Pros, Cons, and Costs of Modular or Prefab Homes

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Buying a house costs an insane amount of money. It’s amazing how many people manage to do it.

The median home price is $229,000, so if you have to pony up 20% as a down payment, that’s about $45,800 in cash you need to pay up front.

Considering that 26% of adults have no savings at all, and the average bank balance is $4,436, it’s pretty impressive how many people find a way into home ownership. But on the flip side, many are left out in the cold as a result of the financial barrier to entry.

One possible solution: modular/prefab homes.

By purchasing a modular/prefab home instead of a site-built home, you’ll get a new home sooner and much cheaper than you would otherwise. However, there are a few pros and cons you should consider before you decide whether modular is the way for you to go:

The pros of modular/prefab homes

  • Lower cost: Using conventional site-built construction methods will tend to cost you between $150 to $250 per square foot if you’re building a standard, non-luxury home. Modular construction, on the other hand, may cost a fraction of that thanks to assembly line efficiency.
  • Quicker build: The efficiency mentioned above also allows you to cut down on building time, because much of the assembly you’d have to do is already done. Many modular buildings can take just a day to assemble.
  • Portability: While modular buildings are generally built to be permanent structures, some designs can be disassembled, so you can pick up and leave anytime you desire.

The cons of modular/prefab homes

  • You can’t customize as much: If you’re big into custom homes, modular probably isn’t for you. While you have some customization options with modular buildings, most designs have limits on how much you can alter their shape or look.
  • You need to be near the factory: Modules are absolutely massive, since they are literally assembled parts of a house. As a result, the cost of transporting such large objects outside 500 miles becomes prohibitive, so you’ll need to be relatively near the factory that produces them.
  • Zoning is an obstacle: Zoning gets a little weird when it comes to modular structures. Modular buildings are relatively new to the construction industry, and local zoning boards are still catching up. You may run into some outdated zoning rules that may be a drain on the project or even block you from building altogether.

How much do modular/prefab homes cost?

Still confident that you want a modular/prefab home? OK. Load up that construction management software, and let’s get to work.

But first, we need to figure out how much it’s going to cost you based on your unique situation. Here are four factors to consider:

1. Location

Whenever you’re talking about houses and real estate, this is your number one concern.

Where you build matters as much as what you build. A modular/prefab home in the Bay Area suburb of Saratoga, California—the most expensive real estate market in the country where the median home price is a staggering $2.5 million—will cost substantially more than a home in Detroit, the cheapest market, where the median home value is just $43,600.

 How to factor this into your modular/prefab home cost:  Look up the median home price in your market by visiting Zillow’s home values tool.

Calculate how your market compares to the national market as follows: divide the current U.S. median home value by 100 (it is $200,700 as of August 2017, so the answer would be 2,007). Now take your market’s median home price, and divide it into that figure. If, for example, the answer is 80, that means your market is worth only 80% of the national market. If you got something like 133, your market is 33% more expensive than the national average.

There won’t be a direct correlation, since you are building a house rather than buying one that exists, but you will have to buy the land and you can expect a price difference based on your market.

2. Design

The average cost per square foot for a typical modular/prefab home is $76.80. But the range can be huge, depending on what design you want.

Some modular/prefab homes may only cost you $50 per square foot, and if you multiply that by 2,687—the average square footage of homes in the United States—that’s only about $134,000 for a brand new home. And if you’re willing to settle for half that square footage, you’d be paying less than $70K for a new home. Not bad, huh?

But you may pay a lot more than that if you want luxury. You might pay $230 per square foot for this eco-friendly stunner. Or $250 for this house designed to go on the beach.

 How to factor this into your modular/prefab home cost:  Check out this helpful list to find your ideal design. It will tell you how much your desired home will cost per square foot, generally speaking.

3. Size

Once you’ve settled on a price per square foot, you need to determine just how much house you can afford. Here, it becomes simple arithmetic: you multiply the price per square foot by the square footage you’re planning on.

The question is, how much square footage is going to be enough for you? The average square footage in the U.S. is 2,687 feet, but do you need all that space? Or could you settle for a square footage that is less than half that? Here’s what a 1,300-square-foot house looks like.

 How to factor this into your modular/prefab home cost:  Multiply the price per square foot you determined in the previous section with the square footage you want. Then, apply the modifier from the “Location” section. For example, if you want 2,000 square feet at $150 per square foot, that will cost you $300,000. If you live in a market that is 33% above the national market median home sale price, you may end up paying about $400,000.

4. Loan

By now, you have figured out your modular/prefab home cost based on your wants and needs when it comes to location, design, and size. Now, the question is whether you can afford it, and how much you’ll have to pay up front for your home.

The best way to figure out how much you can afford to borrow is to go straight to your bank and provide them with all your financial information—your current bank account, income, credit history, and anything else they ask you to provide. They’ll provide you with a pre-qualification estimate of how much they are willing to lend you, and what the interest rates will be.

But don’t stop there. Visit other banks so you can compare rates and see who’s willing to offer you the best deal. It could save you thousands upon thousands of dollars.

Once you’ve settled on an offer, get a contract from the manufacturer of your modular/prefab home, and all the financial information your bank needs, and then apply for the loan.

How much money will you put up front? That, of course, depends on what terms you get with your bank. The traditional down payment is about 20%, but as home prices spiraled upward during the 2000s—and continue to be very expensive even after the collapse of 2007-08—it’s become common for federal agencies and mortgage insurers to drop the demands to between 5% and 10%.

 How to factor this into your modular/prefab home cost:  If you’re buying a 1,300-square-foot modular/prefab home at the national modular square foot average of $76.80 in a real estate market near the national median, you may only have to provide $5,000 (5%) to put a down payment on your home. On a 30-year mortgage, you’d probably end up paying about $400 per month. Not bad at all.

Want to learn more about modular/prefab construction?

Modular/prefab construction is a pretty new concept, and there’s sure to be some pitfalls for newcomers. Let us know of any obstacles you’ve come across in the comments below.

If you’re trying to learn as much about modular construction as possible, try reading some of these other articles on what impact they’re having on the construction industry:

Looking for Construction Management software? Check out Capterra's list of the best Construction Management software solutions.

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About the Author


Dan Taylor

Dan is a content writer at Capterra, specializing in hotel management, construction and real estate. Outside the office, he enjoys spending time with his family and friends, catching up with the latest offering from HBO or paying a visit to a new place.



Hello, Thanks for your story. Just curious – we have been building homes in Connecticut, Rhode Island, Fishers Island and Block Island for about 40 years using exclusively modular construction. We have never once bumped in to a zoning issue regarding modular construction. We have experienced many of the same time-consuming regulations that traditional site builders deal with as well, but never anything specific to modular. Perhaps you could clarify exactly where in the country this is still an issue, and on the scheme of things, is it really an issue at all? What we have found is that it is all about education. There is still some confusion around prefabrication and HUD code product. So sorry for the builders out there if they are experiencing this issue – it is not one we have ever had to deal with. Thank you.


Thank you for giving information about the ins and outs of the profab house clearly. Costs really need to be considered so that it remains under control. It turned out that the profab house besides having many advantages there are also shortcomings. Through this article I can consider building a professional house in the future.


Hi Steve,

Unfortunately, I don’t know much about the modular home regulations in Galveston, but I imagine if you are building near water you’ll need the stilts to avoid flooding/get insurance.

Maybe some of our readers with experience can help?


Great information. I was wondering about building a modular home in Galveston Texas. It’s not on the beach because it has to be built on stilts this is in town didn’t know if you could do that.


You did not mention a very key element: hook ups for utilities.

[…] talked before about the benefits of building modular homes. In 2018, expect the trend toward using more modular and prefabricated structures to […]

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