Make Mine Modular
Building a new house is a dream-come-true for most homeowners although new construction can be costly and stressful especially if you are working within a restrictive budget. A better way to build is with a factory-built house.
You would not recognize a factory-built house if you saw one because it looks just like a stick built house. The reason: because it is. It is built by hand in a factory where every condition is pretty much controlled. It never rains, the temperature and humidity are fairly constant, materials are ordered in bulk, and each house is built according to a buyers wants and likes. From mansions to single story ranches, these houses really are the dreams of the homeowners. You choose the square footage, colors, styles, and amenities such as fireplaces, whirlpool tubs, decks, attached/detached garages, etc.
Factory-built homes, also known as modular homes, are constructed in a weather proof facility under very precise building codes of the state, locality, or region where the finished house will be located. The entire building is put together in a controlled environment so construction moves along quickly and efficiently. The house is built in sections then transported to the site to be placed on its foundation and permanently anchored.
The house arrives to the site totally complete with kitchen cabinets, floor coverings of your choice, all plumbing fixtures and hardware throughout the house right down to the doorknobs and cabinet pulls.
The average cost per square foot to build a modular house is a little less than a stick built house because modular houses are more efficient to produce. Not being exposed to constant weather changes, material waste-management, and the reduction of theft all contribute to the lower cost per square foot. Another savings associated with a modular home is the time it takes to construct.
From the time a buyer has been approved for the construction loan to the final inspection by a local building authority for the certificate of occupancy, a shorter construction phase is required: it can take as little as six weeks to have your house completed and move-in ready.
There are entire subdivisions of modular homes built to meet the needs of a particular group of people. Smaller capes, raised ranches and ranches make great choices for first time buyers looking to get into the housing market. Retirement communities, condominium complexes and commercial projects are being built all over the country utilizing modular home technology. These planned communities can be set up in half the time it would take to build them outdoors in the traditional manner of construction. Remember, a stick built house requires the builder to deal with weather, availability of supplies, and scheduling workers in the trades for each phase of the construction process when needed. All daunting tasks which lead to higher costs to the potential buyer.
A construction to permanent mortgage product provides financing for the purchase of a modular home on its own lot. The potential homeowner may decide to build a single family, two, three or four family property, depending on the buyer's needs.
Usually the homeowner cannot act as the Builder/General Contractor. There are a few lenders that will allow this as long as the homeowner can show proof of construction experience, but the norm is for the homeowner to hire a Builder/General Contract (GC). Most modular home companies offer this very important service as the owner of the company is usually a builder.
The very first step towards homeownership is to sit with your lender and get Pre Approved. This is a very important procedure because your lender will tell you how much house you can actually afford based upon your income which is your ability to repay the debt, credit worthiness by running a credit report to view your credit history, and to verify assets needed to purchase the house of your dreams.
When you meet with your lender you may be required to bring the following items with you as the Pre Approval process is your first step towards mortgage application. Gather up all of the following documents and keep them together in a folder, three ring binder or large envelope for this purpose. Be sure to make copies for your records as you will be leaving these documents with your lender for the actual application.
- Two current paystubs from each borrower.
- Two current checking/savings statements to show you have funds available for your down payment, closing costs, appraisal fee, and two-to-six months of mortgage payments in reserve.
- Two current statements for any other investments you may want to include as assets, such as as 401k, any stocks or mutual funds, etc.
- Your last two years W2's and depending on your job, you may have to provide your last two years complete federal income tax returns.
- A written explanation for any gaps in employment, or to explain less than a two year employment history, or to explain any late payments that may show up on your credit report.
Once that has been done, you will have a Pre Approval letter outlining how much of a loan amount the lender is willing to provide. Present this letter to the builder and you can begin the construction process.
Together, you and your builder can work on a modular home plan that suits your present and future needs, work out all the design details of the finished product, and put together the final floor plans.
Here is what you will need to bring your lender to start the actual loan application:
- A legal description of the building lot.
- A fully executed contract between you and the modular home company/builder.
- A copy of any checks you may have given the modular home company/builder towards the purchase.
- A copy of the floor plans, plot plan, building specifications, a cost breakdown and building permit.
- Some lenders require a copy of your builder's insurance and license.
- You will also need to provide a copy of a Builder's Risk insurance policy for construction. It will cover any fire, theft, or liability risks associated with the construction. You will purchase this from your insurance agent once you know you have final approval from your lender.
At this point, your lender will have you sign all the required application documents and will begin processing your loan for final approval. The processing personnel will verify your employment, income, assets, and review all the documents you have provided to be sure everything meets the lender's guidelines for new construction. When you have received final approval in the form of a commitment letter, you can set a day and time to close on your loan and commence construction.
Briefly, here is what will happen. The builder will order your custom-made modular home, prep the site, pour a foundation, install any utilities needed such as electricity, an on-site septic system and a well for your water needs, unless you are lucky enough to have public water and sewer available to your site. When the modular home is complete it is shipped from the factory to your site via a truck. It will be in sections and arrive at your site to be carefully lifted onto the foundation and anchored in place. All utilities will be connected and any landscaping completed. The final step is to have a local building authority walk through the house to issue you a certificate of occupany, known as the C.O., which allows you to move in.