VA Home Loans for Modular Homes: A Complete 2023 Guide

Modular homes are becoming an increasingly popular housing option for many buyers. With their quality construction customization and often lower prices compared to site-built homes, it’s easy to see the appeal. If you’re a military Veteran, you may be wondering if you can use your VA home loan benefit to buy a modular home. The quick answer is yes – with some caveats.

In this comprehensive guide, we’ll explain everything you need to know about securing a VA mortgage for a modular home. We’ll cover key differences between modular and manufactured homes, VA requirements, builder loans, and tips for getting approved. Let’s dive in!

What Exactly is a Modular Home?

First what defines a modular home? Modular homes are factory-built dwellings made in sections called modules, which are then transported to the building site and assembled. The home’s floor plan is designed using the same construction methods and building codes as a traditional stick-built house. Modules are constructed indoors in a climate-controlled setting, making the building process faster and less prone to weather delays.

Once on site, a modular home’s modules are joined together on a permanent foundation. A general contractor usually oversees integrating the modular sections, coordinating with electricians, plumbers, and other subcontractors to finish utilities and interior details. Local building inspectors review the home at multiple stages, just like a site-built house.

When complete, a modular home is essentially identical in structure, quality, and durability to one built entirely on-site. And unlike a manufactured home, also called a mobile home, a modular house cannot be moved once constructed. From the outside, you usually can’t even tell a house is modular.

Key Differences Between Modular and Manufactured Homes

It’s important to understand the key differences between modular and manufactured homes, as the VA treats them very differently when it comes to home loans.

Modular homes:

• Are built to local and state building codes for standard homes
• Are assembled on site by a contractor
• Are attached to a permanent foundation
• Appreciate in value at a similar rate as site-built homes

Manufactured, or mobile homes:

• Are built to federal HUD manufactured housing standards, not regular building codes
• Are constructed in one finished piece and transported as-is to site
• May be attached to a chassis rather than permanent foundation
• Depreciate in value over time

So in short, modular = regular house construction, while manufactured = mobile home construction. This distinction is critical when it comes to VA loans.

Using a VA Loan to Buy a Modular Home

The good news is yes, you can absolutely use a VA home loan to purchase a modular house! Since modular homes must adhere to local site-built construction standards, the VA considers them standard real estate properties. That makes financing a modular home with a VA loan relatively straightforward.

There are just a few guidelines to keep in mind:

• The modular home must meet the VA’s minimum property requirements for safety, soundness, and structural integrity. Your lender will arrange for a VA appraisal to confirm this.

• The home must be permanently attached to a foundation on land you own. It cannot be built on leased land.

• Modular homes are eligible for VA loans nationwide. There are no geographic restrictions like with USDA or traditional manufactured homes.

• You must own both the modular home and the land it sits on. The VA does not finance modulars on leased land.

As long as those conditions are met, purchasing an existing modular home works exactly the same as buying a traditional site-built home with a VA loan. You can qualify for 100% financing with no down payment in most cases.

VA Construction Loans for New Modular Homes

Now, financing construction of a new modular home is more complex with a VA loan. The VA does not offer true construction loans. However, many modular home builders can provide short-term construction financing themselves.

Here is one common way the process works:

1. Find a modular builder in your state. Choose a floor plan and customize your new home.

2. The builder provides construction financing to start the modular home project. This covers the costs of factory construction of the modules, transportation, and installation on your lot.

3. Once the home is finished and ready for occupancy, you then obtain a permanent VA mortgage to pay off the builder’s construction loan. You now own the completed modular home.

Since the VA doesn’t finance the construction itself, you need to find a builder willing to offer construction financing and handle all the logistics. The builder secures permits and coordinates all contractors and deliveries. They also deal with the local VA appraiser.

This makes building a new modular home simpler than a site-built house, where you would need a construction loan from a third party lender. Modular builders have lots of experience streamlining this entire process for buyers.

Tips for Getting Approved for a VA Modular Home Loan

If you’re a Veterans looking to buy a modular home, either existing or newly built, here are some tips to help your VA loan application go smoothly:

• Shop multiple lenders to find one that regularly handles VA loans for modular homes. Ask about their experience upfront.

• Be ready to provide your lender plenty of details on the modular home builder, blueprints, floor plans, site prep, foundation, and scope of the project.

• For new construction, clarify the builder’s exact role and fees for transporting and installing the modular sections.

• Get pre-qualified based on your credit, income, and service history before starting the buying process.

• Research VA requirements for foundation, wiring, plumbing, and construction materials to ensure your modular home qualifies.

• Ask the builder to be present for inspections by the local building department and VA appraiser.

With proper preparation and research, Veterans can absolutely achieve the dream of homeownership using a VA mortgage to buy a high-quality modular home.

The Bottom Line

For Veterans and service members, a VA home loan can be a great option to finance the purchase of an existing modular home or newly built modular. While manufactured homes face more roadblocks with VA financing, modular homes are treated as standard site-built houses. Just make sure yours meets VA specifications, secure a VA-approved lender, and provide detailed documentation throughout the building process if constructing new. This allows your modular home to appraise as intended, and your loan to sail through approval.