Does the property allow for the size home I want to build?

Many towns have limits on the size home you can build on a lot or set back requirements, so make sure you can build the home you want.

Is the property priced appropriately for my project goals?

Typically, most buyers want to have the price of land plus the price of constructing a prefab home equal or less than the price of a buying a similar quality already built home on the MLS.

Is there a complex design review process in the town?

If there is, review the town or county building plan, and particularly make sure the style and timing of review and approval is consistent with your desires and timing. You can typically quickly learn the zoning and design review procedures by calling the town’s building department and providing the property address or APN#.

Selecting a Prefab House Design

Choose between an already designed home plan or a custom designed home.

If you can find a an already designed plan that you like from a credible manufacturer, then this will likely be less expensive. Typically, if you have a normal flat lot and want to build a home 3500 sqft, you have a lot of good options.

If your lot or ideal lot is on a complicated (i.e. heavily-sloped) lot, is a tight (smaller than 3000 sqft) urban lot and requires an integrated garage, or if you want to build a very large home (4,000 sqft+), then the already designed prefab options are limited

Other key criteria decision (beyond basics like the availability of a design in your area, the aesthetics, size, and price)

Do you want a green home?

Certain manufacturers specialize in building highly energy efficient homes include net-zero homes and homes to the passive house standards.

How many different parties do you want to work with?

Some prefab manufacturers also do all your construction, others have a network of local builders, others require you to hire the builder. Finally some prefab manufacturers only build the shell (outside of the house) which means you have the freedom or obligation depending on how you look at it to fully customize the interior of the home.

Do you have special weather requirements?

Some homes are specially constructed to be hurricane proof or handle large snow loads.

What you should expect to pay

Overall costs for prefab homes are somewhat variable based on geography as the cost of the site work varies a lot based on the cost of the cost of labor

Typical ranges for the cost to build prefab (all-in) which is the cost of everything except the land are $150 - $600, with the cost for high end homes in expensive areas (e.g. San Francisco Bay Area) typically in the $400 - $600 per sqft. As a benchmark, this is not the cheapest solution, but prefab is typically good value for the quality in expensive areas of the country.

Getting a loan

Getting a loan for a prefab home is pretty similar to getting a loan for any new construction project. If like most people, you’re not planning to buy your home “all-cash”, then frequently you’ll likely get either:

● a construction loan - a short term loan that you then refinance out of post-construction or

● a temp to perm loan - a construction loan for the period of the construction that then converts to a normal mortgage post the house being finished. The advantage of these loans is you only have one mortgage close vs. two with just a construction loan.

Other stuff to be aware of that relates to financing:

● These loans often allow you to finance both the purchase of the land and building and finishing of the home

● The construction loan portion of these products is typically “interest only” meaning you only pay interest, and don’t pay back principal. You also only pay interest on the amount drawn

● The underwriting and approval process on these loans can be lengthy (60+ days) as the bank is not only underwriting you as a borrower, but also the viability of your building plans

● To get land in a more expedited process, buyers will often pay cash for the lot for their project and then the lender will credit the land purchase as a down payment percentage on the purchase

● Many of the best lenders for these products are regional and specialize in new construction lending, so contact us if you’d like recommendations

ADU / Tiny home financing

If you’re looking to purchase an ADU (accessory dwelling unit) or tiny home, then you may want to consider a personal loan:

● Many personal lenders allow you to borrow up to $100k with no down payment

● These loans typically amortized over a shorter period than mortgages (up to 12 years)

● These loans typically don’t underwrite the property all and instead underwrite you as a borrower

● Many of the best personal lenders are online and serve almost the entire country

● The time to get approved for a personal loan is generally pretty fast (as little as a day to up to a couple weeks)

Prefab Homes for Investors

Whether you’re building a prefab home to live in or to develop and sell, you’ll want to feel like the home is a good investment. For many that means buying a lot and building a home for less than they could sell the home for right after it’s finished.

Here’s how that calculation might look on a spreadsheet: