Modular homes are a modern, efficient and cost-effective option for homeowners. But while modular offers a significant cost savings when compared to building a home from scratch on site, financing can be a bit complex. In this guide, we’ll take you through everything you need to know about Modular Homes Financing, including your loan options, how much you need to put down, construction-to-permanent loans and 7 tips to help you get the best rate.
For individuals who served in the military, first-time homeowners, or those wanting to lower their carbon footprint, modular homes can offer a pathway to your dream home with the right financing in place.
What is Modular Homes Financing?
Manufactured homes are constructed in factory and then transported in parts to a permanent foundation site, where they are assembled. Modular homes are treated like one thing, while mobile or manufactured houses are treated as another when it comes to financing so modular homes receive all the same loan types as traditional houses such as FHA, VA, USDA and even conventional loans.
But financing a modular home does require a few extra steps, particularly if construction is involved. In most cases, you will want to take out a construction-to-permanent loan that covers both the building and the final mortgage.
Common Financing Options for Modular Homes
1. Conventional Loans
The majority of banks and credit unions will write conventional mortgage loans for modular homes already on a permanent foundation or will be within a reasonable amount of time, provided that the home was constructed according to local building codes. You’ll typically need:
- A credit score of 620 or higher
- Down payment of at least 5%
- Debt-to-income ratio under 43%
2. FHA Loans
FHA loans can be a good option if you have a lower credit score or less money to put down. These government-insured loans require 3.5 percent down and are available to borrowers with all types of credit scores.
3. VA Construction Loan
Military veterans have the VA Construction Loan to help cover the costs of a modular home. With the ability for no money down payments, as well as a loan without the need for mortgage insurance, VA Construction Loans offer a host of benefits for those who’ve served their country. It’s a great opportunity for service-members to create equity while minimizing their financial exposure.3.
What Makes Modular Home Financing Unique?
Although the mortgage steps for a Modular Homes Financing are the same as site-built homes, all buyers will notice that homes are built from inside out. That means:
- The lender must approve the builder and floor plan
- You may need to make interest-only payments during construction
- Inspections and appraisals are done both during and after the build
This is why it’s critical that you select a lender experienced in modular construction.
Where to Start: Secure Land First
You will need to choose a lot for your home before seeking a construction loan. If you don’t know where to start, here’s a guide on where to buy land in Texas for those interested in modular homes. You can finance your land purchase as part of the construction loan, or pay it off earlier with a separate loan or with cash.
Build Smart: Choose Modular Construction
Modularity has lots of benefits, like the sped-up build, less material wastage, and cheaper labor. If you’re still deciding, see our complete guide on Build a Modular Home to learn what the process entails from start to finish.
Choosing the Right Builder Matters
Your lender will probably require an insured and licensed home builder. To help your project go well, make sure you find Texas home builders with experience in modular build. A quality builder will work directly with your lender, follow all state codes, and make sure your timeline and budget are on target.
Modular vs Triple Wide Homes: Financing Differences
But when it comes to financing, modular homes and Triple Wide Manufactured Homes couldn’t be more different. Modular homes are treated the same as site-built homes and are eligible for most types of mortgages. (Factory sets only; not all manufacturers have the capability to produce triple-wide homes.) Make sure your lender knows the difference, because its importance ranges from the likelihood that your loan is approved to the value placed on your appraisal.
How to Qualify for a Loan to Build on Your Own Land
However, if you own or are about to buy land, you could also have the option of a Loan to Build a House on My Land. The cost of the home and site development including, grading, septic, utilities, etc. are included in these loans. This is the perfect find for those buyers who want to have more say in their location and home design.
Save More with Rate Drop Advantage
Interest rates rise and fall, and if you lock into one that’s too high, you could be out thousands over the life of the loan. And that’s exactly why programs like Rate Drop Advantage are a savvy form of investment protection. This means you can refinance your loan to a lower rate without incurring the cost of a traditional refinance perfect for if you build when rates are high, but expect them to drop.
Final Tips for Financing a Modular Home
Here are some things you can do to help your financing process go more smoothly:
- Get pre-approved early. This will give you a clear budget and timeline.
- Choose an experienced lender. Not all lenders are familiar with modular financing.
- Keep your credit strong. Pay down debts and avoid large purchases before applying.
- Plan for construction delays. Always have a buffer in your timeline and budget.
- Understand your loan terms. Know when your payments start and what fees apply.
Conclusion
If you use the right lender, know what to expect, and budget well, Modular Homes Financing can be easy. With affordable financing specially designed for veterans and an expanding network of top-notch builders, choosing modular housing has never been such a no-brainer.
By purchasing a modular home in Texas, you will not have to pay out-of-pocket for your land and home at the same time obtaining single-loan financing that includes a “construction period” and a “permanent loan.” Now is the time to begin examining your funding vehicles and start the process of shaping your future.
