Modular Home Financing: 10 Terms to Know

Modular homes are an excellent way to save money, but before you start looking at homes, you need to have a good grasp on financing. It isn’t as cut as dry as purchasing a traditional home. Here are 10 terms to help you understand modular home financing.

1. Mobile Home vs. Modular Home: One of the biggest misconceptions about prefabricated homes is that they’re synonymous with “mobile” homes. The difference between a mobile home and a modular home is that modular homes are affixed permanently to foundation whereas mobile homes are placed on steel frames and are mobile.
2. Traditional Mortgage: Traditional mortgages are the most recognizable type of mortgage. It’s a 30-year fixed mortgage that is used to purchase real estate. These loans usually have favorable rates around 3.8-4.7%. However, it can be difficult to get this type of loan due to the misconception of modular homes being "mobile."
3. Chattel Mortgage: Chattel mortgage is a personal property loan that comes with much less favorable rates when compared to traditional mortgages. These types of loans are for mobile structures such as a manufactured home. A chattel loan is not the kind of loan you need for a modular house.
4. Prequalification: Prequalification is the initial evaluation of credit when you attempt to get a loan for your modular home. This process is very quick and determines an estimated amount on how much you may borrow. It is by no means guaranteed as it is an "estimate."
5. Pre-approved: Pre-approval is the process of a lender receiving confirmation of income and a credit check from a potential borrower. Being pre-approved determines whether you qualify for a loan as well as the maximum amount you can receive.
6. Base Price: Base price is one of the five prices you may receive when considering the price of a modular home. The base price is the flat cost of making a home. It doesn’t include any customizations, delivery costs, or anything else. This number is represented as a price per square foot.
7. Custom Price: The custom price will be higher than the base price as it will include all of the customization you can choose to add in your modular home. The cost of this varies depending on what sort of changes you want to make to your home including a garage, porch, or marble counter tops. The custom price does not include delivery, site work, or anything else.
8. Delivered Price: While it’s higher than the previous two, the delivered price includes more for what you pay. This amount includes the cost of manufacturing, customizations, delivery, and the setting of the modules. However, buyers need to be sure that this price includes delivering the modules to your build site.
9. Finished Price: The finished price will include the cost of manufacturing, customizations, delivery, setting the modules, site work, foundation, attaching utilities, and touch-up work. While this sounds like everything, it does not include any taxes, fees, and property costs you may have to pay for your modular home.
10. All-In Price: An all-in price is a complete estimate for building and delivering your home, including permits, taxes, fees, etc. The price is impossible to determine without the assistance of a manufacturer, general contractor, real estate agent, town hall, and local utility companies. Without all of these components, it’s impossible to determine the price of your modular home.