If you are considering building a new home and want to determine your modular home budget, I recommend that you start by shopping for financing and a building lot. I’m of course assuming you’ll be getting a mortgage and need to find a lot.
Shop for Financing First to Determine Your Modular Home Budget
By talking to a mortgage lender to determine how much you can borrow, you avoid two common mistakes: setting your sites on a more expensive home than a lender will approve or purchasing less home than you actually can afford. You should ask the lender to tell you in writing how much it will lend, how much the fees and other expenses will cost, and how much you will need to invest as a down payment. However, you should not select a lender until you know your modular home dealer’s and general contractor’s policies.
Shop for a Building Lot Second to Determine Your Modular Home Budget
Next, look at the local real estate advertisements and call a few realtors to find out what a typical building lot costs in the communities you are considering. To see what you will get for your money, you should visit a few of these lots.
Once you know how much money you will have and how much the land will likely cost, you can determine your budget. Subtract the price for the land from the total amount of money you can spend – loan amount plus your deposit less lender costs – and use this price as the maximum you can afford for all costs associated with building a new home. You should create a contingency fund by allocating at least 3% of your total budget (it would be 5 to 10% if you were stick building). What is left is your maximum budget for your shopping.
Shop for a Building Lot to Determine Your Modular Home Budget
Of course, you could start with a price from a modular home dealer, since this will tell you how much money you have left to spend on land and how much money you need to borrow. Clearly, what you learn on each of these fronts will impact your evaluation of the others. Consequently, regardless of which tasks you take on first, you definitely will need to make some progress on all fronts soon after you begin.
For more information about determining your modular home budget, see Selecting a Modular Home Dealer in my book The Modular Home.