How to Purchase a Prefabricated Home

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A prefabricated home is one with some or most of the structure and walls built inside a factory. Since they were built under climate-controlled conditions, they offer high-energy engineering. There is no low-grade lumber used, and no delay in getting the "package" delivered. This includes modulars and homes where the outer walls are factory built, then delivered to your lot.

To purchase this type of home, locate a dealer and discuss the plan that suites you best. The dealer will be able to give a complete cost breakdown, which you will need to begin your purchase process. The dealer may provide a crew to build the home and the construction funding needed. If not, you must set up your own construction funding.

Things You'll Need

  • Credit report
  • Deed to land if applicable
  • Contract for land if applicable
  • Costs for home
  • Costs for site preparation
  • Survey of lot
  • Down payment funds (lender to state amount; if lot is owned, it's value may suffice)
  • A set of house plans

Purchasing a Prefabricated Home

Visit with a dealer who specializes in prefabricated homes to discuss house plans and costs. Ask if dealer provides construction crew and construction loan to build the home. If the dealer provides these services, you will need a "takeout letter" from your lender to refinance the project at the end of construction. Ask about deposit funds required by the dealer. If the dealer only provides the "package" to build the home, you will need to find a general contractor. Decide who will be your general contractor, and get his or her quote on the cost to build the home. Provide a deed and value of your land. (If you do not own your land, you will need an idea of cost to buy the lot). Gather all of these costs together, and make an appointment with your favorite lender.

Visit your lender with all costs totaled, and discuss if the dealer provides construction money to build the home, or if you need to do that personally. If the dealer provides the crew and construction funds, you need the lender to examine all of your finance documents (proof of down payment required in a bank account, (usually 10 percent of total costs), two years W2's, 30 days of paystubs, rental history and all costs involved in producing this home). The lender will need to assemble a file, and run an automated approval to be sure the loan will be approved. They will then give you a preapproval letter for "take out" to give to the dealer. Once you have that, go ahead and do a contract offer on the lot. If you own your land, provide deed, survey and estimated value to the lender. An appraisal of the lot and home (as represented by the house plans) will be ordered by the lender.

If the dealer does not provide construction funding for you, the lender will need to process for you a Construction-perm loan. This is a construction loan that closes the temporary construction loan and the permanent loan at the same time. To do this, you will need all that was mentioned above, plus the general contractor's (GC) cost to build analysis, his signed contract, his draw schedule, and contract for the land if applicable. The GC will need to fill out the lenders' builder approval package, and provide his license and insurance proof.

Provide lender with all required documents requested for construction perm loan. Discuss the permanent loan and how and when you can lock in your interest rate. When all of the documents and costs are in and accounted for, the lender must process and submit the entire loan file to underwriting for final approval. In the meantime, the lender will contact a closing agent. The agent will run the title search on the lot to be sure it is free of legal issues and liens. When all is submitted and approved, the lender will schedule your closing.

Request copy of closing statement prior to closing to review all costs involved, and ask questions regarding anything not understood. Once you have closed on the loan, no major changes can be made. so be certain that last minute changes have been given to the lender. Attend closing for Construction Perm loan, sign documents as required by closing agent. Construction can begin immediately.

When construction is complete, a final inspection from your county as well as the appraiser will be requested. When these are in, and the final draw against the balance has been made by the builder, you will receive a modification package. This package contains needed documents to take you into the permanent stage of this transaction. Some of the documents may need notarization when signed. Once these documents are completed and returned to the lender, your project is complete. Move in and enjoy your prefabricated home

In the event the dealer has provided the building crew and construction funding to build this home, you are now refinancing a construction loan. When construction is about 80 percent complete, meet with your lender to update all of your income and banking documents. the lender will need to have final inspections on the home by your county as well as the appraiser. The entire file will be submitted for underwriting approval. When the approval is issued, request a copy of the closing statement (prior to closing) to review all costs involved, and ask question about anything not understood. Your lender will schedule your closing.

Attend the closing for your permanent loan. Sign closing documents as required by the closing agent, asking questions about anything you don't understand. You have officially closed, but since this transaction is handled as a refinance, the payoff funds are not disbursed (sent out) for three business days. This is a federal law which gives the borrower three business days to decide if he wants to keep the loan, or if he made a mistake and wished to rescind (vacate) it.

Tips & Warnings

  • If you own your land "free and clear" of liens, the entire value will be used as down payment. It is possible to complete this entire project will very little out of pocket costs, depending on land value. If you gave a deposit to the dealer at the beginning of this project, be sure you are getting credited for it on the closing statement. When pricing out the cost of the building package, some dealers will include shipping in this cost. Always ask if it is included. This is major since it involves tractor trailer delivery. For smaller items, you might save money buy buying locally. Always ask what is not included in the package. When the tractor trailer arrives with the material delivery, the builder or someone should inventory the package. Call the dealer if anything seems missing.
  • When construction is complete, no matter if the loan is a refinance of a construction loan or a construction perm, always do your own final "walk through" before you sign final closing papers (or modification papers) and list out unfinished or incomplete work. The builder should complete all the work before you move in.

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