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CONSTRUCTION LOANS FOR
MODULAR HOMES
MOBILEHOME.NET ( November 04, 2008 ) --
A construction loan for a true modular home built to local and state
building codes will offer the same interest rate compared to
traditional construction loans. There is no difference in the rate
or term of the loan, they are the same. So, you may be asking
yourself, what is a true modular home? A true
modular home or sometimes referred to a system built home
is a custom built home, built in a factory out of the weather
compared to a stick-built home constructed on site.
The modular units when completed are delivered to site and assembled
in a matter of days. When the work is completed the total balance of
your line of credit will be converted to a standard residential
mortgage. You may also find a lender of construction loans for
Modular Homes who will agree to include the amount of interest you
pay during the construction and cover any cost overruns. On average
a modular home only takes 90-days to complete, which reduces
interest costs dramatically, compared to a stick built home which
can take 12-months or longer.
How Construction Loans for Modular Homes are Disbursed
Funds are distributed when certain work on your property has been
completed. For example when the foundation is finished the bank will
send someone to inspect the job site to verify the foundation is
done. Once verified the bank will distribute funds to either the
home owner or contractor. As certain property improvements are
completed funds are distributed in a timely manner.
Most lenders will fund the cost of the modular home once it arrives
at the home-owners property and is inspected. Funds are allocated to
the builder or manufacturer and then the modular home builder will
start attaching the home to the foundation. Once this work has been
completed funds will be distributed for the installation of the
home. If you need to ask for additional money above your original
construction loan amount your lender may charge you additional fees.
When talking with a
modular home builder, be sure to clarify when funds will
be distributed. Many builders and manufacturers require payment once
home has arrived to the job site. Some lenders will not fund at this
stage of the game and only fund once the home is completely
installed. This lending practice is looked down upon in the modular
home industry and many builders will not accept this payment method.
Qualifying for Construction Loans for Modular Homes
Like traditional mortgages, construction loans for
modular homes will require you to come up with a 10% to
20% 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. The days of 100% financing are long gone
since the economic melt-down in September.
With any construction loan you should establish a budget and stick
with it. Be aware that the temptation to keep asking for extras as
your modular home is being designed, can throw your entire budget
for the project out of whack and make it more difficult for you to
qualify for a construction loan. |
