tiny home

Tiny-Home Financing: Is It Hard to Get a Loan?

6-Minute Read
Published on November 9, 2020

Taking your tiny-home Pinterest board dreams and making them a reality will likely require more footwork than traditional home buying. Tiny-home financing includes some unique considerations: zoning regulations, whether or not to certify it as an RV, how many square feet you can stand to live with, and if it should be mobile or on a foundation.

Throw in the possibility of having to move this dwelling in the future, and you may find yourself bogged down in the weeds, rather than enjoying the process of thrifting and building your tiny-home dream interior. We’ll go through the hurdles so you can get to the fun.

Why Go Tiny?

According to The Tiny Life, approximately 68% of tiny homeowners are mortgage-free, compared to 29.3% of all homeowners. With a house price range of anywhere from $10,000 – $100,000, it’s no wonder that it’s easier to pay off a 200-square-foot tiny house compared to a 2,200-square-foot home. That extra disposable income can allow for a better quality of life – more vacation time, larger retirement savings, more opportunities for investment and more.

Whether your interest in the tiny home life is motivated by environmental concerns or building a financially secure future, we can walk you through the steps to get there.

Who Finances Tiny Homes?

The chances of finding a traditional mortgage lender to finance a tiny house are lower than normal. Most lenders have minimum loan amounts that still exceed the average cost of a tiny house. The popular FHA loan has a minimum 400-square-foot requirement in order to qualify for the loan. What that means is that the highly regulated mortgage options are quite limited, and so is your access to low interest rates.

In order for Quicken Loans® to finance your tiny home, it has to be built on a permanent foundation. Secondly, an appraiser has to be able to find comparable properties in the area. Finding comparable properties may pose a big hurdle if you go with any mortgage lender. However, you can certainly speak with a Home Loan Expert about options.

More typical tiny-home financing options include RV loans, personal loans, online lenders and plain old thriftiness. You can try to persuade your local credit union to furnish you with an RV loan, but there may be a hitch to that (pun intended).

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The Best-Case Tiny-Home Financing Scenario

Much of the appeal of the tiny-home movement is the DIY approach to how you live your life, when you retire, and what you consume. The best-case financing scenario for a tiny home is to pay entirely with cash. Instead of saving $10,000 – $20,000 for a down payment on a 30-year fixed mortgage, you can use those funds to pay for materials to build out your own tiny home. It’s the ultimate sweat equity building fairy tale, but is doable, especially if you have construction skills.

Another great scenario is to be able to find a home that’s already been constructed in an area where there are recent sales of other tiny homes built on permanent foundations. If that’s the case, you may be able to go through a traditional mortgage lender for financing.

If that’s not feasible, another option is through credit cards. Even with introductory rates, at some point you’re most likely going to be paying a steep interest rate, somewhere around 15.99% – 25.99%. Some enter the tiny-home life entirely on credit and view their monthly credit card payments as tantamount to a mortgage payment.

Finding A Tiny-Home Contractor

Hiring a contractor isn’t just for the less construction-savvy of us. Contractors are experts in local laws and coding requirements to ensure your new home is above-board. The tiny-home movement may take up most of your social media feed, but is far less federally regulated than typical single-family homes. That means ordinances can vary greatly by city, county and state.

The tiny-home construction community has flourished in recent years, and these specialized contractors are now located in nearly every state. There’s an abundance of books, resources and even festivals to attend to determine the ideal look, size, and contractor for your tiny home. The tiny-home rabbit hole exists, and we don’t discourage you from falling into it.

The RV Loan Option

The Recreation Vehicle Industry Association (RVIA) certifies homes to be road-worthy, meaning they fall under the guidelines of the U.S. Department of Transportation’s National Highway Traffic Safety Administration. These temporary living quarters must also comply with strict manufacturer codes.

While these codes can create unwieldy, expensive construction processes for a small shop, a few tiny-home manufacturers, most notably, Tumbleweed Tiny Homes, build out RVIA-certified dwellings. If you’re looking to buy a preowned tiny home, be sure that it’s RVIA-certified so that you can qualify for this lower-interest loan option.

How Do I Get An RV Loan?

Opting for a RVIA-certified home allows you to apply for an RV loan through a variety of lenders like major banks, credit unions and online lenders. Major banks and credit unions will often have longer loan periods of up to 20 years and smaller monthly payments.

If you have a FICO® credit score below 580, the first step to getting a decent RV loan is to boost your credit. Interest rates on an RV loan are generally going to be higher than rates for a more conventional mortgage. Of course, the higher your credit score, the more likely you are to have a lower interest rate.

You may also finance your RV the from an online vendor who has likely partnered with a smaller online lender. Their financing options might go up to 84 months, with rates typically between 4.5% – 7.5%. It’s a higher rate than a traditional mortgage, but easier to pay off in a shorter amount of time because of the lower cost of the home.

What If I Want To Move My Tiny House?

You’re living in your tiny home, financed with the best-case option for your circumstances – but a couple of years down the road, you decide you want to move, or your employer wants to relocate you. Well, you’re on wheels, so it shouldn’t matter, right?

Unfortunately, it does. If it’s a domestic move, the American Tiny Home Association has pulled together a state-by-state directory of tiny-home rules and regulations. Every municipality, town and state can have different laws and codes. Essentially, there’s no national policy.

For instance, in most counties across the U.S., there are county-wide building restrictions that say you must build homes over 1,000 square feet., unless there’s a building code variance like in Park County, Colorado.

If a scant number of counties have regulated their laws for tiny homes, it’s unlikely your employer has set guidelines on moving your tiny home either domestically or internationally. Like most emerging industries, there’s uncertainty on how to regulate.

Domestic Moves

If you’ve decided to move or you’re faced with a relocation opportunity, there are options for your tiny home. Your domestic options are better if you have a mobile, RVIA-certified tiny home. You can advocate for temporary living quarters at a campground or RV park until you can find land or a backyard to accommodate your home.

If you have a tiny home on a foundation, and thereby not RVIA-certified, the situation becomes more challenging:

  • Is the place you’re moving to tiny-home friendly?
  • Is there land on which to accommodate your move?
  • If so, will your employer help you locate or find land?
  • Is moving the house part of your relocation benefit package?

Technically, a tiny home on a foundation is considered in many communities as an Accessory Dwelling Unit (ADU), and can only be built if a primary home preexists on the land. Thus, there is the option of purchasing a home in your new community and applying for an ADU permit.

That said, tiny home communities have cropped up all over the country, allowing tiny homeowners to rent land for a few hundred dollars a month and enjoy a more communal living arrangement. When researching for the right place, try to find a tiny home community or co-op that’s already established its land is up to code.

International Moves

Unless your home is a storage container, then moving a tiny home overseas might present your company with a quandary. They’ll need to determine cost and weight, whether the country you’re moving to has tiny home regulations, if there’s a place to plop down your home, or if you’re even eligible for that type of benefit.

If your employer is unable to accommodate, then you may want to consider renting out your home while you’re taking on your overseas assignment. If it’s long-term, you may want to either find storage for it or sell it.

Summary: Tiny-Home Financing May Be Atypical, But Possible

While tiny-home financing and moving can seem rife with complications, it’s no less complex than constructing a family dwelling. There are rules. There are compromises. And if you’re moving, there will always be stressors – but hopefully with these questions and tips, you’re armed with the right resources to finance construction and move your tiny dwelling.

If you have a tiny home built on a foundation with comparable tiny home sales around it, you can speak with a Home Loan Expert about financing options

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Call our Home Loans Experts at (800) 251-9080 to begin your mortgage application, or apply online to review your loan options.

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