In order to get a loan for a prebuilt delivered modular home, you will need a construction loan. A construction loan is a short-term loan that usually lasts no longer than a year and is paid off as different parts of the house are completed.
After the construction is complete, and an inspector makes sure the house is well built, your home will be approved as livable. After this, you can move forward on applying for a mortgage. A lot of lenders offer a package loan, called a Construction-To-Permanent Loan.
With this program, you get a construction loan while the home is being built, and then, after the home is built, you get a mortgage. This saves a lot of time and reduces the complications of getting two separate loans. Some lenders do not offer this package, which in that case means that you would have to get a new mortgage loan with a different lender after paying your construction loan. This is a longer process, but will still work out for you in the end.
Step 1: Pre-Qualification Estimate
By providing financial information and credit history to your lender, they’ll be able to give an estimate on what they’re willing to lend. In addition to an estimate, fees and interest rates will be included in this report. Remember: this isn’t a guarantee for a mortgage or specific dollar amount.
Step 2: Apply
When applying for a construction loan, you will want to go to several different lenders and see who offers the best rates and packages. Once you do this, you can get pre-approved for a loan and then look for land to build your new home on.
Step 3: Approval
A formal commitment letter will be sent to you regarding the loan amount from your lender. This may contain conditions that will need to met before the loan can close and before construction to start. This may need to be shown to your manufacturer or seller of the lot before the final contract is signed.
Step 4: Disbursement Schedule
Next, you will need to set up a disbursement schedule for your vendors. This basically is a schedule as to when you will pay your vendors that are helping construct your home. This disbursement schedule will also go into detail on what exactly each vendor is doing and how much money they will be paid. (For example: Paying one vendor $2,000 to cut down trees on 4/17 and paying another vendor $15,000 to build a deck on 5/8)
Step 5: Close on the Loan
After the disbursement schedule has been finalized, along with the restrictions and conditions, the lender will sign the final loan documents at the closing of the loan. Once they are signed, you’ll need to pay closing costs.
More fees will apply when you switch over your construction loan over to a mortgage. It’s also a good idea to ensure your local government has given you a building permit. If not, it is recommended that you hold off on transferring between loans.
Step 6: Build Your Home
Now that you have secured your loan and have the money… It is finally time to start building! You already have a disbursement schedule so there should be no confusion on when each part of the house will be done and how much money you will be spending. Everything is in place financially and now it is only a matter of time before your brand-new home is built.
Step 7: Switch Construction Loan to Permanent Loan
If your lender only gave you a construction loan, instead of a construction-to-perm loan, you will have to get another mortgage loan with a different lender. If your lender does offer a construction-to-permanent loan option, then you’re all set! Enjoy your new home.