Many Australians consider transportable kit homes a godsend. Compared to traditionally built properties, these modular houses are generally much more affordable. In addition to their budget-friendly prices, they lend themselves to relocation, giving their owners more freedom and flexibility to move in the future.
Yes, transportable modular properties have design limitations, for they typically have to be boxy to ensure ease of transport. But they are constructed with modern conveniences in mind. If you work with a reputable manufacturer, you will be surprised to discover that there are numerous design possibilities available.
The usual challenge many kit home buyers face, though, is difficulty in financing. The number of lenders willing to fund a modular house construction project is on the rise, but the majority of the mortgage industry remains somewhat conservative. Here are the real reasons why you might find it tough to get your loan application approved.
1. Lenders Trust Licensed Builders More
If you plan to DIY the construction of your transportable kit home, you are required to pay a large deposit. Most lenders are only happy to loan builder-owners anywhere between 75% and 80% of the land value and the cost of construction. Furthermore, you need more extra cash for overruns.
On the contrary, lenders typically agree to loan up to 90% of the land value plus the cost of the construction project when there is a licensed builder involved. Financial institutions naturally think that builder-owners are likely to commit mistakes, so they want to minimise the risk they have to absorb.
2. Lenders Do Not Know What a Transportable Kit Home Is
Although modular housing is not a brand-new concept, many lenders are still not familiar to it. As the borrower, you need to spend extra time articulating the kind of house you want to buy. You have to be more patient with your lender because of your ability to explain your project can make or break the deal.
3. Lenders Refuse to Release All Funds Right Away
Most lenders do not making 100% of the funds available immediately because they know that many things can go wrong during the manufacture of a transportable kit home. In case some sections are not delivered on time or the construction does not go as planned, the lender has nothing but the vacant land as collateral.
In most cases, your lender may only agree to fund your project by releasing the funds in phases. Explain your situation to your kit home builder to come up with a flexible payment arrangement.
4. Lenders Want to See Excellent Credit
It is hard to obtain a mortgage with bad credit, and the application process can become more painful when a modular house is in question. Apart from improving your credit history before speaking with a lender, be prepared to pay more money up front to lower the risk attached to you as a borrower.
Home financing is rarely a smooth process, but anticipate it to be trickier when buying a transportable kit home. If you make the right moves, though, you can secure the loan you need with as little stress as possible.