Article Written By:

Cathie Ericson / Realtor.com

If you’re looking to buy a home or considering building one, you may have heard that modular homes are an increasingly popular option. But what is a modular home? In a nutshell, it’s a house whose parts are built in a factory, then transported to the property and assembled there.

First introduced near the end of World War II, modular homes—also called factory-built, prefabricated, or prefab—still represent only about 1.5% of the homes built in the U.S. today. But prefab homes are getting 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.

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

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 homes, by contrast, cannot be moved; they can be much larger and offer some unique benefits over homes built from scratch on-site.

Advantages of modular homes

There are three main benefits to choosing a modular home over a traditional one.

Speed: The main shell of a modular home can be completed in a factory in just five to eight days, with assembly and finishing work completed on-site. Weather issues pose less of a delay for the building process, unlike traditional construction.

Cost: Modular homes may cost less because they can be built 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 home built on-site. 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: Homes built in a factory may actually be of superior quality to those built on-site, primarily because the materials are not exposed to the elements, from cold to precipitation to humidity. Modular homes also often benefit from better supervision than when multiple subcontractors are working to build a home. Prefab homes also tend to be more energy-efficient, which means you may be able to save on your energy bills.

How to buy a modular home

You can shop for pre-existing modular homes on realtor.com. If you want to build your own, you can shop for styles and sizes at ModularHomeowners.com. 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.

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