What is a modular home? The real estate industry is full of housing options. If you're looking to buy a home, or considering building one, you may have heard that modular homes are an increasingly popular option. In a nutshell, modular homes have parts that are manufactured in a factory, instead of being constructed completely on the home site. Those parts are then transported to the property and assembled there by a builder.

What is a modular home?

First introduced near the end of World War II, modular homes—also called factory-built, prefabricated, modulars, or prefab—still represent only about 1.5% of the homes manufactured in the U.S. today. But modular housing is becoming hotter than ever with design-savvy buyers who want the flexibility to choose their floor plans and styles.

In other words: Just because it's made in a factory doesn't mean it's a boring box just like everyone else's. That's a myth of modular building!

“There is a preconceived notion that modular homes are plain Jane or boring,” says Fred Hallahan, a housing industry consultant with Hallahan Associates, in Baltimore.

In reality, modular homes can come in any style the homeowner wishes, from Cape Cod to Mediterranean to modern, and with any number of floor plans and architectural and design flourishes.

Modular housing is built on nonremovable steel chassis, and each module should be identified by a small metal tag. Modular construction must meet building standards and guidelines that sometimes surpass those of traditional on-site home construction.

Modular homes cannot be moved

Modular homes should also not be confused with manufactured homes (aka mobile homes), which are built entirely in a factory, then transported in one piece.

Modular housing, by contrast, is a site-built home that a builder constructs and places on a permanent foundation. The home buyer can generally move a manufactured home at a later date, but a modular building is not intended to be moved.

The home can be much larger than a manufactured home or mobile home.

In addition, a home built in sections offers some unique benefits over a home site-built from scratch.

Advantages of modular homes

There are three main benefits to going modular over traditional in real estate.

Speed: The building process for the main shell module can be completed in a factory in just five to eight days, with the builder assembling and doing finishing work at the building site. Weather issues pose less of a delay for the modular construction process, unlike traditional construction. Cost: Modular home construction may cost less than a traditional home, because the new homes can be manufactured faster. Some builders will say they can build a home for as little as $35 per square foot—compared with $125 per square foot for a site-built home built. However, keep in mind that that $35 is just a quote, and applies only to the base price. You'll need to buy the property and install electrical lines and plumbing. You may also want to make additions or modifications for your home. The more realistic all-inclusive price for a modular home hovers around $110 per square foot. The cost advantage will be more pronounced in areas where building costs are higher, which is why they are particularly popular in areas like the Northeast, where they constitute nearly 4% of all new builds, says Hallahan. Quality: A manufactured home may actually be of superior quality to a site-built home, primarily because the materials are built in a climate-controlled environment, not exposed to the elements, from cold to precipitation to humidity. Modular construction also often benefits from better quality control than when builders supervise multiple subcontractors working off-site. Prefab homes also tend to be more energy-efficient, which means a home buyer may be able to save on energy bills.

How to buy a modular home

You can shop for preexisting modular homes on realtor.com. If you want to build your own, you can shop for styles and sizes at ModularHomeowners.com. You can also talk to the representative of a modular home company.

Modular homes use “construction to permanent” financing, just as if you were building a regular house. The process begins with a construction loan during the building phase, and then once the modular home is complete, your loan will be converted into a “permanent” loan.