In recent years, modular homes have gained popularity among homebuyers seeking an alternative to traditional site-built homes.
This “Modular Home Buying Guide: Advantages, Costs, and Mortgage Tips” aims to provide valuable information to help you make an informed decision.
Within this guide, we will explore the benefits of choosing a modular home, key factors to consider during the buying process, a breakdown of the associated costs, tips for selecting the right builder, and crucial mortgage considerations.
By understanding these aspects, you will be better equipped to navigate the modular home market and make a choice that suits your needs and budget.
What is a Modular Home?
A modular home is a type of prefabricated housing constructed in sections or modules within a factory setting.
These modules are then transported to the building site, assembled and secured on a permanent foundation.
Modular homes are built to comply with local and regional building codes, ensuring their quality and structural integrity are on par with traditional site-built homes.
The primary distinction between modular and traditional homes lies in the construction process.
While modular homes are built off-site in a controlled environment, traditional homes are constructed entirely on-site.
This difference results in various benefits, such as reduced construction time, lower costs, and less waste, making modular homes attractive to many homebuyers.
Why Buy a Modular Home
Affordability
One thing that’s great about modular homes is the price tag.
Because they’re built off-site, less on-site construction labour is required, and you don’t need to hire an architect.
All the materials and everything else you need get delivered to the building site, saving you much time and money.
When you compare the cost of a modular home to a traditional site-built home, the modular home is usually around 15 to 20 percent cheaper.
Efficient Building Process
Constructing a traditional home can be time-consuming, potentially taking up to seven months to complete.
However, if time is of the essence, a modular home may be the more suitable option.
The modular home construction process is designed for efficiency, allowing you to move into your new home significantly faster than a traditional build.
Efficiency Use of Energy
One great thing about modular homes is that they’re often designed with energy efficiency in mind.
The windows, cladding, and insulation are all optimized to save energy, which is great if you care about the environment.
Plus, because everything’s so well-designed, you’ll have lower energy bills in the long run.
So, if you want to ensure you’re doing your part to reduce your carbon footprint, a modular home is worth considering.
High-Quality Standards:
When it comes to the construction of a modular home, quality control is a top priority.
Everything’s carefully monitored from the beginning to the end to ensure you’re getting a top-quality product.
That means you can be confident that your home is built to last.
Plus, because everything’s so well-made, you’ll have fewer zoning concerns when it comes time to transport the home.
All of this adds up to a higher resale value than you might get with a traditional home.
Things to Consider When Buying a Modular Home
Obtaining Financing Can Be Challenging
When financing a modular home, there can be some hurdles to jump through.
Traditional mortgage lenders prefer on-site-built homes, so they may hesitate to finance your modular home project.
But don’t worry – there are other options out there.
Many modular home manufacturers offer financing and credit options, which can be very helpful if you’re having trouble finding a lender.
So, if you’re set on a modular home but can’t find the right financing, look into what the manufacturers offer.
Smaller Unit Sizes
One thing to remember when considering a modular home is that they tend to be smaller.
But the good news is that smaller doesn’t have to mean cramped or uncomfortable.
Many modular homes are designed to be modern and smartly laid out, making them feel more spacious than a larger home.
And if you’re worried about finding a modular home big enough for your needs, don’t worry—there are larger options.
Just keep in mind that you’re not likely to find any mansion-sized modular homes.
Difficulty Finding Suitable Land for the Construction
Finding the right piece of land can be challenging when building any type of home.
This is especially true if you want to build in a busy urban area. However, with modular homes, there are even more obstacles to contend with.
Some government regulations can make building a modular home in certain areas difficult or even impossible.
Even if you find a suitable piece of land, it is not guaranteed to meet all the requirements for a modular home.
Be prepared to work extra to find the right location if you’re set on a modular home.
What is the Cost of a Modular Home?
Modular home costs vary depending on the building material used and the desired customization level.
The following is a cost breakdown:
The Utility Costs
The cost of connecting a modular home to essential services such as the power grid and water supply can vary widely.
It depends on your location, how easy it is to access the necessary utilities, and what you need to connect to.
Let’s say you want to hook up to the local power grid.
Depending on how far away the nearest connection point is and how much power you need, your costs could range from $3,000 to $10,000.
If you need a well or septic system, it can add another $10,000 to $15,000 to your overall utility costs.
Again, the final price tag will depend on the type of system you need, the complexity of the installation, and any local regulations you have to follow.
Budgeting for these costs is essential when planning to build a modular home.
The Foundation Costs
The foundation is a vital component of any structure, ensuring the stability and support required for a house.
When determining the cost of a foundation, factors such as the size of the house, the type of foundation, and compliance with local building regulations should be considered.
For instance, a basement foundation may range between $18,000 and $30,000, while a more affordable crawl space foundation typically costs between $8,000 and $21,000.
One cost-effective alternative is a prefabricated concrete foundation produced off-site in a controlled environment, thus reducing labour and material expenses.
The cost of a prefabricated foundation varies depending on the size of your home and local market conditions, generally ranging from $10,000 to $20,000.
When selecting a foundation for your modular home, it’s crucial to prioritize durability, stability, and compatibility with the chosen modular home system.
The Construction Cost
What does the final price of a modular home look like?
On average, construction costs range from $233 to $250 per square foot, excluding factors such as land, permits, and additional fees. To provide context, imagine constructing a 1,390 sq. ft. modular home in Canada.
Based on the average above, you would face an estimated cost of around $335,685.
A traditional site-built home of the same size would likely cost over $500,000, making modular homes a more cost-effective option.
However, when budgeting for a modular home, transportation, delivery, and on-site assembly costs must be factored in.
These additional expenses can increase the overall price by 10-15%.
Tips for Finding a Modular Home Builder
Do Your Research
The first step is determining if modular homes are allowed in your area.
Once confirmed, the next step is to find a trustworthy and reliable builder.
Look for builders who specialize in modular homes and ask for references or to see examples of their previous work.
Additionally, checking with organizations such as the BBB or reading third-party reviews can help you assess the builder’s credibility.
Locate A Lender
If you can’t finance the purchase or construction of your modular home in cash, then you will need a mortgage.
It is important to find a mortgage lender early in the process. Start by determining your eligibility and the amount you can borrow.
The lender can then provide you with a list of modular home companies they have previously worked with.
Price and Procedure Should Be Discussed
Once you have found a builder, it is essential to clarify what is and is not included in the base price.
Ask about the payment schedule, whether it’s upfront or after completion, and if the builder will handle obtaining a certificate of occupancy through necessary inspections.
Ensure you get all details in writing, including any quotes you have received.
Financing a Modular Home With a Mortgage
Various types of mortgage loans are available to finance your modular home purchase.
These options include low down payment insured mortgage loans offered by major banks like TD Bank and conventional mortgage loans offered by prime and alternative lenders.
The ability of a lender to finance your modular home will depend on several factors related to the house.
Concrete Foundation
The modular home should be attached to a solid and permanent foundation, such as poured concrete or block.
It may not be easy to finance a modular home that rests on a temporary foundation like wooden or metal posts.
To ensure your mortgage loan can be used to finance the purchase, ensure your modular home is securely and permanently fixed to the foundation.
Land Ownership Type
The type of land ownership can also impact your ability to obtain a mortgage loan to finance or refinance your modular home.
The land on which the modular home is located can either be rented (known as “leasehold”) or owned (known as “freehold”).
Obtaining a mortgage loan for a modular home on leased land can be challenging.
Age and Condition of the Property
The age of the modular home will determine the maximum amortization period that the lender will use to calculate your mortgage payment.
A newer home is generally considered a better investment; thus, lenders may be more willing to offer extended amortization periods for more contemporary homes.
On the other hand, an older home may have a shorter amortization period, meaning higher monthly payments.
Down Payment Requirements
Similar to a traditional mortgage, a minimum down payment of 5% of the home value is required when purchasing a modular home valued under $500,000.
The required down payment ranges between 5% and 10% for homes valued over $500,000 but less than $1 million.
Additionally, if your down payment is less than 20%, you may be required to pay mortgage insurance premiums.
Conclusion
In conclusion, buying a modular home in Canada is a smart and cost-effective way to own a home.
With various financing options, including low down payment insured and conventional mortgage loans, finding the right funding for your modular home purchase is achievable.
However, it is important to ensure that the modular home is built to meet local regulations and to check the manufacturer’s reputation to ensure high-quality construction.
Before beginning the construction process, it is advisable to get pre-approved for financing.
By taking these steps, you can ensure a smooth and successful purchase of your dream modular home in Canada.
