Financing for tiny home

13 Replies

Good afternoon all,

I am looking to build a small, 600 interior sq ft, 1200 total, on over an acre of land. I own the property, the well has been installed and power is hooked up.  The plans have been drawn up and approved by the county, I am all ready to go except that, traditional constructions loans have turned out not to be an option because the banks and credit unions aren't willing to invest in a "tiny home".  Is there a private investor market for such an endeavor? 

Hi @Yvette Carabeo ,

A few questions of clarification - will your tiny home be categorized as a manufactured home, RV, or built as a traditional wood frame construction on footers?  Each will have different inspection or certification requirements and therefore, are looked at differently by lenders.  In my area, I can find traditional loans on buildings that are built to the adopted building code standard, but with a manufactured home or RV, I could probably only get a 10 year loan, akin to a personal loan.

From what I've seen, it's either modify the plans to meet adopted building code and then apply for a standard 30 -year loan or keep the manufacturer/rv designation and use a personal loan (or home equity loan) for construction.

Most of the difference in definition of a tiny home comes from the type of foundation it uses.  You might be able to work with your tiny home architect to make the foundation more permanent.

P.S. I visited your area over Christmas to see the manatees.  What a lovely part of Florida.  I'm looking forward to going back!

@Yvette Carabeo I'm so happy to see someone from Crystal River on BP. I love love love Crystal River and am looking at properties there so its nice to connect with someone in the area. I can not help you with your question but I'm following so keep us posted.

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So glad to hear y'all have visited! It is a fabulous place to live, no doubt!

The building plans have been approved by the county, the building permit has been issued and I have power on the property. =)  It would qualify for a traditional construction loan, as its a block home on a one acre plus parcel.  The issue I'm running into with the banks is that it's not a traditional 2/2 or 3/2 home so they don't want to do a traditional construction loan even though it is on a concrete slab, concrete block home.

It's high risk for a bank as resale values are not good. The tiny home movement isn't really a true home as they are really only glorified recreational vehicles. This is intentional as it allows the builder to bypass building coded. Unfortunately it will make them ineligible for conventional mortgages as they are a deprecating asset class. Trailers do not appreciate.

Your best bet is family or friends personal loans or unsecured line of credit based on your income.

Thanks for your response Greg.  In this case, its not a glorified recreational vehicle because it will be built on a slab, not a trailer.  It's not movable, it is a permanent structure.  And yes, I do understand that even being permanent, it is more of a risk because it is not a traditional 2/2 or 3/2 home.  So resale would be more difficult in most cases.  Thanks again.

What you need to do is modify the plans to build the smallest 2/2 that will qualify and after construction do modifications to the floor plans to suite your needs. Make your life a little easier by making the banks happy.

@Yvette Carabeo

Yvette,

Keep trying banks, it might take you a bit but someone will finance.  We are going through our local credit union to finance this 500 sq ft fixed foundation tiny home we built.  The big problem we are running into is with comps.  Good Luck!

Thanks @Thomas S. Love the house!  And I love Bryson City.  I have a friend who lives out here and I try to go a couple of times a year. Such a fabulous little town!!  Please let me know how you get the comps issue resolved.  I keep arguing that they could base it in the price of the lot, which than can do a comp on, and then add in average price per square foot for construction. Am interested to find out what you work out.

@Yvette Carabeo

We finally closed on our tiny house this past Tuesday.  Our portfolio lender from a small regional bank ended up stepping in and providing financing.  They allowed the appraiser to expand the market area to include some comps that were outside our area.  We ended up with a 20yr 4.75% loan and the proceeds covered our construction and furnishing costs. I hope you have found a financing source.

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@Kyle H. That is great news!  I am so excited for you!! 

I have not yet been able to find a lender that would finance it.  They all want to classify it as an efficiency, not a tiny house, or one bedroom apt, therefore, the comps come in ridiculously low.  I have not given up though!  In the meantime, I have had the house pad cleared and filled, so progress is being made.  I'd love to see pics of the progress, please post!