What Is a Prefab Home and Why You Might Want One

Why do people buy prefab homes?

People are increasingly turning to prefab homes for several compelling reasons, reflecting a shift towards more efficient, sustainable, and flexible home construction methods. Here are some of the key factors driving this trend:

• Cost efficiency: Prefab homes often come at a lower cost than traditional site-built homes. The controlled factory environment reduces waste and improves efficiency, potentially saving buyers money.
• Faster construction: Since many components of prefab homes are made in a factory, the overall construction time is significantly reduced. This means buyers can move into their new homes much quicker compared to the lengthy process of building a traditional home.
• Quality control: Manufacturing parts of a home in a factory setting allows for better quality control. Conditions are controlled, reducing the likelihood of materials being exposed to weather and potential damage during construction.
• Sustainability: Prefab homes are generally more eco-friendly. The factory process minimizes waste, and many manufacturers use sustainable materials. Additionally, the design of prefab homes often focuses on energy efficiency, further reducing the home’s environmental impact.
• Design flexibility: Modern prefab homes offer a wide range of design options, from minimalist tiny homes to expansive luxury houses. This flexibility appeals to a broad spectrum of buyers with different tastes and needs.
• Accessibility and convenience: For those looking to live in remote or challenging-to-access locations, prefab homes can be an ideal solution. Components manufactured off-site can be transported to virtually any location, overcoming obstacles that traditional construction might face.

These factors make prefab homes an attractive option for a variety of homebuyers, from first-time buyers to those looking for a sustainable and modern living space.

Drawbacks to prefab homes

While prefab homes offer numerous benefits, there are also some drawbacks that potential buyers should consider. These challenges can influence the decision-making process and impact the overall satisfaction with a prefab home:

• Financing hurdles: Obtaining financing for a prefab home can sometimes be more challenging than for a traditional home. Lenders may have stricter requirements or may not be as familiar with the prefab home process, leading to potential complications in securing a mortgage. (More on this topic later.)
• Perception and stigma: Despite their growing popularity and advancements in quality, some people still hold misconceptions about prefab homes, viewing them as lower quality or less desirable than site-built homes. This stigma can affect resale value and buyer interest.
• Land and zoning restrictions: Finding a suitable plot of land and navigating zoning laws can be more complicated for prefab homes. Some areas have strict regulations that may not accommodate prefab construction, limiting where you can place your home.
• Customization limitations: While prefab homes offer a range of design options, there may be limitations compared to fully custom, site-built homes. Buyers looking for highly specific or unique architectural features may find prefab homes restrictive.
• Site preparation and assembly challenges: The process of preparing the site and assembling the prefab components can encounter unexpected challenges, such as weather delays or issues with the land itself. These factors can lead to delays and additional costs.
• Transportation logistics: The need to transport large home sections or modules to the site can lead to logistical challenges, especially for remote or difficult-to-access locations. Transportation costs can also add significantly to the overall expense.

Understanding these drawbacks is important for anyone considering a prefab home. By weighing these challenges against the benefits, buyers can make an informed decision that aligns with their needs, preferences, and long-term goals.

How much do prefab homes cost?

Average costs for a prefab modular home can range between $80 and $160 per square foot. This includes a base house unit, site preparation, delivery, installation, and finishing. If your purchase includes any custom finishing or features like a porch, deck, or garage, you might pay $90 to $310 per square foot.

Depending on the location and manufacturer, some example prices calculated by Angi and HomeAdvisor are:

• Low end: A 1,600-square-foot prefab home might cost $130,000 to $180,000.
• Mid-range: A 1,800-square-foot could fall in the range of $180,000 to $270,000
• High end: A 2,000-square-foot prefab home might start at $270,000 to $360,000

HomeAdvisor provides the following detailed cost estimates for prefab home kits:

Prefab home kit prices per size

Home type	Square footage	Average cost
2-Story	2,100	$84,000 – $168,000
1-Story Ranch	1,600	$64,000 – $128,000
4 Bedroom/3 Bathroom	2,200	$88,000 – $176,000
3 Bedroom/3 Bathroom	1,700	$68,000 – $136,000
3 Bedroom/2 Bathroom	1,500	$60,000 – $120,000
5 Bedroom/3 Bathroom	2,600	$104,000 – $208,000
2 Bedroom/1 Bathroom	1,000	$40,000 – $80,000

Source: HomeAdvisor

Many prefab home companies will provide online tools to calculate your estimated costs. Of course, purchasing the land is a significant cost consideration, which also varies widely depending on location.

Can I finance a prefab home?

Financing a prefab home is indeed possible, but the process can be a bit tricky, and options may differ slightly from those for traditional site-built homes. Prospective owners have several financing avenues available, including both conventional and government-insured loans. But, like any loan, you’ll need to qualify for the financing. Let’s look at some options.

• Retail installment contracts: A common method for financing manufactured homes is through retail installment contracts, which are available through your retailer. This financing method allows you to make payments directly to the retailer.
• Conventional and government-insured loans: Lending institutions offer a variety of financing plans, including conventional, long-term real estate mortgages. However, these may require the home to be placed on approved foundations to qualify. Additionally, prefab homes are eligible for government-insured loans provided by the Federal Housing Administration (FHA), the Veterans Administration (VA), and the Rural Housing Services (RHS) under the U.S. Department of Agriculture, offering options to meet different financial situations.
• Construction-to-permanent loans: For those building a prefab home, a construction-to-permanent loan could be a viable option. This loan covers the initial costs of building the home and transitions into a mortgage once construction is complete and the home passes inspections. Typically, lenders look for a credit score of at least 620 and a 20% down payment for these types of loans.
• Chattel mortgages: If your prefab home will be placed on leased land or is considered movable property, a chattel mortgage might be an appropriate financing route. These loans use the home itself as collateral rather than the land it sits on. While chattel mortgages can offer more flexibility in terms of property ownership, they often come with higher interest rates compared to traditional mortgages. It’s estimated that more than 40% of manufactured housing loans are chattel loans.

Who sells prefab homes?

Prefab homes are sold by a variety of vendors, ranging from specialized manufacturers and builders to retailers who focus on modular and manufactured housing. Here’s a brief overview of the types of sellers in the prefab home market:

• Manufacturers: These companies design and build prefab homes in factories. They often offer a range of standard models, but some may also provide options for customization. Manufacturers typically sell directly to the buyer or through a network of approved dealers.
• Dealers and retailers: Specialized dealers and retailers work with one or several manufacturers to sell prefab homes. They can assist buyers in choosing a home, coordinating delivery, and sometimes even help with assembly and setup on the property.
• Design-build firms: Some firms offer a comprehensive service that includes both designing and constructing prefab homes. These companies cater to buyers looking for a more customized or unique prefab home experience.
• Online marketplaces: With the rise of digital shopping, there are now online platforms that list prefab homes from various manufacturers and builders, making it easier for buyers to compare options, prices, and features from the comfort of their home. Yes, you can even use Amazon to buy a prefab home.
• Local builders: In some cases, local builders may offer prefab or modular home options. They often handle the site preparation, assembly, and finishing touches, providing a more localized service.

FAQs about prefab homes

How long does it take to build a prefab home?

The construction time for a prefab home can vary significantly based on the design, manufacturer, and site preparation, but it is generally faster than traditional site-built homes. On average, it can take anywhere from a few weeks to several months from the time of order to the final assembly on-site. This shorter timeline is due to the efficiency of manufacturing components in a controlled factory setting and simultaneous site work.

Is maintenance different on a prefab home?

Maintenance for a prefab home is similar to that of a traditional site-built home, focusing on regular upkeep to ensure longevity and performance. However, some prefab homes are designed with modern materials and technologies that can reduce maintenance requirements. For instance, materials used in construction may be more durable or designed to be low-maintenance, potentially lowering the time and cost associated with upkeep.

How big is the average prefab home?

The size of prefab homes can vary widely, accommodating a range of needs and preferences. The average size tends to mirror that of traditional homes, ranging from compact 600-square-foot tiny homes to larger structures over 2,500 square feet. The modular nature of prefab homes allows buyers to choose or customize the size based on their specific requirements and the constraints of their land.

Are there zoning issues with prefab homes?

Zoning regulations can impact the placement of prefab homes, as local codes vary significantly by region. Some areas may have restrictions on the type of prefab homes allowed, such as modular versus manufactured, or specific requirements regarding the foundation and property size. It’s essential to research local zoning laws and obtain the necessary permits before proceeding with a prefab home project to ensure compliance and avoid potential issues.

Is it true that prefab homes are more eco-friendly?

Yes, prefab homes are often considered more eco-friendly compared to traditional site-built homes. This environmental efficiency comes from the controlled factory setting in which they are built, which typically results in less waste and more precise use of materials. Many prefab homes are also designed with energy efficiency in mind, featuring better insulation, energy-efficient windows, and sometimes renewable energy sources like solar panels. Additionally, the reduced construction time lessens the environmental impact on the building site. These factors contribute to a smaller carbon footprint for prefab homes, making them a popular choice for environmentally conscious buyers.

Should I buy a prefab home?

Deciding to buy a prefab home comes down to your personal needs, preferences, and circumstances. Prefab homes offer a range of benefits, including cost efficiency, faster construction times, and potential environmental advantages. Many industry experts believe prefabricated homes could move the needle on affordability for countless young or lower-income Americans struggling to be part of the homeownership game.

If the benefits align with your priorities and you’re prepared to navigate the unique aspects of prefab home buying, then a prefab home could be an excellent choice for you.

If you’re new to the buying process, or you’re in the market for a prefab home with land, such as a manufactured unit located within an established community, HomeLight can connect you with a top real estate agent to guide you through the process.

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