How Factory-Built Homes Are Paid

Prefab homes

Whether you're buying a HUD Manufactured Home or a pre-fab home certified by the ICC or the State, most factories require the same payment structure.

Typically payment starts with the initial cost of permit submissions to the local municipality, typically around $10,000. This really covers the permits for the foundation and utility connections, all of which fall under the purview of the local municipality.

Prefab homes are built inside the factory and typically permitted there as well, which is why they have faster turn-times for delivery. Shortly after submitting for permits, the factory will require a 50% payment to start construction. This payment mostly covers the cost of materials, nearly all of which are ordered upfront.

Once the factory-built home is delivered to the site, the factory typically requires final payment.

This is where financing options differ from the construction needs. Previously, most lenders would only provide 10-25% of payment upfront, leaving the factory or the homeowner to float the remaining cost. Fortunately, Fannie Mae recently changed it's loan guidelines to allow lenders to pay up to 50% of the factory order upfront.

Final payment is typically provided by the lender once the house is delivered and 'permanently affixed to the land - so no one can drive it away (yes, that's an issue). However, Many lenders require final permit approval by the municipality before the factory is paid.

These timeline challenges are one of the many reasons why you want a collaborative team between your lender, the factory and the contractor. Clarifying and setting proper expectations of payment and timelines are critical to keep you moving forward.

If you would like to learn more, please book a call at https://calendly.com/ADUloans.