Truck towing a modular home
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Modular homes are homes constructed in sections in a factory and then assembled on a building site.

Like custom-built homes, modular homes are permanent dwellings that stay at a fixed location, but modular construction can offer homebuyers big advantages: Because the bulk of construction is done off-site, modular homes are quicker to assemble than traditional homes built on-site, and often end up being significantly less expensive.

On overview of modular homes

A modular home, also sometimes called a prefab (prefabricated) or factory-built home, is a home built in segments in a factory. From there, the segments are shipped to the buyer’s property, where a builder assembles them on top of a foundation.

Modular homes are not the same as mobile homes. While the names may sound similar, mobile homes can be moved from one location to another. In contrast, modular homes are placed on permanent foundations and cannot be relocated once assembled. And unlike mobile homes, which often depreciate in value, modular homes appreciate like traditionally built homes do. Modular homes also can be customized to suit your design preferences.

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Why consider a modular home?

Modular homes offer several benefits over traditional home construction. Because modular homes are built in an indoor, climate-controlled environment, construction isn’t subject to delays due to inclement weather, and the materials aren’t exposed to poor weather conditions. The expedited building process for modular homes means they usually cost less than custom residences built on site. On average, modular homes cost around $75 per square foot versus nearly $100 a square foot for homes built on site.

Another benefit is that sections of a modular home are inspected in the factories, and sometimes held to more rigorous standards than local building codes that apply to traditional site-built homes. In addition, modular homes are frequently optimized for energy efficiency, which can lower monthly heating and electric costs.

How to buy a modular home

If you’re considering buying a modular home, your first step is to find a piece of land for your new residence. Then, research different modular home companies to find the home that suits your needs—conduct internet research about different companies or talk with friends or family members who live in modular homes.

Modular homes come in a variety of designs and price points. Compare your options for the size and style of home you want, as well as amenities each builder offers.

How to finance a modular home

Many modular homebuyers use a loan to finance their purchase, but the process is different than when buying a site-built home. Modular homebuyers typically apply for a “construction-to-permanent loan”—a loan that starts as a construction loan, during which you generally only pay interest on the loan, and then becomes a traditional mortgage once the home is finished. You can use funds from this loan to pay for the land, the construction cost of the home segments, as well as the fees for the contractor who assembles the home.

Consider additional costs

While modular homes can be a more affordable option than traditional homes, be sure to factor in additional costs beyond the purchase price. Additional costs include fees for connecting to utilities, costs related to plumbing, electric and sewer or septic, the cost of building the foundation, and the onsite assembly of your home.

Because of the differences from traditional site-build homes, modular homes can offer homebuyers several potential benefits. As with any major purchase, do your research and consider all the pros and cons of a modular home.