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Kit Homes: What You Need To Know

6-Minute Read
Published on July 19, 2022
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Rocket Mortgage® doesn't offer mortgages for kit homes at this time.

If you’ve found the breakneck pace of the housing market exhausting or fallen in love with many a quaint, tiny house from HGTV, you may have thought about ordering a kit home for yourself.

With a history going back over 100 years and numerous companies (including Amazon) now offering to deliver to your property for immediate construction, kit homes are not a far-flung dream. By understanding what you’ll need to successfully build your own kit home, from land to financing, you can decide if one is right for you.

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What Is A Kit Home?

Kit homes are mail-order homes meant for landowners to build by themselves or by hiring a contractor. Similar to prefab homes, kit homes come in individually manufactured parts and are more affordable than purchasing homebuilding materials on your own. Kit homes’ affordability comes from the manufacturer’s ability to purchase materials in bulk and organize components in an efficient, climate-controlled manner.

Kit homes originated in the 19th century to allow for the quick construction of homes. In the early 20th century, Sears was the premier kit home manufacturer. Today, multiple companies have their own specialties and different building kits.

The kits vary in quality, size and floor plan and are often less expensive than traditional houses. Unlike modular and manufactured homes, which companies construct off-site, kit homes are only built on the land the buyer intends as the home’s location. Additionally, kit homes are not mobile once built.

How Much Are Kit Homes?

The thought of ordering and building the home of your dreams at a reduced cost can be exciting. According to HomeAdvisor, panelized building kits can cost an average of $40 – $80 per square foot.

While kit homes are often cheaper than building a traditional house, many factors influence the final price. For example, square footage, location, floor plans and materials are in play for every kit home. That said, varying circumstances give rise to additional costs, such as appliances, utility setup and land. As a result, it’s a good idea to include all associated costs to accurately calculate how expensive one would be.

How Much Do Kit Homes Cost To Build?

The cost to build a kit home will depend on the wants and needs of the homeowner. Aside from materials and components of the home, labor and construction costs can dramatically increase the final cost. It’s recommended to meet with a contractor to determine if buying a kit home is a sound financial choice.

Keep in mind that each kit home manufacturer offers different packages, and they currently don’t follow any federal regulations. As a result, some home kits might be cheaper but come without critical pieces, such as a foundation. So, a lower price doesn’t always mean a better deal.

Additionally, purchasing land and making your lot home-ready can be costly. For example, if you’re building on a new plot of land, you may have to set up utility connections and pay contractors the associated costs. Therefore, it’s crucial to consider each facet of building your own home to get an accurate idea of the cost.

How Do You Finance A Kit Home?

If you don’t have the cash available, financing a kit home is similar to getting a mortgage for a traditional home. Since most kit home manufacturers don’t finance their products, homeowners can turn to mortgage lenders for assistance. However, you’ll also need to take out a short-term home construction loan to address the costs of building your home.

Home construction loans are usually harder to qualify for because few lenders offer them and they may require a payment of at least 20% and a credit score of 620. The loan funds the costs your builder charges you for constructing your home (but not designing it, which the homeowner must finance on their own). After building your home, you can apply with your lender to change your construction loan to a traditional mortgage.

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Pros And Cons Of Prefab Kit Homes

Whether you choose a modular home, kit home or a conventional house, there are always pros and cons that come with it. Additionally, while a kit home might cost less, financing one is as meaningful a decision as a standard mortgage.

Consider the following when deciding if a kit home is right for you.

Pros

Cheaper Costs

Kit homes tend to be more affordable than traditionally built homes for several reasons. First, the company incurs reduced labor costs by manufacturing the kits in a closed, controlled environment. Second, it purchases materials in bulk, which in turn gives you a lower price.

Quicker Delivery Time

Manufacturers can arrange and deliver building kits within a couple of weeks, making your wait time short and sweet. Note that once your home arrives, you’ll need to construct it yourself or hire a professional to help.

Quicker Construction Time

Since all necessary materials arrive together with instructions for every step of construction, build time for a kit home tends to be quicker. Since your home could arrive in a month or less, building your home could take just a matter of weeks.

Allows Customizations

If you’re a prospective home buyer, the houses on the market and the contractors who build conventional homes present limited options. Kit homes allow you to customize your new home according to your exact needs and preferences.

No Prior Residents

As the builder of your new home, you’ll be the first to live in it. So, naturally, there should be fewer issues (or none at all) from surprises, concealed damage or wear and tear.

Durability

Home manufacturers use materials to produce homes that can last half a century or more. As with any other home, regular maintenance and care will lengthen the life of your house. In addition, quality materials and skillful construction will help your home age well.

Cons

Delivery Limits

Almost all manufacturers have delivery limits based on where your property is. Typically, companies will not deliver a kit farther than 750 miles away. If you’re ordering from a different state or outside a company’s usual delivery radius, it may cost you additional delivery fees to transport the kit.

Little To No Standards

Kit homes are newer in the economy and still growing in popularity. Therefore, the Department of Housing and Urban Development has not yet imposed any standardized, industrywide regulations on them.

As a result, the company you choose could significantly impact the quality and number of parts you receive. For example, while one manufacturer may provide drywall, you may have to source your foundation or other essential components elsewhere.

Location Can Increase Cost

Metropolitan areas generally have lower kit home costs. However, if you’re in a rural or less expensive region, you may experience increased costs for this kind of home.

Labor Costs

If you don’t have experience with plumbing, electrical and other trade work, you may want to consider hiring contractors to complete that work for you. The added labor costs can get pricey depending on the extent of work you need.  

What To Do Before Ordering A Kit Home

Unfortunately, ordering a kit home is not as simple as finding a company to supply you with the necessary parts. As with other methods for purchasing a home, preparation and planning are vital.

The following steps make for an excellent start when buying a kit home.

Secure Land

Before building any type of home, you’ll need land to place it on. If you don’t have land already, finding a lot available for purchase is your first step. Then, you’ll need to ensure it is ready for a home to be built on it. Preparing your land for a home involves clearing out obstacles and hiring help to set up lines for water, electricity, gas and sewer services.

Additionally, you will need to obtain all necessary building permits, conduct a property survey, check for easements and test your soil.

Decide What You Want

A kit home allows you to customize every last detail of your dream house. Planning out your building kit purchase involves contemplating how many bedrooms and bathrooms you want, the total square footage and much more. 

Find A Reputable Company

Whether you want an eco-friendly kit home, a tiny home to rival ones featured on television or a unique design of your own, a variety of kit home manufacturing companies can meet your needs. If you’re considering a kit home, it’s recommended to do your research to find a reputable company that provides everything you’re looking for.

The Bottom Line

While kit homes are unconventional, they have been a housing option in America for over 100 years. Kit homes offer the advantages of lower costs, high customization and quick turnaround time. However, kit homes do not follow any federal regulations. Furthermore, the costs vary according to location and needed materials, and finding a lender to finance your project can be challenging.

If you’re getting serious about buying a house, making an informed decision is essential to ending up happy in a conventional home or a manufactured house of your own creation. If you’re a potential homeowner looking to take the next step beyond kit homes, apply for a mortgage today to ensure you have financing for your housing needs.

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Headshot Ashley Kilroy

Ashley Kilroy

Ashley Kilroy is an experienced financial writer. In addition to being a contributing writer at Rocket Homes, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.