Modular Home Financing

People often have questions about how best to finance the construction of their new modular home. With the exception of the “draw schedule”, a construction loan for a modular home is basically the same as for a site-built home.

A “draw” is what it is called when you take money out of your construction loan to pay your construction expenses. The draw schedule is the time and amount in which funds are taken out of your construction loan. If you were building a site-built home, the funds come out of your construction loan in smaller and more spread out “draws”.

On a modular home construction loan, fewer draws are needed. As a result, these fewer draws tend to be for larger amounts. This makes sense when you think of modular home construction and how the expenses are different from site-built construction.

If you are site building a home, you might have 20 or more different subcontractors that need to be paid. And, the work takes longer when it is done on site. So you would need more frequent, smaller withdrawals out of your loan.

With modular homes, you may only have a few select subcontractors. And, a large portion of your construction budget is the cost of the home from the modular factory. When placing your order with the modular home factory, there are typically 3 payments. 15% upon placing the order, 60% in mid-production, and 25% upon completion.

Because of this, you want to be sure that your construction loan will work with the modular draw schedule. Some loan products simply won’t allow for that large 15% modular deposit up front. Of course, the financing we recommend for our clients is a perfect fit for the modular draw schedule.

Another, more critical element of your modular home financing is the requirement of a “general contractor” for your project.