Modular vs. Manufactured Homes: What’s the Difference?

So you want to build a new home — but you’ve got sticker shock. In researching cost-effective options, you may have discovered modular and manufactured homes.

These home types are typically more affordable than traditional new construction, known as “site-built” homes. The Manufactured Housing Institute reports that a manufactured home costs half as much per square foot as a site-built home. For modular builds, a 2017 study by the Terner Center for Housing Innovation at the University of California, Berkeley estimates construction savings of at least 20%.

Depending on land costs and the model you choose, a new manufactured or modular build might even cost less than the average existing home.

Modular and manufactured homes are both types of prefabricated, or “prefab,” homes. That means they’re built indoors at a factory, then transported to the building site. But just because they both start out in a factory doesn’t mean they’re the same thing.

Let’s explore the differences between these two home types.

What is a modular home?

A modular home is factory-built in large, three-dimensional pieces known as modules. When the modules leave the factory, they are up to 90% complete. The finishing touches happen at the building site, where the modules are attached to a permanent foundation and each other. Then, the finished home is inspected to ensure it meets local building codes.

What is a manufactured home?

A manufactured home is what you might think of when you hear the term “mobile home” or “trailer.” However, that terminology is considered outdated. Today’s manufactured homes come in a wide range of designs and styles.

Like modular homes, manufactured homes are built in factories. Depending on their size, they are transported to the building site in one piece, known as a single-wide, or several pieces, known as a double- or triple-wide.

Unlike modular homes, manufactured homes are attached to a permanent chassis. This is a metal frame that can be attached to wheels; that’s where the term “mobile home” comes from. The chassis cannot be removed, but you can remove or cover up the wheels.

Manufactured homes are built to national building standards set by the U.S. Department of Housing and Urban Development (HUD), called the HUD Code.

Compared to new site-built construction, modular and manufactured homes are a more affordable path to homeownership. Here are some things to consider when deciding between the two:

• Cost and resale value: A manufactured home typically costs less than a modular home. While manufactured homes have come a long way in terms of quality, they still can depreciate in value over time, similar to an automobile. Modular homes generally change in value with the market similar to site-built homes.

• Building codes: Manufactured homes are built to the HUD Code. Modular homes follow the same state and local building codes as site-built houses.

• Size and durability: Available sizes vary, although modular homes offer more ability to customize layouts. Manufactured homes don’t hold up as well in high winds or hurricanes compared to modular homes. 

• Portability: Manufactured homes must be affixed to a steel chassis. Depending on their size, they can be built and transported in full from the factory. Modular homes do not have a chassis. They are built in pieces, transported and assembled on-site.

• Construction efficiency: Modular and manufactured homes share some advantages over site-built homes. Indoor construction pretty much eliminates weather delays. Assembly-line construction is also faster and cheaper. Less construction waste saves home buyers money, and with efficiency gains, you’ll likely move in sooner.

Modular homes

While a modular home is being built, you might have to make up-front or installment payments to the builder. These can be paid in cash or through a construction loan. Once construction is complete on a modular home, it can be financed with a traditional mortgage — just like a site-built home.

Manufactured homes

Manufactured homes are not always eligible for traditional mortgages. Here are some options:

• Traditional mortgages: To qualify for a mortgage, you must own the underlying land and have the manufactured home titled as real property. 

• FHA Title 1 loans: If your home doesn’t qualify for a mortgage, the Federal Housing Administration (FHA) offers Title 1 loans to finance manufactured homes. With an FHA Title 1 loan, the buyer is permitted to lease the land where the home resides, such as in a manufactured home community — sometimes called a mobile home park.

• Chattel loans: Often, buyers finance manufactured homes using chattel loans. A chattel loan is a direct form of financing for personal property, similar to an auto loan. However, these loans typically have higher interest rates than traditional mortgages. The Consumer Financial Protection Bureau reports that around 42% of manufactured home owners use a chattel loan to finance their purchase.

A manufactured home is less expensive and can get you to your goal of homeownership sooner, especially if you live in a rural area where affordable housing is scarce. Citing March 2023 data, the U.S. Census Bureau reports that the average cost of a new manufactured home is $124,700. However, future home equity is less predictable for manufactured homes. Typically, their value depreciates over time. But it also could hold steady, depending on your local real estate market. Other factors, such as if you own the land underneath — and how you landscape it — affect long-term value, too.

A modular home is a larger up-front investment, but the home value typically grows over time, like that of a site-built home. Modular construction is sturdier than that of manufactured homes, too. If you finance a modular home using a construction loan, you might need a higher credit score and lower debt-to-income ratio to qualify, compared to credit score requirements to buy an existing home. That’s because you don’t have a finished home to use as collateral, like you can in a traditional mortgage.

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If you’re looking for an affordable path to homeownership, here are other options to consider: