Modular Homes HQ

After the financial foundation for your new modular home has been laid, and you have decided what sort of loan to use to finance your construction project, you are on your way to constructing the modular home of your dreams. Understanding how the construction loan process works in tandem with your modular home construction will help you know what to expect, which will assist you with seeing that the process goes as smoothly as possible.

Once you have been pre-qualified for a modular home construction loan, you are ready to begin the process of building your modular home. You will need to begin looking for a modular house plan, a modular home manufacturer, and a general contractor to work on your home at the home site. Also, if you have not found a site for your home, will need to do this before beginning the construction loan process. However, if you own the land the home will be constructed on, this will add equity to your project, which will result in more favorable loan terms. To find a modular home manufacturer, see the National Modular Housing Councils’ directory of modular home manufacturers.

When you have selected a home site, home plan, modular home manufacturer and a general contractor, you are ready to begin the construction loan application and approval process. In order to be ready for the loan application, you will need to have the following:

• Money to cover fees, including the application fee, credit check fee, and appraisal fee,
• Contracts or other information for the modular home you wish to build,
• W-2s and pay-stubs, or other information that will verify your income,
• Loan statements for other loans that you may have.

The loan approval process will take anywhere between several days to a couple of weeks, or whatever length of time it takes the lender to verify the documentation that you have submitted and process your application.

After you have been approved for your construction loan, you will receive a commitment document from your lender. This document will include information about the terms of your loan, including how much money you have for your project, conditions and restrictions that will need to be acknowledged and addressed before the loan is closed, and requests for blueprints or plans for your modular home and a deed for your property if it is being used as equity for the home.

When the approval process has been completed, a disbursement schedule, also known as a draw schedule, will be created. The draw schedule details when the construction loan money will be disbursed to the modular home manufacturer and the contractors who will work on your home. These draws will also allow you to create a timeline for your project by scheduling payments to coincide with completion of the successive aspects of your construction project, from the foundation to the delivery of the modules to the finishing of the interior and exterior of your home. As the successive milestones in your project are completed, you and your lender will typically work together to arrange for inspections to make sure that the loan funds are being drawn according to schedule.

However, before construction on your modular home begins, you will close on your loan. You will sign the final documents for your loan and pay the closing costs, which will average at 5% of the loan total. You will also need to arrange for a building permit for your building project.

At this point, construction on your new modular home can being. This is also when you begin paying on your construction loan. One of the biggest advantages in building modular homes is that the construction process is so quick; because your site is being prepared simultaneously with the construction of your home at the modular home manufacturer’s factory, the construction time for a modular home is often much shorter than that of a traditionally built home. What this means in terms of your construction loan is that the biggest draws will come toward the end of the project, when the sections of the home are shipped and constructed; because your loan payments are tied to the amount disbursed for the project, this results in smaller payments for you until the home is nearly finished. And, because the modular home can be constructed in such a short amount of time, you will be making fewer construction loan payments.

After your modular home is completed, you will either convert your construction-to-permanent loan to a traditional mortgage, or, if you took out a construction loan only, you will need to have your home appraised and go through the mortgage process.

Financing a new modular home construction process can be challenging. However, the end result is worth it – an investment that will grow in equity, and a home you can be proud of.

Tags: Construction Loan, Financing, financing your modular home, modular homes