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Financing Your Modular Home

Jul 12, 2008
As with any new home purchase, the first task is to define what you can afford. This saves a great deal of inconvenience later if you realize what is within your budget. In order to figure this out, meet with a mortgage broker or lender. This defines the pre-approval process. If you are serving as your own general contractor, be sure that the lender also offers "sweat equity" loans so that you can get the best deal. After evaluating your income, your credit, and your debt to income ratio, your lender will be able to give you an answer. Usually within 24 to 48 hours, you will know what your finances allow in terms of affordability. Additional information such as required escrow funds and down payment at closing is also provided most of the time.

Once you have been pre-approved, you will then figure out the exact costs of the project. For most people, it is recommended that they take their pre-approval figure and reduce it by 15 percent. This allows some built-in room for extra expenses along the way. Once you have selected your modular home style, design, and amenities, manufacturing costs will be secure. It will be your task with your builder to specify all the other costs that will be needed to finalize your closing costs form with your lender. These expenses will include excavation and landscaping costs, finishing work after the set, land lot costs, permitting expenses and several others. These are important to know at the beginning so you can hold your builder accountable.

When ready for closing document preparation, your lender will need engineered drawing plans for your modular home, the home's order sheet with specifications, a complete list of costs from your builder, a legal description of your lot, two years of employment history, and two months of recent bank statements. In addition, the lender will order an appraisal and title search for the property to make sure the appraisal covers the financing and that no liens are attached to the property. These are all standard steps of the financing process.

Depending on your situation, you likely will have a construction loan during the construction period before the actual mortgage loan is closed at completion. A construction loan basically allows you to pay your builder, your subcontractors, the manufacturer, etc. along the way before the final home closing is performed. Did you know the driver upon delivery of your modular home expects payment for the delivered modules? It would be an issue if there were no means to pay him. As work is completed, each vendor will expect payment, and a construction loan makes this easy while the building process proceeds.

Overall, because costs are more secure with modular homes, there are usually less surprises at closing that might otherwise occur with site-built home construction. Likewise, since modular homes are a better investment overall, the chance an appraisal will come in less than the amount financed is also uncommon. Modular homes actually give you the best ability to stay within your budget.
About the Author
Michael Zenga founded ZN Custom Building in 2002 which specialized in building modular homes in the Boston, MA area. Contact ZN Custom Building and let them answer your questions about modular homes today.
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