Prefab Happiness

I’ve been a fan of the prefab housing movement for awhile now and the options just keep getting better. Generally I like the design ethic and modern styling that seems to be par for the course in the modern prefab. My mind immediately goes to an minimalist series of connected rectangles, lots of glass, flat roofline with some steel and stained wood.

modular home

Once you have found some options for your new prefab home you will want to be sure to ask some serious questions. Michelle Kaufman, Bay Area architect and an pioneer in todays prefab movement, created an list of some essential questions one should ask while picking an builder. Check this great article by Jaime Gillin at DWELL magazine, Buyer Beware: A Prefab Shopper’s Guide.

  • You will need to identify the land and research the location to be sure it is suitable for your intentions. Prefab companies can give you great advice on what will work.
  • Pick a home you like and research the custom items and costs involved.
  • Get financing, again your prefab company most likely has some referrals but it’s always good to do your own research and know your options.
  • Permits will most likely be handled by the prefab company, but there will still be local codes and on site issues to address.
  • While they are building the components that will become your home, in the factory, your lot will be prepared for the delivery. Foundations, water lines, sewage, electricity.. they need to be ready for installation when the house arrives.
  • Delivery of your home is next. Big cranes lowering the pieces into place and connecting the pieces together.
  • Now the utilities will be connected, joints and sealed and anything that loosened up in transit will be tightened and/or touched up before you move in.
  •   Re-finance time. Get out of that higher interest rate construction loan and into a traditional home loan.

Lending on Prefab housing offers some unique problems in terms of financing, but it is possible. Buyers of pre-existing housing will find conventional lending methods easy to obtain, where the house has already been built and bolted down. As long as the house isn’t on wheels and it bolted to the ground, it’s really the same as any home purchase.

If you’ve saved up and are ready to pay cash for the prefab, maybe you just need an loan to purchase the land. Better yet, pay cash for everything! I know, I know, but I can dream.

Since most prefab housing is assembled on site, it can generally qualify for New Construction loans, although it is trickier than traditional types of home loans. You will be borrowing money for the land and improvements, so you will need to be prepared to show the lender much more than an home that can be appraised. You will need to show the value of the land, cost of the improvements, potential value after completion and that your plan is a legitimate one.  It helps if your home is being built by an established firm with a track record. Besides the land and the house, there will be foundations, razing the lot, delivery of materials, permits and other expenses to figure into your plan.

I’ve heard that direct lenders are the best bet for these loans and or course some of the larger lenders don’t offer construction loans. At the end of construction you will refinance into an traditional home loan to reduce your interest rate. When you are ready to sell your home and move on to your next project, the new buyers won’t have to face any of those challenges… they are just buying an house.

Do I need a disclaimer? I’m not a lender, nor do I play one on TV. I also do not own a prefab home, but one day I just might.