Looking for a home that’s ready to live in right out of the box? A modular home may be the right fit, but there are reasons to possibly hesitate.
By the way, it’s easy to confuse modular homes and manufactured homes. Modular home components are constructed in a factory and put together on a permanent foundation; the homes must adhere to all building codes. Manufactured homes (called mobile homes before 1976) are attached to a chassis with wheels and transported to the homesite. They are built according to Department of Housing and Urban Development standards.
OK. So you’re interested in building a modular home? Read on before purchasing a prefabricated place.
How Are Modular Homes Constructed?
One of the biggest differences from a traditional home is the way kit homes are constructed. Modular homes are composed of modules that are assembled in a factory and delivered to the homesite in one or more trips.
The benefit of constructing modular home components in a factory is the controlled environment. Because the parts are assembled under ideal conditions (perfect temperature, humidity, etc.), buyers can usually expect a consistent, high-quality build.
The Problems of Modular Homes
Though they can offer quality, modular homes may carry disadvantages. Here are 10 common problems with modular homes.
1. Foundation Cost
A downside of modular homes is pouring the foundation. While the bulk of the home is assembled off-site, modular home owners will still need to lay a foundation on the property. Building a foundation can cost between $5,000 and nearly $20,000, on average.
2. Payment May Be Required in Full
One of the problems with prefabricated houses is financing. Similar to financing mobile homes, modular homes have fewer lending options because a home doesn’t yet exist.
Most modular home buyers will use a new-construction loan, which may require good credit or, in the case of an FHA or VA construction loan, be relatively rare. Given those issues, a modular home buyer may not qualify as a first-time home buyer or other lending assistance.
If that’s the case, the buyer may have to pay for the home in full. Even though the average modular home may run at least 15% less than its exact stick-built counterpart, that can be a prohibitive price tag if paid in full.
3. Hard to Guarantee Quality
One of the dangers of modular homes can be quality control. Portions of the home may be constructed in an ideal factory setting, but parts of it could be damaged during transport.
Similarly, because it’s built off-site, buyers don’t have the opportunity to check in on the build, meaning mistakes might not be caught until assembly.
4. Extra Costs
Buying a home out of the box sounds enticing, but the price tag can be misleading. One of the problems with prefabricated houses is the additional costs associated with them. Buyers pay not only for the home but also:
• Foundation assembly
• Electrical, plumbing, and ductwork
It can be challenging to predict these numbers, but they can be an unexpected cost on top of the price of the modular home.
5. Difficult to Make Modifications
Buying a home out of a catalog sounds exciting, but one of the disadvantages of modular homes is the cookie-cutter design. Depending on the builder, the buyer may not be able to choose custom finishes or other modifications. Modular homes don’t leave much space for creativity.
6. Customization Issues
While buyers may be able to pick from several floor plans, a downside of modular homes is that they’ll never be entirely customizable. If a buyer’s dream home includes a screened porch or attic bedroom, it might not be an option with their modular home build.
7. Hard to Finance
If modular home buyers choose to finance their purchase, they have limited options, as described above.
Similar to financing a tiny house, they may be able to finance the land.
Some buyers may find the terms of construction loans harder to qualify for, and the terms may be less favorable than those of a traditional mortgage.
8. Finding Land
Among the cons of modular homes is land limitations. The cost of a plot of land varies, of course, depending on where it’s purchased. Additionally, not all lots are zoned for modular homes. It may require an in-depth search to find land that’s the right fit.
9. Bias About Modular Homes
There may be tremendous interest in building modular homes, but a danger of modular homes is bias. While modern modular homes may be indistinguishable from traditional homes, they carry a stigma for some people. That could translate to issues getting building permits in a desired neighborhood or a general misunderstanding about the home.
10. Reselling Problems
Perhaps the biggest con of modular homes is the possible struggle for resale. Both real estate agents and future buyers may be biased against modular homes, even if it’s a high-end build, which could lead to a lower resale value than a traditional home of a similar build.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
What to Look for When Choosing a Modular Home to Purchase
If you’re set on buying a modular home, here are things to consider:
• Style of home. Modular homes come in various styles, from contemporary to log cabins. It may be important to buyers to work with a modular home manufacturer that suits their taste.
• Manufacturer location. The cost of transporting a modular home can be high. It may be essential for the budget-conscious modular home buyer to work with a manufacturer close to the home’s final destination.
• Custom builds. Some modular home manufacturers may offer more customizable options, including floorplans and finishes.
• Timeline. Some modular homes go up relatively quickly, while other manufacturers could be on a monthlong back order.
Explore Home Financing Solutions With SoFi
There may be common problems with modular homes, but no home is without disadvantages. A modular home might be the perfect fit for the price-conscious buyer with an eye toward environmentalism and time saving.
For some buyers, the benefits of modular homes will outweigh the downsides. If that’s the case, consider a cash-out refinance or no-fee unsecured personal loan from SoFi to build your fab prefab.
And SoFi has partnered with SpringEQ to allow homeowners to tap into their home equity.
Are modular homes dangerous?
The dangers of modular homes are minimal. As long as the assembly of the modular home complies with local building codes, modular homes are as safe as a traditionally built home.
Is the value of modular homes decreasing?
Modular homes appreciate and depreciate similar to traditional builds.
Where can you get financing for modular homes?
Among the possibilities from various lenders are a construction loan, home equity loan or line of credit, a cash-out refi, and a personal loan.
How long will a modular home last?
With proper maintenance and high-quality materials, a modular home should last as long as, or longer than, any traditionally built home. Some of the first modular homes, built in the early 1900s, are still standing today.
Photo credit: iStock/turk_stock_photographer
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.