For the most part, modular home is considered the same as traditional stick-built homes. They are both permanent structures and will appreciate in value over time. There are some small differences in financing a modular home.
Types of Financing Loans for Modular Home
To build a modular home you need to pay the dealer for the modules and the general contractor for his services. If you do not own a building lot, you need to purchase it as well. There are three typical sources of these funds. The first is private funds, such as personal savings, an equity loan on another property, the sale of personal assets, or a family loan. The second is a lending institution, usually a bank, credit union, or mortgage company. The third source is the modular dealer or GC.
Difference In Financing a Modular Home
There is one very significant difference between paying for an existing modular home and paying for a new home. When you buy an existing home you pay the seller in full before you take possession of the home. If you use a loan to pay for the home, you secure the funds with a mortgage. When you build a home, you make periodic payments as work is completed. This process protects you and your lender should something prevent the builder, in this case the dealer and the GC, from completing the home. You cannot wait until the home is completely finished to pay the dealer and GC in full because they need funds to pay for materials and labor as the project progresses. Receiving compensation as the job progresses also protects the dealer and GC should something prevent you from paying for the finished home.
Getting Started With Financing Modular Home
If possible, you should first approach a mortgage company that has experience with modular homes. Otherwise, you may encounter some headaches as the inexperienced mortgage company tries to catch up with and learn about modular homes. They may try to fit your modular home project into one of their predesigned loan packages instead of having a proper matching loan package to start with.
As with buying traditional stick-built buildings, modular homes can have a fixed interest rate or an adjustable interest rate for the life of the loan. It is also possible to finance a high percentage of the value (up to 95%) although it is not recommended. Once you are approved for a loan, you can have a timeframe of up to one year for construction to be completed. This is plenty of time since most modular construction only requires one to three months. Make sure you find an expert to help you with this process.
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Topic: Modular Home
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