Best prefab and modular construction lenders?

12 Replies

@Michael Frank I live in Northern Virginia and built my prefab home in 2017. I called almost 30 banks. Big and small. Local and National. Only three were willing to work with me and they were all local small banks. The bank I choose was Bank of Charles Town. They understood the draw process of a prefab home.

However, on the day the home (4 boxes) were delivered the bank would not wire the money until the boxes were set on the foundation and the prefab company wouldn’t put the boxes on the foundation until the funds were wired. it was a catch 22. Luckily we worked this out before hand and someone was at the bank in the early hours with me on the phone. When the first box was lifted off the trail the wire was sent with a proof of transfer sent to the email of the prefab company.

When I do another prefab house I would also look into hard money if there are no banks. A prefab homes is built in 2-4 months so the holding costs should be too painful.

@Eric Teran . wow - that's quite a story! I've thankfully never had to deal with that during a project. Which other banks were also willing to work with you? Also, what were the attributes of the lending products? Was it just a short term product construction product that you had to refi out of or was it a one time close product?

The process that @Eric Teran is pretty typical.   Both the manufacturer, builder, and the bank need to be a little flexible but it really isnt that difficult.  It all comes down to timing and being proactive instead of reactive.  

It shouldn't be a big problem as long as the lender is very clear with the builder about the process up front.  The lender just needs to explain the builder up front that the funds can be wired same day as the home is set on the foundation and coordinate with the appraiser/inspector to meet at the time of delivery.  Then the appraiser will send the report or picture to the bank and the bank can release the funds.  In my experience I have had some builders/manufacturers push back against this process but if they want the business then they will typically play ball.  Where the manufacturers/builders tend to get frustrated is when they are finding about this last minute and you the customer ends up in the middle of a finger pointing disagreement where you dont know who is right or wrong.  

In all reality this is the process you as the owner should probably prefer.  Last thing you want is the bank forwarding 100's of thousands of dollars to a manufacturer before you have the underlying collateral attached to your property that you own. If the manufacturer delivers a damaged building or if the manufacturer files for bankruptcy you could end up the creek without a paddle.

For full disclosure my experience with construction lending on prefab/modular homes is limited to residential 1-4 units so there may be some differences if you are building much larger commercial units

@Michael Frank I found a construction to permanent loan so there was only one closing cost. The other bank I found was Union Bank and I can't remember the third. I think some of the other ones offered only construction and then a new loan had to be done for a permanent loan. The LTV range was from 60% to 90%. Bank of Charles Town gave me 90% and one time closing which is why I choose them.