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Modular Home Construction Loan
As you may know, a modular home is far easier to build than an onsite-built home. These homes are manufactured in kits, with parts delivered to the site, and then assembled. So for example, instead of having to build a wall from scratch, the whole wall complete with sheet rock and paint may be delivered to the site to be installed instead. The key difference between a for an onsite-built home and a modular home is the time line, an onsite built home could take 6-12 months to build, as a modular home may only take 3-4 months to complete. So to the home owner, this means less interest will be paid on the construction loan. This is a great thing, because generally construction loans carry a higher interest rate than permanent financing.
Mechanics of the Modular Home Construction Loan
As aforementioned, the biggest difference in modular home construction is the amount of time required to complete construction. Most all the other facets of the loan will be the same. A customer will want to get a combination home construction-to-permanent loan to complete the work, and will likely operate on a draw process to pay the contractor on a periodic basis as the construction is being completed. One more key difference on a modular – because of the nature of the construction a the shorter time line, banks will probably only want to allow up to about 4 draws on the funds. In the case of an onsite-built home, there will likely be many more draws than for the modular home.
Once the construction is complete and all draws released, then the customer would commence the final closing of the permanent loan with the lender. This would likely be any type of fixed, ARM or other mortgage that would be typical for any house, new or used. So be sure you check in to all the normal terms conditions like payback term, interest rate, monthly payment, and total interest paid over the life of the loan. Be sure to shop around, as there is a seemingly endless supply of lenders out there, each with their own set of terms and conditions. Make them fight for your business, play one against the other, and get the best deal possible. These lenders are not your friends, they are out to make the most money possible, so make them compete against each other.
Summing Up the Modular Home Construction Loan
In closing, a modular is almost the same as a regular home construction loan, with the key differences being a shorter amount of time to complete construction, and significantly fewer draws on the money. So be sure that the manufacturer of the home is aware of the terms of your construction loan, and be sure to check the manufacturer out thoroughly before contracting with them. This is your new home, and you need to take as much time as necessary to hire the most qualified builders. Don’t be stuck to price only, because a bad contractor will cost you much more in lost time and re-work than a good contractor.
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