My modular home purchase loan

When you buy a modular home most people will need a loan.  You arrange for a conventional mortgage but during the construction phase of your modular home you have a construction loan.  This is an interest only loan, each payment you make is pure interest, the principal of your loan does not decrease.

The phases of your construction loan.

Your modular home loan lender will specify phases of completion of the home building process.  Only once a phase is completed and inspected by your home loan provider, will your loan provider issue a payment to the contractors responsible for that phase.  The check will be written directly to the contractor.  Just remember as far as the contractor's concerned you're the one ultimately responsible to pay his bill.  There can be many phases in your construction loan.  For our modular home, the phases were foundation completion, well completion, home installation, home completion.  Home completion is basically a fully functional home, well, septic, everything works, you could resell the home.

Problems with the loan conversion

Until your construction loan becomes a conventional mortgage you're really throwing away money in interest only payments.  Don't forget 2006, mortgage interest won't be deductible!

Our 3rd party contractor was really reluctant to finish the sand mound portion of the septic system, due to very muddy soil conditions.  He said we could make it through the winter with just the septic tank once the water was in place. The problem with this: The construction loan could not be completed or convert to a normal mortgage until the septic system was done!  The house (septic) had to be finished.  We also had a large deck in the agreement but the bank let that slide till Spring and converted the construction loan into a conventional mortgage.  When we explained the loan situation to our third party contractor, he came through with the sand mound completion much sooner.

Soggy soil can be a big problem for new home construction, keep it in mind.

Hope this helped with information about construction loans for your modular home.

Bob