Modular Home

What is a modular home?

Updated November 1, 2022

A modular home is a type of prefabricated structure in which most of its sections, or modules, are constructed in a factory-like setting. The components are then shipped off and assembled on the building site’s foundation. It’s hard to distinguish a traditional onsite home and a modular home just by looking at it, as they come in all shapes, sizes, designs and floor plans. Like traditionally built houses, home values of modular structures fluctuate with the rest of the housing market. 

Photo: Giovanni Gargiulo/Pixabay

While modular homes are often considered more affordable options, especially as supply chain issues have plagued the new-build market, in recent years, modular homes have become more luxe, in some cases selling for eight figures.

What is the difference between a modular home and a manufactured home?

The components of both manufactured and modular homes are built in a factory. But, manufactured homes are built on a fixed chassis and must follow requirements set by the U.S. Department of Housing and Urban Development. Modular homes must follow the same state and local building codes as houses that are built onsite. They are also not 100% completed at a factory, unlike manufactured homes which are shipped completely built.

What are the pros and cons of buying a modular home?

Modular homes are a fast and cost effective way to build your dream house. It’s often cheaper to build a modular home because there is no construction waste, the building time is faster and there are no delay costs since weather, for example, won’t delay building since modular homes are constructed indoors. Some parts of the world that have harsh weather are even more well suited for modular homes, as a result. 

Modular homes are also customizable when it comes to design, so you have the creative freedom to choose architectural styles from Colonial to modern, and everything in between—both inside and outside. 

Though modular homes can be a great investment, there are challenges, too. Finding a suitable and large enough plot of land with proper zoning can be hard, especially if you want to live in a relatively crowded area. There are also financing difficulties when it comes to modular homes. Because they’re not deemed as a traditional, stick-built home, lenders often raise red flags about them. Builders typically require modular homes to be paid in full before the delivery, meaning you must be sure you can afford to pay for your prefabricated home upfront. If you don’t have the required amount of cash, then you might have to find other financing options like seeking an FHA loan, which has a 3.5% minimum down payment, or a Veterans Affairs (VA) loan. You can also take out a construction loan and later convert it to a mortgage after the home is finished.