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How are factory built homes financed in the USA / other countries?


Here in Australia lenders will not release funds to build a factory built home (often known as a transportable home or a modular home) until they are complete and on site. From a banks point of view they only have the land as security so cannot lend for the house using a mortgage until the house is attached to the land.

This causes a big problem for builders cashflows. I was wondering how prefabricated houses are financed in other countries and if you have the same problems that we do?

Answer by bull_rooster_aardvark
Talk to another lender, I can’t believe this is flat out not do-able at all. The way its often done here (USA – east coast) is you get a construction loan, and the money is put aside for you but you can’t just take it out. Instead as construction progresses and the bills come due you get the house inspected at various stages and when the different stages are approved the money is released to you in stages. So you are really just getting enough money to pay for work that is completed, as it is completed.

Answer by Luis S
I have been in the mortgage industry for 10 years in the US, and I lived in the northeast where a ton of modular construction was done, and is commonplace now, and many of the homes are treated as “stick-built” quality.

I specialized in construction loans, and the banks I used for modular construction were more suited for this. They would not release the funds to the custiomer – ever – but they would to the builder, based on the lender sending someone to ensure that the construction was in process, and being completed as scheduled.

However, they would only release a maximum of 40% of the funds until the home was physically dropped on the slab, and put together, when they would pay the remaining amount to the builder upon it passing final inspection, and final sign off by the home buyer.

These homes though, are not considered trailers, though, but do have a stigma associated with them in certain parts of the country.

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