Kit Homes: What You Should Know Before Buying

Rocket Mortgage® does not currently offer financing for kit homes.

Nontraditional homes are becoming increasingly popular as buyers get creative on their paths toward homeownership. Innovations in alternative housing options have made kit homes affordable, energy-efficient, customizable and accessible to more home buyers. Today, you can order a high-quality kit home from prominent retailers like Amazon and have all the materials needed to build a house delivered right to your building site.

As innovative and exciting as a kit home sounds, home building kits have been around for more than a century. Here’s what you need to know before you buy a kit home.

Kit homes are essentially mail-order houses and are a type of prefabricated (prefab) home. Kit houses are delivered in parts by a manufacturer and built on your property either by yourself or a hired contractor. By buying a kit house, you can save money on sourcing the materials through your contractor, making them a more affordable option than traditional site-built homes.

You can order a kit home to build anything from a work studio to a to a three-bedroom contemporary home.

While online retailers like Amazon have revived interest in kit homes in recent years, kit homes were extremely popular in the first half of the 20th century. In fact, more than 100,000 kit homes were built in the U.S. between 1908 and 1940, according to a University of Maryland archivist. The department store Sears is still the most well-known kit home manufacturer from that era.

The price of a kit home varies based on its size and layout, your location and the manufacturer. Compared to traditional homes, kit houses can be much cheaper to build. Many kit home manufacturers have business models that are similar to those of modular and manufactured homes. In fact, many home building kit suppliers will also offer modular options, which are built off-site and delivered to your property in sections.

While Rocket Mortgage doesn’t currently finance kit homes, we do offer financing for modular homes and manufactured homes that have been affixed to the land as real property.

Building or assembling home kits in a climate-controlled environment helps shorten the build time and the subsequent labor costs. Because the construction materials are purchased in bulk and delivered to a factory, the cost for the materials is often lower than if you were to outsource all of the materials for a new site-built home, also called a stick-built home.

Average House Kit Costs

A simple house kit floor plan can cost as low as $30 per square foot. You may find that cheaper house kits don’t come with drywall or any interior elements. More typically, the cost of an average panelized home kit, one that includes wall panels and a roof, may be closer to $40 – $80 per square foot, according to HomeAdvisor.

It’s a good idea to talk with a general contractor before committing to a house kit to get a more realistic estimate and compare what different kits include.

In many cases, ordering a kit home can be cheaper than buying a traditional home or building your own house. However, there are several hidden costs to keep in mind if you’re interested in a kit home.

One manufacturer estimates that the house kit amounts to about 25% of the total cost of the home once you include construction labor costs. For example, let’s say a house kit comes in at about $15,000, including materials and construction costs. Once you factor in the additional costs to finish the house, like drywall, flooring and other interior finishes, the total cost of your home project could be about $60,000.

You’ll also want to consider the cost of buying land and removing any obstructions. If you’re hoping to have running water or electricity, you’ll also need to hire professionals to set up gas lines, sewer mains and other utility services.

You might want to meet with a general contractor before buying a kit home to ensure you understand all of the steps in the process, from the labor costs to any potential utilities and installations on the property.

As with any other financial decision, there isn’t one right answer for everyone. Here are some important factors to consider when deciding whether a kit home is the right type of house for you.

Pros Of House Kits

• Lower cost: Kit homes are typically cheaper than traditional on-site home builds.
• Quick delivery: Kit home manufacturers can typically get the entire kit organized and delivered to you within weeks.
• Rapid construction: Because every piece is precut and labeled with directions on how to assemble the house, a kit home can be built more quickly and accurately than other house construction projects.
• Customization: A major benefit to building a kit house is that it’s a custom home. Homeowners can use any home design or floor plan they want to create their dream home.
• New home construction: Kit homes are just as durable as any other stick-built home and can last up to 50 years or more. Plus, you and your family get to be the first inhabitants of a new kit home.

Cons Of House Kits

• Delivery limits: Most manufacturers have a delivery limit of 750 miles, give or take. For example, if you prefer the floor plans offered by a manufacturer in Utah but you live in Texas, you’ll likely have to pay expensive delivery fees to receive the kit.
• Location limitations: Kit homes may not be cheaper than contractor-produced homes if you live in a rural or less expensive area of the country. However, if you live in a metropolitan area, a kit home will usually be cheaper than buying or building a traditional home.
• Lack of standards: The industry is in a new boom, which means nothing has been standardized industry-wide or regulated by the U.S. Department of Housing and Urban Development (HUD). A full kit may include a foundation and interior design for one company, while for another, it won’t even include drywall. Do your research before deciding whether a kit home is right for you.

It’s entirely possible to take out a mortgage to finance a kit home, though there are several factors to consider.

Most kit home manufacturers don’t offer financing options on their products. If you can’t pay for the home build in cash, then you’ll likely have to get a short-term home construction loan through a third-party lender. Once your home is built, you can apply to refinance your construction loan to a traditional mortgage with a lender.

While Rocket Mortgage doesn’t offer construction financing, including kit home financing, we’re here to help you understand your options. Keep in mind that we offer financing for modular homes once they’re complete.

Whether you're looking to build a new barn, garage or a tiny house of your very own, kit homes are sent ready for you to build yourself or with the help of a contractor at a more reasonable price than building a new traditional home.

If your kit home is already built and you’re ready to refinance your construction loan into a traditional mortgage, start your application online today.