Modular Home Financing

Before seeking modular home financing a potential buyer should become familiar with all aspects of this type of funding. In general, financing options are quite similar for site built residences and for prefabricated homes. If an individual is unable to afford to purchase this alternative style of housing without the use of credit then a construction loan will have to be obtained. Typically, this type of financing, which is considered a line of credit by most lenders, is more costly when compared to securing a mortgage for an existing dwelling. A construction loan will help a buyer to cover some of the anticipated costs associated with building a modular home, such as work conducted by subcontractors, certain permits and fees and the actual construction phase, but not necessarily architectural plans or site testing.

With everything on the rise throughout the United States, from gas for automobiles to increasing food prices, purchasing a modular home may be a more viable option for an individual compared to buying an existing residence. Before further discussing modular home financing, it may be best to first define what exactly this type of housing entails. Modular homes are built in a factory and then assembled in sections on the buyer's land. In contrast, site built homes, often referred to as stick built, are constructed directly on a particular site. Both site built and prefabricated houses typically increase in value over time and they are both constructed to the same specific Uniform Building Codes (UBC).

There are several advantages for a person to think about when deciding whether to choose prefabricated construction or not, including it usually takes half the amount of time to construct one of these houses, they are built in climate controlled facilities and generally this alternative form of housing is less expensive when compared to site built structures. Consumers must not confuse a prefabricated home with a manufactured house, also called a trailer or mobile home. This type of dwelling, though also built in a climate controlled factory, may or may not be set up on a permanent foundation. Trailers also often decrease in value over time since they are typically considered personal property, which generally makes it increasingly more difficult for a buyer to securing financing.

As with a site built house, an individual will need to secure a construction loan when they purchase a modular home. When seeking modular home financing, borrowers have the option of acquiring a construction/permanent loan, which includes both the construction line of credit and mortgage all rolled into one package. An advantage to this type of financing is the buyer will only have to pay one set of closing costs instead of two, but, interest rates tend to be higher with construction loans. Before obtaining any form of funding, a potential borrower should spend time creating a construction budget, which will include all the details of the costs for the project, to better have an understanding of how much modular home financing will be needed. Consumers should realize that construction loans are for short periods of time, typically no more than 12 months, and the borrower will pay the interest only until the project is completed, at which time, the financing will convert to a traditional mortgage and the individual will then pay both interest and principal.

A significant advantage for buyers in purchasing a modular home versus building a stick built house is there is usually a reduction in cost overruns for these projects since these structures come with a guaranteed price and construction occurs in a climate controlled factory, eliminating weather-related delays. When seeking modular home financing, a borrower also has the possibility of using the equity in their land for a down payment. It would be wise for a consumer to conduct extensive research in securing a construction/permanent loan since this is a specialized type of mortgage lending.

Whether a person obtains modular home financing, a traditional mortgage for an existing residence or funding for constructing a site built house, the bottom line is the buyer is securing funds for a loan. Scripture provides advice about borrowing in general by stating, "The rich ruleth over the poor, and the borrower is servant to the lender" (Proverbs 22:7). The wiser decision for an individual considering buying a house would be to diligently save as much as possible for such an expensive acquisition. If this option isn't feasible, then a potential buyer should invest much time in selecting the most appropriate and affordable house and they should shop around to find the best deal in modular home financing.

Modular homes are fast becoming an alternative choice for buyers with an estimated five to 10 percent of all houses built in the United States being this form of residence. This figure is expected to increase to 35 percent within the next 10 years. Floor plan options are numerous, from a modest vacation getaway, a simple single-story ranch, a four-plex unit, to an exquisite two-story mansion. Manufacturers of these types of houses can assist a buyer with everything from site selection tips, obtaining necessary permits, choosing a floor design and even modular home financing. The savings an individual is likely to experience when purchasing this style of housing compared to constructing a site built home could potentially be used to buy top quality appliances, upgrade to customized options, add nicer carpeting and include a host of other features.





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