Understanding Modular Homes and How to Finance Them

• Author: Aubrey Sipes
• Posted: 2025-10-02

With the cost of buying a home still higher than it was before the pandemic, many people are looking for alternatives to traditional houses. One option that can make becoming a homeowner more affordable is a modular home.
 

What Is a Modular Home?

A modular home is a house built in sections at a factory, then transported and put together on a permanent piece of land. You can often personalize these homes, choosing things like the type of foundation, siding, and other features.

Modular homes can be ready fairly quickly—some can be built and set up in about four to nine months.

If you buy a modular home that’s already been built, it will be fully assembled on its land.
 

Modular Homes vs. Manufactured Homes vs. Mobile Homes

All three types of homes are made in factories, but they have some important differences:

• Modular homes are installed on a permanent foundation.
• Manufactured homes (sometimes called mobile homes if built before June 15, 1976) don’t require a permanent foundation.
• Manufactured homes are usually cheaper than modular homes, but they are considered personal property, not real property. This makes them harder to finance using regular home loans.

 

How Much Do Modular Homes Cost?

According to Angi, the average price for a modular home in the U.S. is around $240,000, not including the land it sits on. Prices can range from $160,000 to $320,000, depending on factors like:
 

• Size: Larger homes cost more because they need more materials and work.
• Foundation: Basements are pricier than other foundation types like crawl spaces or slabs.
• Location: Labor and delivery costs can change depending on where you live.
• Land condition: It’s cheaper to build on land that’s already cleared and ready.
• Upgrades: Custom features will increase the cost.

 

Financing a Modular Home

There are different ways to pay for a modular home, depending on whether you’re building a new one or buying one that already exists.

Building a Modular Home

To build a modular home, you'll probably need a construction loan. These loans usually:
 

• Have shorter time frames.
• Require a bigger down payment.
• Charge higher interest rates than standard mortgages.

You’ll pay only the interest during construction, and when it’s done, convert the loan into a regular mortgage.

Buying an Existing Modular Home

If the modular home is already built, you can apply for a regular mortgage. This could be a conventional loan or one backed by the government.
 

Types of Loans for Modular Homes

Here are some common loan options for modular homes:
 

• Conventional loans: As little as 3% down with programs like Freddie Mac’s CHOICEHome.
• FHA loans: Less strict credit requirements and possibly only 3.5% down.
• VA loans: No down payment needed for eligible military members, though there’s a funding fee.
• USDA loans: No down payment for homes in certain rural areas, but there are income limits

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