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The first step in building a new home is to get pre-approved for a construction loan (which is quite different than being pre-approved for a "regular" mortgage) and find out how much money you can borrow. Utilizing a bank with experience in modular home construction financing will save you both time and money. Click here for information about the steps in obtaining a construction loan and loan documentation requirements.
Today’s modular home buyer has an array of financing options. Most mortgage companies and banks make financing a modular home easier than ever and may even have departments or divisions specific to modular home financing. While the financing process can vary slightly from bank to bank, many new modular home loans are construction-to-permanent loans that follow a general template similar to any new home purchase.
During the financing process, home buyers can expect to proceed through the loan application and underwriting stages just as they would for any other new home purchase. The appraisal process is also similar; in fact, a home appraiser is not limited by construction type when determining the value of your home. Comparables to your new home may likely be similar site-built homes with comparable square footage and design features.
When your modular home is being constructed, money is disbursed to the borrower and the builder/contractor in the same manner as it would be during any new home construction process. During construction, the borrower will typically make interest-only payments to the lender on the funds as they are disbursed. One of the greatest advantages of modular housing is that the construction time frame is reduced during the financing process (saving you money). Additionally, modular-friendly lenders will disburse funds upon the delivery of the modular units to the building site.
If you have a construction-to-permanent mortgage, your lender will convert the loan into a permanent mortgage (e.g., 30 year mortgage) after your home is constructed and the final home inspection is complete. Once the mortgage is closed you officially own your new modular home and begin making regular mortgage payments.