Are you considering the dream of building a brand-new home, but finding the cost a bit overwhelming? In your search for cost-effective options, you may have come across modular and manufactured homes.
These housing options are often more budget-friendly compared to traditional site-built homes. According to the Manufactured Housing Institute, the cost per square foot for a manufactured home is about half that of a site-built home. Similarly, modular homes offer significant construction savings, as a study by the Terner Center for Housing Innovation at the University of California, Berkeley, estimated at least 20% in cost reduction in 2017.
Depending on land costs and your choice of model, a new manufactured or modular home might even turn out to be more affordable than an existing home on the market.
But, let’s delve deeper and explore the key distinctions between these two types of homes.
Definitions: Modular vs. Manufactured Homes
What is a Modular Home?
A modular home is constructed in large, three-dimensional modules within a factory. These modules are up to 90% complete when they leave the factory. The final touches take place at the building site, where the modules are affixed to a permanent foundation and to each other. Subsequently, the completed home undergoes inspection to ensure it adheres to local building codes.
What is a Manufactured Home?
When you think of a “mobile home” or “trailer,” you may be picturing a manufactured home, though those terms are somewhat outdated. Modern manufactured homes come in a wide range of designs and styles. Like modular homes, they are built in factories. Depending on size, they are transported to the building site either in one piece, known as a single-wide, or as multiple pieces, known as a double- or triple-wide.
A crucial distinction is that manufactured homes are attached to a permanent chassis, a metal frame that can be connected to wheels. The term “mobile home” originates from this feature, even though the wheels can be concealed or removed. Manufactured homes are constructed in accordance with national building standards set by the U.S. Department of Housing and Urban Development (HUD), known as the HUD Code.
Pros, Cons, and Key Differences
When deciding between modular and manufactured homes, there are several factors to consider:
1. Cost and Resale Value:
Manufactured homes are typically more cost-effective than modular homes. However, it’s important to note that manufactured homes can depreciate in value over time, similar to automobiles. In contrast, modular homes tend to fluctuate in value in line with the real estate market, much like traditional site-built homes.
2. Building Codes:
Manufactured homes are constructed to comply with the HUD Code. Modular homes, on the other hand, adhere to the same state and local building codes as traditional site-built houses.
3. Size and Durability:
Modular homes offer more flexibility when it comes to customizing layouts. Additionally, they tend to withstand high winds and hurricanes better than manufactured homes.
Manufactured homes must remain affixed to a steel chassis. Depending on their size, they can be transported in full from the factory. In contrast, modular homes do not have a chassis and are built in pieces that are transported and assembled on-site.
5. Construction Efficiency:
Both modular and manufactured homes offer advantages over site-built homes. Indoor construction reduces weather-related delays, and assembly-line construction is faster and more cost-effective. Less construction waste translates into savings for home buyers, and with increased efficiency, you can move into your new home sooner.
Loans and Financing
While a modular home is being built, you may need to make upfront or installment payments to the builder. These payments can be made in cash or through a construction loan. Once construction is completed, you can finance a modular home with a traditional mortgage, similar to a site-built home.
Manufactured homes may not always qualify for traditional mortgages. However, you have some alternative options:
- Traditional Mortgages: To be eligible for a mortgage, you must own the underlying land and have the manufactured home titled as real property.
- FHA Title 1 Loans: If your home doesn’t qualify for a mortgage, the Federal Housing Administration (FHA) offers Title 1 loans to finance manufactured homes. These loans allow the buyer to lease the land where the home is located, which is common in manufactured home communities.
- Chattel Loans: Many buyers finance manufactured homes using chattel loans, which are a form of financing for personal property, similar to an auto loan. However, it’s worth noting that these loans often come with higher interest rates compared to traditional mortgages.
Modular vs. Manufactured: Which is Right for You?
Choosing between a manufactured and a modular home depends on your goals and circumstances. If you’re in a rural area with limited affordable housing options, a manufactured home can provide a more cost-effective path to homeownership. The average cost of a new manufactured home, as of March 2023, is $124,700. However, it’s essential to consider that the value of manufactured homes can depreciate over time. Factors such as land ownership and landscaping can also influence long-term value.
On the other hand, a modular home represents a larger upfront investment. However, it typically appreciates in value over time, similar to site-built homes. Modular construction is more robust than that of manufactured homes. Financing a modular home may require a higher credit score and a lower debt-to-income ratio compared to credit score requirements for purchasing an existing home because there’s no finished home to use as collateral, as is the case with traditional mortgages.
Alternatives to Modular and Manufactured Homes
If neither modular nor manufactured homes align with your preferences, several alternative options are worth considering:
- Townhouses or Condominiums: These options can help you build equity at an affordable price point, although you may have to account for homeowners association fees if you choose this route.
- Site-Built Homes: If you’re committed to new construction, be prepared to pay a higher cost per square foot compared to modular or manufactured homes. However, you can manage expenses by opting for a smaller home and modest finishes.
- Tiny Houses: Tiny houses, typically 400 square feet or smaller, offer a unique lifestyle. They can be set on wheels or a permanent foundation, but it’s crucial to weigh the pros and cons of minimalist living before downsizing.
In conclusion, the choice between a modular and a manufactured home depends on your specific needs, budget, and long-term goals. By considering the pros and cons of each option, as well as the available financing choices, you can make an informed decision that will lead you to your dream home.