Choosing and Financing Modular Housing

It may feel as if technology moves at a dizzying pace, but some things change very, very slowly. Ever since mankind first traded up from caves, we've constructed homes in pretty much the same way: put together mounds of mud, straw, logs, twigs, bricks, blocks, slates or whatever, and then stick or nail them together to form walls and roofs. More recently, as we've grown soft and pampered, we've started to demand all manner of frivolities, including windows, draft exclusion and roofs that are waterproof.

Refined over countless millennia, this form of construction works. But it's not wildly efficient. It's a bit like making a pile of all the parts and materials you need to build a car, and then having your local mechanic put them together. As Henry Ford discovered, factories can do the same job quicker and better. And that's what modular homes are all about.

What Are Modular Homes?

Here, it's important to make a distinction. These homes may be largely built in factories, but they're not what most folks call "manufactured homes." That's a technical term for something built on a steel chassis, which might also be called a mobile home or "tra*l*r." (Use the T-word near any one of the growing legion of modular-housing evangelists, and you're likely to provoke a violent reaction.)

Modular homes can be pretty much as big and grand as you want. In fact, there's a good chance you've seen and admired them as you've driven around, and not realized they were constructed anything other than traditionally. Come to think of it, you could probably live in one for years, and never guess it was largely built in a factory.

Individual components (mainly wall, floor and roof sections) are constructed inside a factory. Usually, at least the installation of the windows, doors, electrics, insulation and dry-walling is also carried out there. But it's possible to complete about 90 percent of all construction processes -- from kitchen and bathroom fitting to hardwood floors -- during this stage. When ready, the components are loaded onto large trucks and transported to the site. There, a crane removes them, and a team (either a local contractor's or one provided by your supplier) bolts them together, and finishes the build.

Advantages of Modular Homes

Just as you find with your local contractors, suppliers of modular homes vary in their skills, resources and service provision. That means it's important to shop around for a company with a good reputation. It also means that the following benefits are only a guide as to what to expect:

  1. Firmer budgets and timetables: Construction tasks mostly have to happen in a particular order. If a subcontractor fails to turn up at a the agreed time, your completion date can be put back, and you may end up paying for other people to sit around, waiting until they can begin their work. Building in a factory reduces dramatically the likelihood of such issues. It similarly drives down the chances of delays due to bad weather.
  2. Better construction standards: A good factory can deploy the sorts of custom-made jigs and computer-controlled cutting equipment that are never seen on sites. So one of these homes is more likely to be square and plumb throughout.
  3. More green: Those better construction standards (along with factory techniques, such as the more extensive use of sealants) generally allow less cold air to get in, keeping energy bills down and you more comfortable. Many factories also use thicker timber frames, which allow for greater insulation.
  4. Wide design choices: You can decide to choose from a wide range of standard designs, or to customize your own. Either way modular homes can be effectively limitless in their variety, from the highly traditional to the ultra-modern.
  5. Speed of construction. These houses can often be constructed in one-third the time that a local contractor would take. Some suppliers promise to get you from approved plans to moving in within a month, though seven to eight weeks is probably more realistic for an average-sized building.
  6. Quality assurance: It's simply easier to inspect work and ensure quality at every stage in a factory environment.
  7. Superior code compliance: Most suppliers are used to working to different building codes, and should have no problem complying with your state and local ones. Indeed, all those quality-assurance inspections may make total compliance significantly more likely.

Mortgages for Modular Houses

It should be no harder to find a mortgage for a modular house than one that's been traditionally built. It's true that some brokers and lenders may raise an eyebrow when you ask, but that's almost certainly because they're yet to learn the difference between modular and manufactured homes. Educate them!

Fannie Mae's rules are, for example, quite clear. It's perfectly happy to purchase a mortgage on a factory-built, single-family dwelling providing:

  1. It has the characteristics of a "stick-built" (traditionally constructed) home.
  2. It is legally "real property."
  3. It is permanently attached to its foundations (and those must be appropriate for the site's soil).
  4. It meets state and local codes.

It's hard to imagine why a modern modular home wouldn't easily meet those criteria.

Financing Construction

As with most new-build projects, it's usual to take a "construction-to-permanent loan" when constructing a modular home. This starts off as an interest-only loan that finances, as and when required, both your purchase of the site and subsequently your building costs.

Such a loan generally comes with a "disbursement schedule" that provides for tranches of money to be released to you as certain construction milestones are reached. Your lender is likely to want proof that each such milestone truly has been achieved, and may often send inspectors to check.

Once the construction has been completed (and your permits and code compliance have been verified), and you have received the last of the money you're due to borrow, the interest-only loan is converted into whatever sort of mortgage you have previously chosen.

Having your new home constructed from scratch can often be challenging -- but also hugely rewarding. And, if you choose the modular route, you may well find it's faster, easier and less stressful than the traditional alternative.

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