Modular homes vs manufactured homes: What's the difference?

Unlike traditional homes, both modular and manufactured homes are both built in a factory offsite — to an extent.

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The three main differences between modular and manufactured homes is how they are built, the type of foundation they are laid on once they are completed, and the building codes they must comply with.

Manufactured homes are built entirely offsite and usually aren’t placed on a permanent foundation, whereas modular homes are built partially offsite and then are assembled onsite on a permanent foundation.

Both options have their own unique set of advantages and disadvantages, but the one advantage they both share is costing less than a traditional home, which can make homeownership much more accessible.

What is a modular home?

A modular home is partially constructed in a factory, then the pre-built components are moved to the land lot. Once there, the components will be pieced together and placed on a foundation before being completed. When you buy a modular home, you'll also need to buy land where you can set it up.

Similar to a traditional home, modular homes have a permanent foundation — they can even have basements. Once they are completed and placed on their foundation, you can’t move a modular home, just like you wouldn’t be able to move a traditionally built home. 

When constructing a modular home, builders have to comply with the local building codes based on where the home will actually be placed — not the codes for the factory location where the home is built. 

At first glance, modular homes look the same as a site-built home. You can choose between a wide variety of floor plans and designs. This makes it easy to design a home that fits in with your neighbors. For example, if two-story colonials are all the rage, you can select that style of home even though it’s built somewhere else. 

Modular homes are virtually indistinguishable from a normal home and can give homeowners the chance to customize their house to their liking for much less than the cost of a new construction home that's built on-site.

You can also finance a modular home just like you would a traditional home, so there’s no need to spend all of your cash at once. You can make a downpayment and take out a mortgage loan like you would for any other home. 

What is a manufactured home? 

While modular homes are very similar to traditional homes, manufactured homes are not. That's because this type of home is built entirely in a factory and is movable. A manufactured home is built on a fixed, steel chassis instead of a permanent foundation, and it usually comes with wheels, which are detached after the manufactured home has been towed to the home site. 

Trailers and mobile homes are considered manufactured homes. But design-wise, manufactured homes don’t always look like the trailers most people picture. They don’t tend to be as customizable as modular homes, but you will still have different floor plans and architectural styles to choose from that can make them look more like traditional, site-built homes. There are also plenty of add-ons to choose from, too, like decks or porches (though no basement).

Financing

Financing can get a bit tricky: Most mortgage lenders don’t offer mortgages for manufactured homes. Some lenders, like Fannie Mae and Freddie Mac, do offer conventional loans for manufactured houses, and you can pursue government-backed loans that allow the purchase of manufactured homes. FHA and VA loans are a good place to start if you can qualify for them.

That being said, just because it can be harder to find a mortgage loan for a manufactured home doesn’t mean it’s impossible. You may find that you have more financing options if you decide to affix a manufactured home to the land.

Standards

When it comes to building codes and standards, manufactured homes must adhere to HUD standards.

Manufactured homes have a bad reputation for being unsafe and poorly built — but this is an unfair misconception. Thanks to the National Manufactured Housing Construction and Safety Standards Act of 1974, there are many stringent construction and safety standards for all HUD-certified manufactured homes. The law didn’t go into effect until June 15, 1976, so if you want to buy a manufactured home that meets HUD standards, you should buy one that was built after that date. 

The difference between modular and manufactured homes 

Here's another look at modular homes vs. manufactured homes. 

Modular homes Manufactured homes
Construction Partially built in a factory; multiple pieces are assembled at home site Entirely constructed in a factory
Placement Permanent foundation; no mobility Moved to the land lot; can be disaasembled or moved again
Design Customizable floor plans and layouts Customizable floor plans and layouts
Financing Standard mortgage options Limited mortgage options
Code requirements Local, state, and regional building codes Federal HUD code
Cost comparison Higher Lower

Costs

While modular homes can cost more than a manufactured home, they tend to cost less than a traditionally built home. If you’re looking for a custom build on a budget, a manufactured home can be a great option, especially if you live in an area with severe weather that could drag out the construction timeline. 

Financing

If you buy a manufactured home, it can be harder to get financing, whereas mortgage lenders have no problem issuing loans for modular homes. 

Benefits

The benefit of buying a brand new modular home or manufactured home is that you know the home won't need major repairs any time soon. You also won’t have to worry about things like home inspections since you are buying a home from a manufacturer, and not an individual seller. 

All of that being said, you should still purchase a good homeowners insurance policy to make sure your home is protected from any perilous events that may be covered by a claim. Mortgage lenders will require you to have homeowners insurance coverage, but even if you buy a modular or manufactured home in cash, it’s a really good idea to have coverage.  

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