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So you want to build a new home — but you’ve got sticker shock. In researching cost-effective options, you may have discovered modular and manufactured homes.
These home types are typically more affordable than traditional new construction, known as “site-built” homes. The Manufactured Housing Institute reports that a manufactured home costs about a third as much as a site-built home on average.
Modular and manufactured homes are both types of prefabricated, or “prefab,” homes. That means they’re built indoors at a factory, then transported to the building site. But just because they both start out in a factory doesn’t mean they’re the same thing.
Let’s explore the differences between these two home types.
Definitions: Modular vs. manufactured homes
What is a modular home?
A modular home is factory-built in large, three-dimensional pieces known as modules. When the modules leave the factory, they are up to 90% complete. The finishing touches happen at the building site, where the modules are attached to a permanent foundation and each other. Then, the finished home is inspected to ensure it meets local building codes.
What is a manufactured home?
Manufactured homes are also built in factories. Depending on their size, they are transported to the building site in one piece, known as a single-wide, or several pieces, known as a double- or triple-wide. Today’s manufactured homes come in a wide range of designs and styles, breaking the old “mobile home” stereotype.
Unlike modular homes, manufactured homes are affixed to a permanent chassis. A chassis is a metal frame that can be attached to wheels — that’s where the term “mobile home” comes from, though this term is considered outdated now. While the chassis cannot be removed from a manufactured home, you can remove or cover up the wheels.
Manufactured homes are built to national building standards set by the U.S. Department of Housing and Urban Development (HUD), called the HUD Code.
Did you know...
Technically, the term “mobile home” only applies to factory-constructed homes built prior to June 15, 1976. That’s when the HUD Code went into effect. The HUD Code set federal standards for safety and durability of manufactured homes. Pros, cons and differences
Compared to new site-built construction, modular and manufactured homes are a more affordable path to homeownership. Here are some things to consider when deciding between the two:
- Cost: A manufactured home typically costs less than a modular home.
- Resale value: While manufactured homes have come a long way in terms of quality, they still can depreciate in value over time, similar to an automobile. Modular homes generally change in value with the market similar to site-built homes.
- Building codes: Manufactured homes are built to the HUD Code. Modular homes follow the same state and local building codes as site-built houses.
- Size and durability: Sizes and floor plans vary, although modular homes offer more ability to customize layouts. Manufactured homes don’t hold up as well in high winds or hurricanes compared to modular homes.
- Portability: Manufactured homes must be affixed to a steel chassis. Depending on their size, they can be built and transported in full from the factory. Modular homes do not have a chassis. They are built in pieces, transported and assembled on-site.
- Construction efficiency: Modular and manufactured homes share some advantages over site-built homes. Indoor construction pretty much eliminates weather delays. Assembly-line construction is also faster and cheaper. Less construction waste saves home buyers money, and with efficiency gains, you’ll likely move in sooner.
Loans and financing
Modular homes
While a modular home is being built, you might have to make up-front or installment payments to the builder. These can be paid in cash or through a construction loan. Once construction is complete on a modular home, it can be financed with a traditional mortgage — just like a site-built home.
Manufactured homes
Manufactured homes are not always eligible for traditional mortgages. Here are some options:
- Traditional mortgages: To qualify for a mortgage, you must own the underlying land and have the manufactured home titled as real property.
- FHA Title 1 loans: If your home doesn’t qualify for a mortgage, the Federal Housing Administration (FHA) offers Title 1 loans to finance manufactured homes. With an FHA Title 1 loan, the buyer is permitted to lease the land where the home resides, such as in a manufactured home community — sometimes called a mobile home park.
- Chattel loans: Often, buyers finance manufactured homes using chattel loans. A chattel loan is a direct form of financing for personal property, similar to an auto loan. However, these loans typically have higher interest rates than traditional mortgages. The Consumer Financial Protection Bureau reports that around 42% of manufactured home owners use a chattel loan to finance their purchase.
Summary: Key differences
| Manufactured home | Modular home | Site-built home | |
|---|---|---|---|
| Cost to build | Lower | Medium | Higher |
| Type of foundation | Semipermanent (e.g. pier and ground anchors) or permanent | Permanent | Permanent |
| Portability | Yes (has a chassis that can be attached to wheels to move the home) | No (Once modules are delivered, they are permanently attached to each other and the foundation) | No (Built entirely on-site) |
| Building code | HUD code | International Residential Code (local building codes) | International Residential Code (local building codes) |
| Options to customize | Less | More | Most |
| Durability | Less | Most | More |
| Financing (after construction) | Chattel loan, FHA Title 1 loan or traditional mortgage | Traditional mortgage | Traditional mortgage |
| Value over time | Could increase or decrease | Typically increases | Typically increases |
Modular vs. manufactured: Which is right for me?
A manufactured home is less expensive and can get you to your goal of homeownership sooner, especially if you live in a rural area where affordable housing is scarce. Citing September 2024 data, the U.S. Census Bureau reports that the average cost of a new manufactured home is $125,200.
However, future home equity is less predictable for manufactured homes. If you own the land it’s on and keep up with maintenance, the value could grow, depending on your local real estate market. But if you don’t own the land and/or don’t keep up with repairs, it’s possible for manufactured homes to lose value over time.
A modular home is a larger up-front investment, but the home value typically grows over time, like that of a site-built home. Modular construction is sturdier than that of manufactured homes, too. If you finance a modular home using a construction loan, you might need a higher credit score and lower debt-to-income ratio to qualify, compared to credit score requirements to buy an existing home. That’s because you don’t have a finished home to use as collateral, like you can in a traditional mortgage.
Alternatives to modular and manufactured homes
If you’re looking for an affordable path to homeownership, here are other options to consider:
- Townhouses or condominiums: If you don’t mind sharing walls with your neighbors, buying a townhouse or condo can help you build equity at an affordable price point. You might have to pay homeowners association fees, though, so account for that when budgeting.
- Site-built homes: If you’re committed to a new build, you’ll pay more per square foot for traditional construction compared to a modular or manufactured home. However, you can cut costs by building a smaller home and opting for modest finishes.
- Tiny houses: Sized around 400 square feet or less, tiny houses can be set on wheels or a permanent foundation. Minimalist living is a lifestyle shift, so consider the pros and cons before you downsize.
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