Wondering how to pay for a factory-built house? Modular home financing usually means a construction loan during the build, then a standard mortgage, or a single loan that does both.
| Item | Value |
|---|---|
| One-time close loan | Just one closing, one underwriting process and one set of fees |
| Typical FHA down payment on a one-time close loan | Often ~3.5% |
| Foundation requirement | Permanent foundation |
| Construction loan | Can be harder to get than a typical mortgage |
| Building rules | State and local building codes apply |
These figures come from a lender’s one-time close guide and NerdWallet’s modular home overview. Terms change and vary by lender, so check the source and your own lender before you rely on them.
This guide is an independent educational piece and is not affiliated with any lender or company named. It sits within our wider guide to buying a modular home, which covers the purchase from start to finish.
Why modular home financing works differently from a ready-built purchase
When you buy an existing house, the lender pays the seller at closing and you start repaying right away. A modular home is different, because the house does not exist yet. Money has to flow out in stages while the factory builds the modules and a crew sets them on site.
That is why construction financing is usually part of the picture. According to NerdWallet, buyers who need financing will probably need a construction loan, and qualifying can be more difficult than for a standard mortgage. Lenders want to see a clear budget, a builder they trust and a plan for the land.
The good news is that the finished home is treated much like any other house. Like site-built houses, modular homes have permanent foundations and must comply with state and local building requirements. That is what lets many lenders approach them with familiar mortgage products.
The main ways to pay for a modular home
Most buyers end up with one of the routes below. Which one fits depends on whether you already own land, how much cash you have and how your lender handles draws during the build.
- Construction-to-permanent loan: a single loan that covers the build and then converts to a long-term mortgage.
- Stand-alone construction loan plus a separate mortgage: two loans, two closings and two sets of costs.
- Cash or home equity: using savings, or borrowing against another property, to cover some or all of the build.
- Government-backed options: FHA, VA or USDA programmes, where a lender offers them for modular construction.
- Personal or land loans: sometimes used for pieces of the project, such as buying the lot first.
Each route has trade-offs in cost, paperwork and risk. The sections below look at the most common ones in more detail.
How a one-time close loan works
A one-time close loan, also called a construction-to-permanent loan, rolls the build and the long-term mortgage into one. According to one lender’s guide, it means just one closing, one underwriting process and one set of fees rather than separate loans for each stage.
Because you qualify once, you avoid being re-approved when the build ends. Ask whether the lender offers a rate lock and how long it lasts.
Requirements differ by program. For an FHA version, the same lender lists these conditions: the home must be on a permanent foundation, must meet local building codes, must be your primary residence, and the down payment is often ~3.5%. Whether your project qualifies depends on lender policies and the loan type, so ask early.
Stand-alone construction loans and separate mortgages
With the two-loan approach, you take a short-term construction loan first and then refinance into a mortgage once the home is finished. This can give you more freedom to shop for the best mortgage later. It also means a second round of approval, a second closing and the risk that your finances or market rates have changed by then.
Ask any lender how repayments work during the build and how draws are released. Terms differ, so get the schedule in writing and plan your budget for the point when the permanent loan starts.
How to prepare your application
Lenders look at the whole project, not only at you. A tidy file shortens the process and gives you better odds with a lender that may be less familiar with factory-built homes.
- Check zoning and local building rules for your site, and confirm modular homes are allowed there.
- Gather a full budget that covers the home, delivery, crane work, foundation, utilities and finishing. Our guide to modular home cost explains what usually goes into that number.
- Find lenders that have worked with modular builds, and ask how they handle construction draws.
- Compare rates, fees and down payment rules across at least a few offers.
- Ask how the lender will value the finished house, since the figure affects how much you can borrow. Our page on modular home appraisal covers that step.
Keep a cash cushion beyond the quoted price. Site problems and changes often add costs that the loan does not cover.
Modular versus manufactured: why the label matters for loans
Modular and manufactured homes are both pre-built in factories, but lenders treat them differently. Manufactured homes are built to the federal HUD Code, while modular homes follow the same state and local codes as site-built houses. Because of that, a modular home on a permanent foundation can usually use the mortgage products that site-built homes use.
When you speak to a lender, describe the home accurately. Using the wrong term can send your application down the wrong track or lead to a quote for a loan type that does not suit your project.
Frequently asked questions
Can I get a regular mortgage for a modular home?
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Often yes, once the home is finished and sits on a permanent foundation. Lenders vary, so ask whether they have handled modular projects before.
Do I need a construction loan?
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If you can’t pay cash, you will likely need one, according to NerdWallet’s overview. A one-time close loan can combine construction and the mortgage into a single loan.
What down payment should I expect?
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One lender says an FHA one-time close loan often needs about 3.5% down. Other loan types and lenders may ask for more, so compare offers.
Is a one-time close loan better than two loans?
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It offers one closing and one set of fees, and it can lock in your rate up front. Two loans give flexibility but add cost and a second approval.
