Modular home moving to final location.

Modular Homes: Everything You Need To Know

Victoria Araj5-minute read

September 19, 2022


Nontraditional housing like shipping container houses, tiny homes, mobile homes and modular homes may all be conflated in your mind as the picture of minimalism and efficient design, but they are not the same. Understanding the difference between terms like prefabricated, manufactured and modular homes will help you decide which is right for you.

As homebuyers continue to demand more sustainable and affordable options, the modular construction market is projected to boom 7.1% from 2018 into a 129.67 billion dollar industry by 2023. Read on to find out what all the hype is about.

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What Is A Modular Home?

Modular homes are customized houses built offsite in a climate-controlled factory. Individual sections (called modules) are then transported to the property and assembled on a permanent foundation.

Once the concrete has been poured, your modular home is permanently fixed as real property. That means you can benefit from financing it just as you would a traditional mortgage.

Modular Home Vs. A Manufactured Home

While both are under the umbrella of prefabricated homes, that may be the only commonality between modular and manufactured houses. Both are built in massive, climate-controlled factories, which makes their construction exponentially faster than on-site construction.

While on-site “stick builds” take months to construct due to weather conditions, prefabricated homes can take just a few weeks to construct. In labor costs alone, prefabricated homes are much more cost-effective than traditional homes.

From the factory, manufactured and modular homes take vastly different routes. Modular houses are transported module by module, usually in a semi-truck, to the property. There, the house will be assembled using a crane and placed on a permanent foundation. You’re likely not able to tell the difference between a modular home and a traditional house once constructed.

Manufactured homes have a different history. Before 1976, manufactured homes were widely referred to as mobile homes. As mobile homes increased in popularity as a viable permanent housing option, the U.S. Department of Housing and Urban Development (HUD) established new regulations via the Federal Manufactured Home Construction and Safety Standards code. To this day, manufactured home construction remains the only federally regulated type of home construction on the market. 

For a manufactured home to receive a certification label from HUD, it must be built on a permanent chassis in a factory and transported to the site on its own running gear. Manufactured homes are beholden to federal HUD construction codes, whereas modular homes simply follow the same state, local or regional building codes as stick homes. There are also fewer financing options available for manufactured homes than there are for modular homes.

For your purposes, the main difference to take away is the mobility of each option. Modular homes are fixed to the land, whereas manufactured homes, like Airstreams, can be moved, whether by crane or on their own wheels. Modular homes appreciate over time while manufactured homes tend to depreciate in value.

What Is The Average Price Of A Modular Home?

Modular homes vary widely in size and price. You may opt for a tiny home under 400 square feet or build a 2,500 square-foot home. You’re not just paying for the base home itself, either.

Often, you’ll need to buy land before installing the prefab home. If that land isn’t primed for a house, you may need to spend more money leveling and removing trees from the property. Then you’ll need to connect utilities and pay for the installation itself. Still, it may be a more affordable option than a traditional home.

On average, a modular home costs $80 – 160 per square foot compared to $100 – $200 per square foot for stick-built houses. That makes modular homes 10% – 20% less expensive to build than an on-site house. 

Meanwhile, the average selling price of a manufactured home in 2019 was $81,900, according to the U.S. Census Bureau’s Manufactured Housing Survey. The hottest region for a manufactured home is overwhelmingly in the Pacific states (Alaska, California, Oregon and Washington) with a regional average of $104,700 average selling price.

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Pros And Cons Of Going Modular

Whether you’re debating manufactured vs modular homes or are simply considering a more sustainable option than a stick-built house, there’s plenty to consider before taking the plunge.

Benefits Of Modular Homeownership

Here are some of the pros of owning a modular home:

  • Sustainable construction: Modular builders and manufacturers overwhelmingly reported the largest benefit of modular construction is reduced waste. Because companies can order supplies in bulk to a single location, the environmental impact of transporting small batches of varying materials for an on-site build is lessened.
  • Affordability: Arguably the most compelling perk of modular homeownership is the bang for your buck. While they are virtually indiscernible from stick-built homes, they are considerably cheaper to build.
  • Speed: A modular home can be constructed in weeks rather than months or years compared to an on-site construction.
  • Traditional mortgage options: Lenders appraise modular homes the same way they do on-site builds. That means you can expect the same competitive interest rates, insurance premiums, taxes and loan options as traditional houses.
  • Highly customizable: Manufacturers often have various floor plans available for you to mix and match to meet your specific needs. The interior can be designed however you like – rustic, modern, log cabin and so on.
  • Energy efficiency: Modular homes are often constructed to be more energy efficient than their stick-built counterparts. You’ll feel the effects when your monthly utility bill arrives. Plus, their highly customizable nature allows you to opt for home solar panels and other energy efficient options.

Considerations Of Modular Homeownership

Modular homes aren’t for everyone. If the following considerations are giving you pause, they may not be the right fit for you.

  • Land: Since modular homes are immovable, it doesn’t make sense to build on rented land. If you’re building a modular home from scratch, you’ll need to buy and prepare land before you can install your home. 
  • Zoning restrictions: As popular modular homes might be in your #TinyHome Instagram feed, they make up a small percentage of homes in the U.S. Many cities either have outdated or an absence of zoning codes, which can make finding appropriate land difficult.
  • Upfront costs: While a manufactured homeowner could just rent land with no upfront costs, you’ll need to prepare to spend more upfront. Preparing the land alone may cost $4,000 – $11,000 between surveying and excavation work.
  • Construction loan: You’ll likely need a construction loan to afford the manufacturing of your new home. Those typically require a 20% – 25% down payment and will then be merged with your mortgage payment.

How To Buy A Modular Home

There are several routes you can take to become a modular homeowner. Whether you’re looking to build the customized modular home of your dreams or move right into an established modular home, your steps will be similar.

Modular homes have exponentially improved in quality since their inception. The first thing you’ll want to do is research the manufacturer’s reputation and ensure that you’re investing in a high-quality home. 

Because modular homes are financed the same as a stick-built house, getting preapproved will help you understand your budget before moving forward with construction. However you plan to kick your feet up in your home, Rocket Mortgage® is here to help you get there.

Get approved to buy a home.

Rocket Mortgage® lets you get to house hunting sooner.

Victoria Araj

Victoria Araj is a Section Editor for Rocket Mortgage and held roles in mortgage banking, public relations and more in her 15+ years with the company. She holds a bachelor’s degree in journalism with an emphasis in political science from Michigan State University, and a master’s degree in public administration from the University of Michigan.