Tidewater Custom Modular Homes Blog

When you build your own home, there is a significant difference in the financing as compared to buying an existing home.

When you buy an existing home you pay in full before you take possession of the home.

When you build a home, in this case a modular home, you are given money incrementally by the lender as the home is built. You make periodic payments on that amount as work is completed. This process protects you and your lender if something stops the builder from completing the home. It also protects the builder if something prevents you from being able to pay.

When you use a lender to build a modular home, you get a "construction loan”. Construction loans are short-term loans that range from a four- to twelve-month duration. You make a series of payments as the home is completed.

After your new modular home is built, the building inspector issues you a certificate of occupancy, the lender then pays off the construction loan and issues you a traditional mortgage. Tidewater Custom Modular Homes has relationships in the banking and mortgage industry. Contact us if you want more information on the building and financing process.

Often there are questions regarding the value, appraisal or retail value of a modular home. Modular homes appreciate in the same way as a traditionally built home, and sometimes there value is higher than a traditional home of comparable size and layout.

Modular Homes are built to more consistent, high standards than traditionally built homes, they are also built more sturdily, using screws and glue. Because of this, often times the wear and tear on a modular home is less despite being in the same geographic location. However, for simplicity, and because home value depends on how the home is maintained overtime, we say that modular homes retain value consistent with stick built homes.

Banks and mortgage companies consider modular homes to be the same as traditional homes. Most modular home factories are well known to lenders, and the construction time is faster therefore, lenders often like to initiate construction loans. But for the homeowner, the interest generated on the loan is less too because of the shorter construction period.

Contact Tidewater Custom Modular Homes if you are interested in learning more about the value or appreciation of modular homes to help you in your decision making process.

To build a modular home you need to pay the modular home company for building the modules and the general contractor for his services. If you do not own property, you also need to purchase that.

There are two typical sources of these funds. The first is private funds, such as personal savings, an equity loan on another property, or the sale of personal assets. The second is obtaining a mortgage through a lending institution, like a bank or mortgage company.

There is one major difference between paying for an existing, already built home and paying for building a new home. When you buy an existing home you pay the seller in full before you take possession of the home, usually through the mortgage. When you build a home, you make periodic payments as the work is completed. This protects you and the lender should something prevent the completion of the home on the GC end. Receiving compensation as the job progresses also protects the modular home company or dealer and the general contractor should something prevent you from paying for the finished home.

When you use a lender to build a home, you obtain a "construction loan" which is a short-term loan usually four- to twelve-months' duration. The loan provides for a series of payments as work is completed. Once the local building inspector issues a certificate of occupancy and the lender agrees that the home is essentially complete, the lender pays off the construction loan and issues you a mortgage.

What is the most different regarding construction loans for modular home construction is the time line. With traditionally built, stick built homes, the construction process is very long, a year or longer in some cases. The modular construction process is much shorter, a couple of months only.

A new construction home loan is not the same as a typical home loan. New construction loans have different requirements and a different set of rules. However, the new construction loans are used for both new construction stick built and new modular construction homes. After learning about these types of loans you will find it is easy to finance and build your dream modular home.

A new construction home loan requires the lender to provide the money to build your new home. Firstly, your mortgage provider requires a detailed accounting on the estimated costs to build the modular home; including how much you are going to spend and what it will look like when it is complete. After these initial questions are answered you begin the credit check and annual earnings process.

There are a few different construction loans out there but the most popular one is a “construction to permanent” loan. Instead first applying for a construction loan and following that up with a typical home loan, a construction to permanent loan is a two-in-one loan which, in most cases, only requires you to pay closing costs once.  This loan is a combination of construction loan and permanent financing, and can help you save money and time.

Keep in mind that with new construction loans it is very difficult to lock-in a permanent or fixed mortgage rate. This is because with traditional construction, you usually won't be closing the loan for six months to one year depending on the build time. With modular construction, because the build time is so much shorter, you can more often get a fixed rate, or the fixed rate you close with after construction will be very close to the variable rate you had when you took out the loan. 

Of course you will be required to pay monthly interest on the construction loan amount during the modular construction process, but the amount you owe each month will depend on the amount you have used to date. If you are approved for a construction loan of $100,000 but you have only drawn $50,000 then your interest payment will be based on $50,000.

Sometimes lenders like to interview or see the license of the contractors who will be building your new home, so often it is beneficial to speak with the bank where the contractor has a relationship.

The sub-prime mortgage crisis has affected just about every form of housing within the country. Lending is more restrictive, current home inventories are still tremendous, and a large percentage is unable to make their current mortgage payments. And while the modular home industry has felt the effects, the impact has been much less than on the site-built housing industry.

Recent trends at the end of 2009 and thus far in 2010 has seen new customers considering modular homes in greater numbers. The largest group is those that normally spend $200,000 for a home but are looking to maximize their value while keeping the price within their budget. Modular homes boast greater value through better durability, larger square footage and more amenities compared to most equally-priced site-built homes. Given the continued pricing instability of new and existing homes, modular homes give a more stable value.

Fortunately, lending practices for many banks have now loosened enabling easier financing for modular homes that had met resistances previously. This will likely continue for both new and existing modular homes as incentives to banks to make these loans become more accessible to the home-buyer. Because some people are selling their existing homes out of necessity, getting into a new home at a lower price is their eventual goal. For the same amount of money, modular homes offer more than traditional site-built structures.

In addition to modular homes offering a better value solution, modular home manufacturers and retailers are expanding their markets. By being more creative, those in the modular home industry have found new customers who benefit from this technology. Virginian residents are starting to look more and more at modular homes as well. With the tidewater area being a huge construction type area, TC modular has definitely been on the rise of success. Contact us today should you have any questions regarding modular homes or if you'd like to take a look at our custom built homes we have to offer.

First, a construction loan for a modular home will carry a greater interest rate than a standard mortgage, because it is actually a line of credit and will cover only as much of the cost of building your modular home as been determined in advance. We recently posted an article about how mortgage loans differ between traditional built homes to modular homes. Well we wanted to break apart from that article (so to speak) in an effort to explain how construction loans work in your modular home building experience.

What Construction Loans For Modular Homes Won't Cover
You'll need to find other ways to finance the early stages of your modular home instruction, including soil and perk tests, building plans, and your site plan, which must be approved by your municipal zoning board before you will be have access to the funds from your construction loan for a modular home.

How Construction Loans For Modular Homes Are Disbursed
None of the work being done on your modular home will be paid for until your lender has had it inspected, and when a particular phase of the construction has been completed and met inspection standards, payment will be made directly to the suppliers and subcontractors. If you need to ask for more payments than the number to which your lender originally agreed, you may be charged an additional fee for each extra payment.

Qualifying For Construction Loans For Modular Homes
Like traditional mortgages, construction loans for modular homes may require you to come up with a down payment. The chances of this will be higher if you are requesting a very large loan, or don't own the lot on which your home will be constructed. But there are lenders of construction loans for modular homes who will give 100% financing even if the person building the home doesn't own the lot outright.

Feel free to contact us today if you have any questions about modular home construction. Or even if you want to take a look at our inventory of beautifully built homes. We are more than happy to help any individual in regards to modular homes.