What Is A Prefab Home?

After over 100 years on the market, prefabricated homes have a rich history in the United States. The concept was first created during the California Gold Rush in the late 1840s to allow prospectors to construct homes quickly and affordably. Prefab homes stayed popular into the early 20^th century, and recently have grown higher in popularity once again due to homeowners’ increasing calls for more affordable, sustainable housing.

But what is a prefab home and how would it fit your lifestyle? In this article we will explore what makes a home prefab, the different types of prefab homes and if this option could be right for you!

Prefabricated, or “prefab,” homes are manufactured piece by piece in an off-site factory, transported to the home site and assembled on the homeowner’s property. For many, prefab homes are a fast and affordable way to build sustainable housing.

The word “prefab” refers to how and where the home was constructed, not the style, which means there are multiple types of prefab homes you can consider.

Modular homes: These homes are constructed from factory-made pieces and can feature customizable floor plans. The main difference between modular and manufactured homes is that the former are built and transported in complete sections before being assembled on the home site.

Manufactured homes: Also known by the outdated term “mobile homes,” manufactured homes are built entirely in the factory before being transported to the site where they'll rest. Manufactured homes must adhere to strict building codes laid out by the U.S. Department of Housing and Urban Development (HUD). We offer financing for manufactured homes that are on a permanent foundation and attached to land as real property. 

Kit homes: Similar to modular homes, a kit home is assembled from precut pieces and can be assembled by the homeowners themselves. Rocket Mortgage^® does not offer financing on kit homes.

Although the price of prefab homes can vary widely between types, they are among the cheapest ways to build a house, averaging 10% – 25% cheaper than stick-built homes. Modular homes are the most expensive and luxurious form of prehab housing, although they are still 10% – 20% cheaper to build than standard housing.

The reason for this is multifaceted. Building prefab homes in an offsite warehouse allows the builder to do multiple things – from buying mass-produced materials in bulk to having carpenters, plumbers and electricians on site – which allows them to keep construction time short and costs low.

But keep in mind that the price tag of a prefab home does not factor in all upfront costs, as you will also need to purchase the land for the home and account for permits and utility hookup fees. Additional costs may include landscaping, driveways, garage builds and more.

How To Finance A Prefab Home

Financing a prefab home build can be difficult, but a construction loan could help lighten your financial load. A construction-to-permanent loan will cover the upfront cost to build the home and then transition into a mortgage once construction and inspections are complete. A 620 credit score and 20% down payment is traditional for a construction loan.

A chattel mortgage, which is a loan on a movable property such as an airplane, houseboat or manufactured home, may be another feasible option for financing. These mortgages use a specific piece of property, or a chattel, as collateral on the loan. This differs from a conventional mortgage, when the loan is secured by a lien on the stationary property.

With a chattel mortgage, you may be able to finance your prefab home even if it is placed on leased land that you do not own. Despite this, it’s important to note that chattel mortgages are typically more expensive than traditional ones and Rocket Mortgage® does not offer them.

Now that you understand prefab homes, you may be wondering if this is a feasible option for you and your family. To make this decision, there are a number of factors to consider.

Benefits

Prefab homes are popular for a reason, as they offer a few distinct advantages over standard homes. The most impactful benefits of prefab homes include:

• Affordability: Prefab homes are faster to build and more affordable than standard housing.
• Sustainability: The tighter seams for prefab homes lead to better energy-efficiency.
• Safety: Modular and panelized homes tend to be safer and better built than site-built homes. They are also built to withstand weather and other extremities.

Drawbacks

Despite the positives, prefab homes also come with a few drawbacks that all potential homeowners should consider before beginning construction:

• Rules and regulations: Homeowners require building permits to construct prefab housing and must adhere to building codes and zoning laws – so you can’t just build what you want, when you want.
• Utilities: These can be difficult to set up for various reasons, from uneven land to the distance to the closest water source.
• Heavy upfront costs: Prefab homes are paid for upfront rather than over time, so although they are cheaper to build overall, they can still be expensive without the right form of financing.
• Financing: Without it, your dream of a prefab home may never become reality, but unfortunately it can be difficult to obtain depending on your financial background.

Whether due to affordability or sustainability, it’s no secret that nontraditional housing is on the rise. Between modular, manufactured and kit homes, there is a prefab home option to fit any lifestyle – but be sure to analyze both the benefits and drawbacks before deciding if these homes are right for you.

Although Rocket Mortgage does not offer financing for kit homes, getting preapproved for a manufactured or modular home loan is similar to doing so for standard, stick-built homes.

Want to learn more about your home financing options? Apply for a mortgage today! You can also give us a call at (833) 326-6018.