Kit Homes: What You Should Know Before Buying

Rocket Mortgage^® does not currently offer financing for kit homes.

Nontraditional homes have become all the rage as buyers get creative on their paths to homeownership. The innovation of alternatives to traditional stick-built construction has made kit homes affordable, energy-efficient, customizable and accessible to more people. Today, you can order a high-quality kit home from Amazon and have all the materials needed to build a house delivered right to your building site.

As innovative and exciting as a kit home sounds, home building kits have been around for more than a century. Here’s what you need to know before you buy into their newfound momentum.

Kit homes are essentially mail-order homes, similar to prefab homes, delivered in parts by a manufacturer and stick-built on your property either by you or by contractors. House kits are far more affordable than hiring contractors to source all the materials themselves. You can order a kit home to build anything from a work studio to a bungalow to a three-bedroom contemporary home.

While Amazon has revived interest in kit homes, they were extremely popular in the first half of the 20th century. In fact, more than 100,000 kit homes were built in the U.S. between 1908 – 1940, according to a University of Maryland archivist. Sears is still the most well-known kit home manufacturer from that era.

Kit homes vary in pricing based on size, layout and location. Still, they can be considerably cheaper to build than traditional houses. Many manufacturers of kit homes have business models that are similar to those of modular and manufactured homes. In fact, many home-building kit suppliers will also offer modular options (built off-site and delivered in sections). Rocket Mortgage^® offers financing for modular homes and manufactured homes that have been affixed to the land as real property.

Building or assembling kits in a climate-controlled environment exponentially shortens the build time and, therefore, the labor costs. Because the construction materials are purchased in bulk and delivered to a factory, the cost for the materials is often lower than if you were to outsource all of the materials for a new stick-built home.

The most bare-bones house kit floor plans can come as cheap as $30 per square foot. You may find these cheaper kits don’t come with drywall or even any interior elements. More typically, the cost of an average panelized home kit, one that includes wall panels and a roof, may be closer to $40 – $80 per square foot, according to HomeAdvisor. It’s a good idea to talk with a general contractor before committing to a house kit to get a more realistic estimate and compare what different kits include.

It’s easy to get swept up in the thrill of online shopping for homes with a significantly lower price tag than you’d find while doing some more traditional house hunting or getting ready to build a new house. While it’s true in some ways that kit homes can be cheaper than building a stick-built house, there are many hidden costs to factor in.

One home kit manufacturer estimates that the kit amounts to just 25% of the total cost of the home once you include construction labor costs (generally $130 per square foot). If the house kit is $15,000, but you still need to furnish it with appliances, drywall, flooring, etc., it can quickly double in cost in materials alone.

You’ll also want to consider the cost to buy land and remove any obstructions. If you’re hoping to have running water or electricity, you’ll also need to hire professionals to help set up gas lines, sewer mains and other utility services. 

It’s important to meet with a general contractor before making a big purchase like the structure pieces to a house and ensure this type of home is still the right choice for you.

As with any other financial decision you’ll make in your life, there is no one right answer for everyone. A kit home may ultimately not be much cheaper if you live in a low-cost area. Here are some important factors to consider when deciding between different types of houses.

Pros Of House Kits

• Cost: Kit homes are typically cheaper than general contractor traditional home builds, for a number of reasons.

• Quick delivery: Kit home manufacturers can typically get the entire kit organized and delivered to you within weeks.

• Rapid construction: Because every piece is pre-cut and labeled with directions on how to assemble the house, it can be built significantly more quickly and accurately.

• Customization: The biggest benefit to building any home from the ground up is bringing a homeowner’s customized dream home to life.

• New home: Kit homes are just as durable as any other stick-built home and can easily last 50 or more years. Plus, you and your family get to be the first inhabitants.

Cons Of House Kits

• Delivery limits: Most manufacturers have a delivery limit of 750 miles, give or take. If you prefer the floor plans offered at a manufacturer in Utah but you live in Texas, you’ll have to pay expensive delivery fees to receive the kit.

• Location: Kit homes may not be cheaper than contractor-produced homes if you live in a rural or less expensive area of the country. If you live in a metropolitan area, a kit home will usually be cheaper.

• Lack of standards: The industry is in a new boom, which means nothing has been standardized industry-wide or regulated by HUD. A full kit may include a foundation and interior design for one company, while for another, it won’t even include drywall. Do research before making your final decision.

Getting a mortgage on a kit home is no different than building any other house. Most manufacturers don’t offer financing options. If you can’t pay cash, then you’re looking at a short-term home construction loan. Once your home is built, you can apply for a traditional mortgage.

While Rocket Mortgage doesn’t offer construction financing, including kit home financing, we’re here to help you understand your options. It’s also important to note that we offer financing for modular homes once they’re complete.

Whether you're looking to build a new barn, garage or a tiny house of your very own, kit homes are sent ready for you to build yourself or by a contractor at a more reasonable price than building a new traditional home.

If your kit home is already built and you’re ready to convert your construction loan for a modular home to a traditional mortgage, apply online!