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Here’s Why Prefab Homes Are Your Financial Stepping Stone


Many younger Americans, both single and married, are moving into tiny homes, ADU homes, and travel trailer homes. Buying one of these homes can give them a taste of homeownership in an increasingly challenging housing market. But what is their long-term potential? 

Affordable Housing

Compared to traditional houses, tiny homes, ADU homes, and all other prefabs cost far less. Manufacturers of these homes order materials in bulk to keep construction costs low. Also, prefab homes tend to cost less per square foot than traditional houses. These attributes make prefab houses more affordable for renters and homeowners. 

That also has benefits for homeowners’ finance. Spending less money upfront, monthly and on maintenance costs allows homeowners to save more. You can invest in a retirement plan or set up an emergency fund with more money saved. You can even save up for a traditional home in the future. 

A Sense of Ownership

The U.S. is in the throes of a global housing crisis. A recent report discovered that 49% of Americans considered affordable housing a major problem. There are also nationwide inventory shortages, skyrocketing rental fees, and inflation in the mix. For new homeowners, the landscape doesn’t look too promising. 

Prefab homes are giving aspiring homeowners hope again. The low costs and growing supply of prefab homes have opened doors (excuse the pun) for people who thought homeownership was unlikely. 

Most states recognize prefab homes as legitimate housing properties, and residents can live in real communities. More importantly, a prefab tiny house, ADU home, or any other type is technically an asset, like a traditional home. 

No Strings Attached 

Prefab homes are cheaper than traditional houses. That makes the long-term commitment to a prefab house much shorter than a conventional home. Homeowners can pay them off faster or rent them to get a sense of what prefab life is like. Designing a prefab tiny home will be financially feasible and a great selling feature as well. 

With traditional homes, there’s more pressure from banks and lenders to qualify for mortgages and pass stress tests with normal homes. Homeowners still need to show they’ll be good candidates for a prefab home, but the requirements aren’t as stringent. 

Also, prefab homes are often mobile, so you don’t have to commit to one location for decades. That is mainly true for tiny houses and manufactured homes, which homeowners can relocate with a moving company. 

The One Caveat of Prefab Homes

Here’s why we say that prefab homes are mainly good financial stepping stones- their resale value. A traditional home or a rental property is an asset because they significantly appreciate value. We’re all familiar with seeing a once “decently-price” home sell for high six or seven figures in a relatively short period. 

Prefab homes simply don’t have that kind of value yet. They’re too new. Even though they’re becoming more accepted in the mainstream now, they’re not a mainstay yet, and lenders are wary of prefabs. 

The average homeowner hasn’t considered living above someone’s garage or in their backyard. There’s also the perception that prefab homes are low quality and at a higher risk of damage from harsh weather. All of these factors make the initial and resale value of prefabs low. 

What should homeowners do in the present? 

Consider finding a very low-cost prefab house, one that you can pay off quickly or rent. As we mentioned above, they’re much cheaper than traditional houses. You can save more owning or renting a prefab house and use those savings for a conventional home in the future. Remember, a prefab home doesn’t have to be your forever home. 

Insurance Policies for Prehab

You can also use a prefab home to establish your home insurance history. Just like your credit profile, you have a home insurance history, and it can look good or poor. If they don’t have solid records, aspiring owners of traditional homes can face home insurance rejection or high insurance rates. You can establish a good record by owning or renting a prefab home so that future approvals are fast and easy. 

Manufactured home insurance and coverage for prefab tiny homes usually fall under HO-7 coverage or specialty insurance for mobile homes. This is because they’re like RVs and can be relocated. ADU homes and modular homes fall under traditional homeowners insurance (HO-3 policy). 

Prefab Homes Give You a Headstart

Homeownership in 21st century America is wrought with curveballs and challenges. But prefab houses can help new homeowners gain entry into the housing market. Owning a prefab house can give you a sense of ownership, while allowing you to save for a traditional home in the future. 

Keep in mind too, that the low resale values of prefab housing will likely increase as time progresses. They appreciate in value just like any other home. It’s just that their lower costs at present don’t appreciate to the extent of regular houses. 

But as time passes and more Americans flock to these homes, their resale values will rise. By then, selling a prefab home will truly be worth your ROI. 
Here at CoverTree, we offer coverage for all types of prefab homes that take only minutes to find and get approval for!

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