?

A modular home is a house that is built in a factory and then put together on a permanent site. Buyers can usually pick things like the foundation, siding, and other materials, allowing you to customize the home to fit your needs.

Modular homes can be built and installed fairly quickly—some companies can do it in four to nine months. If you’re buying a modular home that’s already built, it will be fully assembled on the property.
 

Modular vs. Manufactured vs. Mobile Homes

Modular Homes are built in a factory and placed on a permanent foundation.

Manufactured Homes are also made in a factory but do not require a permanent foundation. They are usually cheaper but are considered personal property rather than real estate, which can make getting a loan more difficult.

Mobile Homes refer to manufactured homes built before June 15, 1976. After that date, the government started calling them manufactured homes.
 

How Much Does a Modular Home Cost?

According to Angi, a typical modular home costs about $240,000, not including the price of the land.

However, prices can range from $160,000 to $320,000 depending on several factors:
 

• Size of the Home: More space means higher costs for materials and labor.
• Foundation Type: A basement is more expensive than other options.
• Location: Labor and delivery costs vary depending on where you live.
• Land Condition: If the land is already cleared and prepared, you can save money.
• Upgrades: Custom features will add to the total cost.

 

How Do You Finance a Modular Home?

There are two main ways to finance a modular home, depending on whether you are building a new one or buying an existing one.
 

Financing a New Modular Home

If you’re having a modular home built, you’ll likely use a construction loan. These loans often have shorter terms, higher down payments, and higher interest rates than regular home loans.

While the home is being built, you usually make interest-only payments. When construction is finished, you’ll have to pay off the full balance, usually by switching to a traditional mortgage.
 

Financing an Existing Modular Home

To buy an existing modular home, the process is similar to getting a regular mortgage. You can apply for standard loans or government-backed loans. Check with lenders about their options for modular homes.
 

Types of Loans for Modular Homes

 

• Conventional Loans: You may be able to buy with as little as 3% down with certain programs.
• FHA Loans: These loans have easier credit requirements, and you might only need a 3.5% down payment.
• VA Loans: For qualifying military members, VA loans require no down payment, but you may pay a one-time fee.
• USDA Loans: If the home is in a qualifying rural area and you meet income limits, you may be able to get a loan with no down payment.

 

Frequently Asked Questions

Is it cheaper to buy or build a modular home?

Buying an existing modular home is usually cheaper than building a new one. With new homes, you incur additional costs, including purchasing land, preparing the site, and installing utilities.

Is getting financing for a modular home hard?

Existing modular homes are often eligible for regular mortgages and may not require a large down payment. For new builds, obtaining a construction loan is typically more challenging.

Is a modular home right for me?

A modular home can be a good choice if you find one that fits your needs and budget. They are often more affordable than homes built on-site, and you can get a standard mortgage for an existing modular home.

However, if you plan to build, remember to budget for extra costs like land, delivery, and utility installation.

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Read more: Is Now the Right Time to Take an FHA Loan?