Prefab homes have come a long way in the past few decades. In many ways, they are more like conventional homes than they are to an old doublewide on cinderblocks.
While Quicken Loans® does not currently finance loans for manufactured homes or prefab home construction, it does finance existing modular homes considered single-family residences.
In this article we’ll cover what a prefab home is, how to finance one, the different types of homes and how much they cost.
What Is A Prefabricated (Prefab) Home?
A prefabricated (prefab) home is a type of house built piece-by-piece from sections manufactured in a factory. Prefab homes can be built off-site and transported to the home site or be delivered in different sections to be assembled by the homeowner.
“Prefab” is an umbrella term. They come in different sizes and types, from manufactured homes to kit homes. The thread tying them all together is a large amount of the building work being done off-site.
Financing A Prefab Home
With some types of prefab homes, such as manufactured homes, you will need to find a mortgage lender that finances them. Some lenders will finance modular homes over other types.
Financing a prefab home build requires a construction loan. A construction-to-permanent loan will pay the upfront cost to build the home and transition to a mortgage after construction and inspections are completed. A 20% down payment is typical for a construction loan and a credit score of 620 is a general requirement.
Types Of Prefab Homes
One prefab isn’t identical to the next. They come in various styles, differing by the way they’re constructed.
The following list is examples of some of the most common prefab homes.
Manufactured homes and mobile homes are terms commonly used interchangeably. Officially, a mobile home is a factory-built house built before the U.S. Department of Housing and Urban Development (HUD) code came into law in 1976.
The HUD code laid out construction and safety standards which these types of homes must adhere to. With the Housing Act of 1980, it was mandated “manufactured” be used in place of “mobile” for newly built homes. Manufactured homes are held to the 1976 code and are often sturdier and safer than the mobile home built before 1976.
As opposed to conventional homes, manufactured homes depreciate in value over time.
Modular home are homes where pieces, or modules, are built off-site, then delivered to the home site for assembly. Unlike manufactured homes, they have a permanent foundation and are classified as single-family homes.
The cost of modular homes is significantly lower than a site-built home, but like site-built homes, they tend to appreciate in value. In fact, some studies have found modular homes are safer than most site-built homes.
Because modular homes must comply to strict standards in some states, most modular homes are built to these standards. If you live in a state with more lenient standards, a modular home will be built to higher standards than a site-built home.
Modular homes offer a wider variety of styles and floor plans than manufactured homes. Cape Cods, bungalows, ranches and more are available in modular homes. With their high degree of customizability, a modular home could be right for you.
Homes built using a panelized building system are often called “panelized homes” or “open-wall homes.” This construction technique uses pre-built panels off-site, then ships them to the site to be assembled.
They’re typically broken down into the three components: the floor system, interior and exterior walls and roof trusses. If being build on a concrete foundation, the foundation is built on-site, then the home is built on top.
Like modular homes, panelized homes are touted as safer and more energy efficient than site-built homes. Also like modular homes, they’re built to the highest national standard, meeting your local building codes before leaving the factory.
If a modular home is large pieces built off-site and a panelized home is smaller pieces built off-site, a kit home is the next step. Also known as a ready-cut house, kit homes come with premade pieces and are usually assembled by the homeowner.
This may make you think of clunky and cheap furniture, assembled with hard-to-read instructions. While you will need to decipher the instructions, you should be thinking of log cabins instead. Log home kits are the only full-size kit homes currently being built.
If you want to downsize, you can look into a tiny home kit. These cute home kits could make a great project. While they’re affordable, they’re also small, meaning they aren’t for everyone.
How Much Are Prefab Homes?
While prefab homes can vary widely, they have one thing in common: affordability. They’re among the cheapest homes to build. A modular home, which is one of the nicer prefab styles, is on average 10 – 20% cheaper than a standard site-built home.
Here’s why prefab homes are so affordable:
- Factories purchase mass-produced prefab home materials in bulk.
- Construction requires less labor and shorter work hours.
- Assembly utilizes all materials and creates less waste.
- Factories can operate no matter what the weather is, unlike site-built homes.
- Assembly-line style operations reduce construction time.
Pros And Cons Of Prefab Homes
Prefab homes have many benefits, but there’s also cons. Let’s contrast the two.
- Fast and affordable construction
- Prefab homes are more energy-efficient because of tighter seams
- Built to withstand weather and other extremities
- Modular and panelized homes tend to be safer and better built than site-built homes
- Homeowners must secure a permit to build on the land, as well as act in accordance with zoning laws and buildings codes
- Construction needs to be paid for upfront
- It may be more difficult to finance a prefab home
- Utilities can be difficult to set up for any number of reasons (e.g. uneven land, distance from city or well water, etc.)
When it comes down to it, a prefab home could be right for you. Remember not all prefab homes are alike. Understand the differences between modular and manufactured homes.
If you’re interested in building one, know you’ll have to secure the land, have the build permitted and get the appropriate financing for the construction. If you’re buying an already built one, research what lenders and loan types are available to you.
Want to learn more? Read about the home buying process.