Modular Homes: A Guide For Home Buyers

If you’re in the market to buy a house, a modular home could be a great option due to its energy efficiency, affordability and relatively fast build time compared to that of a traditional home. However, modular homes have historically been greatly misunderstood and commonly confused with other types of non-traditional houses, such as manufactured and mobile homes.

Like other popular house styles, modular homes come with certain pros and cons for home buyers and homeowners. Before deciding if a modular home is right for you, let’s first take a look at what a modular home is and then review the answers to some frequently asked questions about this type of house.

What Is A Modular Home?

A modular home is a prefabricated house built in bulk in a climate- and quality-controlled factory. To build a modular house, individual sections called modules are constructed and then transported to the owner’s property where professional home builders will assemble the completed house onto a permanent foundation.

Modular homes have traditionally carried some negative connotations – such as the idea that they’re not as structurally sound as a standard “stick-built” house. However, the overall quality of modular homes has improved drastically over the years. In fact, it’s often almost impossible to tell the difference between a modular home and a traditional home.

Modular Vs. Manufactured Vs. Mobile Homes

Modular homes are often confused with manufactured – or “mobile” – homes because their names are sometimes used interchangeably. While these types of homes do have some similarities, each is unique in the way it’s built.

For example, modular homes are built in sections and then assembled into a complete home on-site. On the other hand, manufactured homes – the modern-day term for mobile homes – are built entirely on a chassis to ensure they’re always mobile. Another difference between modular and manufactured homes is that construction of manufactured homes is regulated by the Department of Housing and Urban Development (HUD), whereas modular homes are subject to codes set by the local governing body.

Finally, home buyers may have to finance a manufactured home differently than a modular home. Typically, it’s harder to get a mortgage for a manufactured home since it’s not permanently affixed to the property. In this case, a lender may not consider the house real property – rather, it’s deemed personal property, and a mortgage isn’t a financing option.

That's not to say getting an affordable mortgage on a manufactured home isn't doable. You can get financing through Rocket Mortgage^®. There are three primary considerations if you're looking into this:

• The home has to be permanently affixed to a foundation.
• It has to be titled as real property attached to the land.
• The home must have a HUD tag and has to be made after June 15, 1976. Prior to that date, there weren't today's safety standards in place from HUD. Homes built prior to this date are referred to as "mobile homes."

FHA loans for manufactured homes require a foundation inspection according to the standards set by the Permanent Foundations Guide for Manufactured Housing. If you've had a prior inspection, that can be used to qualify.

Characteristics Of Modular Homes

Before choosing a modular home as your dream home, it’s important to understand its unique features. Here are some key characteristics of modular homes:

• They come in various sizes and with various floor plans, architectures and design styles from the interior to exterior.
• They’re highly customizable to suit your lifestyle and accommodate other needs.
• They must adhere to the laws and building codes of the local governing body.
• They have the same potential as stick-built homes to appreciate in value.
• Construction in a factory setting typically takes only 3 – 4 months to complete, compared to traditional on-site construction, which averages just over 7 months.
• Buyers can finance a modular home with a traditional mortgage.

Pros And Cons Of Modular Homes

Now that you’re familiar with the ins and outs of modular homes, it’s time to carefully consider the advantages and disadvantages of buying one so you can decide if it’s the right option for you.

Pros

Some of the pros of modular homes include:

• Energy-efficiency: Modular homes are typically built from more sustainable materials than traditional homes built on-site, and they often go through a more energy-efficient construction process.
• Cost-effectiveness: Since they’re mass-produced in a factory setting, modular homes can allow home buyers to save on some of the traditional costs of building a house, especially when compared to a new construction built on-site.
• Speedy construction: Building a modular home is faster than traditional stick-built home construction, helping you avoid plenty of common construction delays.
• Potential value appreciation: Once permanently established on a foundation, modular homes can increase in value at the same rate as traditional homes.
• Variety of financing options: You can typically finance a modular home with most types of mortgages.

Cons

Now for some of the downsides of modular homes, which include:

• Construction costs: Before you can finance through a standard mortgage lender, you may be required to pay your builder. This means you may have to apply for a construction loan before seeking out a mortgage.
• Additional costs: Along with the cost of the house itself, you’ll need to buy land to build on, pour a foundation, and install plumbing and electrical systems.
• Stigmas: Although modular homes have come a long way with regard to public perception, they’re not in all cases completely removed from the stigmas that were once commonly associated with this type of home purchase. Therefore, selling your home can present some challenges in the future.

How Much Do Modular Homes Cost?

Since modular homes come in numerous shapes and sizes, costs vary from house to house. According to HomeAdvisor, the average price per square foot of a modular home is $100 – $200, not including the cost of labor, installations, etc. This means a 1,000 square foot modular home can cost up to $200,000.

Customized modular homes are more expensive per square foot, depending on the level of personalization. To put this in perspective, a customized modular home can cost anywhere from $350,000 to over $1 million.

How To Buy A Modular Home

If you determine that a modular home suits your needs, the first step is to find and purchase land where you can establish a new home. Don’t forget that a modular house will need to comply with the local building codes and zoning requirements, so be sure to select a property where a modular home is permitted.

Then, you’ll shop around for a reputable building company and select your floorplans and customizations before the project begins. At this point, you’ll also need to seek out a construction loan to pay your home builders once the house is complete. Once construction concludes, you can install electrical work and an HVAC, and furnish the house.

When your modular home is permanently established and deemed real property, you can transition to a standard mortgage, expanding your financing options. Remember, when choosing a mortgage lender, it’s best to shop around for the best interest rate and loan terms before you commit.

Modular Home FAQs

If you still have some lingering questions about modular homes, we’ve got answers for you.

Do modular homes hold their value?

Modular homes hold their value the same way a stick-built home does. As long as a homeowner takes proper care of their home and makes necessary repairs and improvements, a modular home can hold its value.

Are modular homes a good investment?

Because modular homes can hold their value and appreciate over time, a modular home can be a good investment in many situations. To increase resale value, consider making worthwhile home improvements and working with a real estate agent to discover comparable home sales in the area you’re building in.

Can modular homes have basements?

Yes, many modular homes have a basement. Consider during the planning stage of your modular house construction whether you’ll prefer a basement.

How long do modular homes last?

Modular homes can last up to 100 years, but their longevity depends on several factors – including but not limited to the durability of the materials used to build them, and how well the owners maintain the home.

The Bottom Line

A modular home can be an affordable and highly customizable option compared to other types of prefabricated homes. Although somewhat similar to manufactured homes, modular homes are unique, and their quality continues to improve as they increase in popularity.

If you’re thinking of buying a modular home, we can help you match with a real estate agent who can help find the perfect neighborhood to settle down in.