Modular vs Prefab Homes: Finally Understand the 7 Key Differences

So you’ve decided it’s time to build your affordable dream home. If a site-built home is out of your budget and you are exploring other types of homes, you probably have come across prefab and modular houses. 

But now you’re faced with the question of the difference between modular vs prefab homes.

Is there even a difference, or are they the same thing?

Are modular homes glorified LEGO sets, or are prefab homes just mobile homes or trailers? 

Honestly, it was a bit confusing even for me in the beginning. Once I got into the nitty gritty, it all made sense. 

So, buckle up because we’re about to dive into those key differences between modular and prefabricated homes, and by the time we’re done, you’ll be ready to make an informed decision about which method is right for you. 

Disclosure: This post may contain affiliate links, meaning I can earn commissions. If you decide to purchase through my links, it is at no cost to you.

Understanding the Basics of Prefab and Modular Homes

Prefab and modular homes have become increasingly popular but are often mistakenly considered the same. Let’s get it straight today.

I have explored too many prefab homes (mostly manufactured homes) and purchased a modular home. As a real estate agent, I know homes of every kind.

A modular home is a type of prefab home construction.

So a Modular Home is a prefabricated home, but a prefabricated may not be a modular home. 

No matter the difference between modular and manufactured homes, both are great options for affordable housing, much like tiny homes. 

Defining a Prefab Home

Wikipedia says Prefab Homes “Are specialist dwelling types of prefabricated building, which are manufactured off-site in advance, usually in standard sections that can be easily shipped and assembled.” 

If any component is manufactured in advance in a factory before being shipped to the site for assembly, it is considered prefabricated. 

Prefab homes comply with HUD (Department of Housing and Urban Development) codes and are more affordable, yet they don’t match the rigorous standards of modular homes.

Prefab homes come in a range of construction methods:

• Modular Construction
• Panel construction
• Steel frame construction
• Manufactured Construction (sometimes referred to as mobile homes)

Defining a Modular Home

Modular Construction and homes are a more specific subset of prefab and are composed of pre-assembled pieces or ‘modules.’

Modular homes adhere to International Residential Codes and standards, making them more expensive but well-regarded by lenders for favorable financing and appraisal terms. 

Each module, housing one or more rooms, is built almost entirely in a factory, often complete with pre-installed wiring and plumbing.

These modules are then transported to the building site and assembled on a pre-poured foundation, kind of like assembling LEGO blocks. 

Modular vs Prefab Homes: Understanding the 7 Key Differences

Now that you know a modular home is a prefabricated home, let’s get into the seven key differences between these two. 

1. Building Codes & Acceptance: How the Home is Built Makes All the Difference

The primary difference between manufactured homes and other prefab constructions is the building code standards they must meet. Prefab homes must meet HUD code standards. Modular homes go a step further. 

Modular homes are also built to comply with the same building codes as traditional site-built homes. This means they also meet local building codes even though they are constructed in a factory. 

The difference in which code the structure is built will drive many other things like financing available, resale, appreciation, insurability and durability.

What is frustrating for modular homes is that even though they are built to the same standards as site-built homes, there are still some regulations on where they can be placed.

Many HOAs have not accepted this type of housing in their subdivisions, even though some have started to accept them. 

2. Financing Options

Financing for modular homes is often similar to that for traditional homes, with various mortgage options available.

Most lenders offer financing on modular homes, but not all will offer lending on a prefabricated home.

Financing for prefab homes may be more restricted and come with different terms. Some lenders offer financing on manufactured homes at higher interest rates and loan terms.

Financing a manufactured home is sometimes less straightforward since lenders classify some manufactured houses as mobile homes if built before June 15, 1976. Homes built before that date did not have to meet HUD standards.

3. Stability, Durability & Insurability

Some prefab buildings could lack the stability and longevity that modular structures offer. They could develop more problems and are not as energy-efficient as modular homes.

Manufactured homes tend to be less desirable in areas with an increase in things like tornados or hurricanes. New manufactured homes are increasingly being built to higher construction and safety standards, but these homes don’t meet the modular building codes.

Modular home construction tends to be more durable, last longer, and withstand harsher elements, such as high winds. This stability and durability also impact the insurability of the structure. 

Insurance for a prefab home will be higher than a modular home.

4. Resale Value and Appreciation

The real estate housing market typically does not consider manufactured homes and other prefab buildings as real estate but rather as personal property.

When listed by a real estate agent, these structures are listed as a separate category. The resale value of a prefab home can vary and does not typically maintain its value or appreciation.

This is not always the case because, many times, a prefab home is placed on a piece of land and could be sold for more. 

Imagine a 10-acre piece of property with a prefab home overlooking a lake or other beautiful nature scene.

If this property were to be sold in the future, it could sell for more, but the entire opportunity or scene is being sold. There are plenty of rental properties set up like this that are proving to be good investments. 

Modular homes often retain value and appreciate similarly to site-built homes. If the home is sold in the future, it will be classified as a single-family residence, just as a stick-built home. 

5. Design, Customization & Cost

Modular homes generally offer more customization options. They can be designed with more complex layouts and architectural features.

More design and customization for modern homes also means a higher price tag.

A modular home’s price per square foot will be higher than a manufactured home but likely less than a site-built one.

Prefab homes could offer customization like different paint colors, floor plans, flooring finishes, etc. They often have more limitations in design due to their construction and transportation methods. The price tag of this option is less. 

I will say new manufactured homes are being designed with some of the same features of modular homes, like taped and floated sheetrock, Hardi siding, and upgraded kitchens and bathrooms. 

6. Foundation Requirements

Modular homes are placed on a permanent foundation, similar to a site-built home. Since most modular homes come in sections like manufactured homes, they are assembled and never moved once they are placed at their location. 

Prefab homes can be placed on various foundation types, and some, like certain types of manufactured homes, may not require a permanent foundation.

Some single-section prefab homes can be moved easily from one location to another. 

7. Size and Transportation

Modular homes are typically larger and have fewer size and layout restrictions than prefab homes.

Since some of these structures fold up to be shipped and then are connected like a puzzle once they reach their destination, the layout can be very creative. 

Prefab homes need to be built and transported to accommodate road travel, which can limit their size and shape.

They also have to be easily connected once they reach their destination, so the layouts you see are usually very similar. 

Pictures of Prefabricated Homes

Pictures of Modular Homes

Conclusion

In summary, while modular and prefab homes offer unique benefits, the key distinction lies in the fact that a modular home is a specific type of prefabricated home, but not all are modular.

The choice between the two depends on individual requirements, budget, and desired features.

Understanding these differences is essential for making an informed decision that aligns with your long-term housing goals.

Whether you prioritize customization, cost-effectiveness, or durability, both options present viable solutions for affordable and efficient home building.