Tiny homes are growing in popularity. These homes offer a cost-effective alternative to traditional houses. Buyers who might not qualify for larger home loans still have a path to homeownership with tiny home living.
Housing costs are rising, yet housing budgets struggle to maintain pace. However, there’s more to financing and buying a tiny home than meets the eye, so we’ll go over the top five things to know before you buy.
Can You Get Financing for a Tiny House?
The answer for most home loans is, “It’s complicated,” and tiny house financing is no different. Most lenders have minimum mortgage requirements, which differ from one lender to the next and depend on what area of the country you’re in. The average minimum mortgage is around $125,000, but this number can be significantly higher or lower depending on your location and the market.
Tiny House Financing Options
Tiny homes often cost far less than most minimum mortgage requirements. But unfortunately, while they’re low cost is part of what makes them so attractive, it makes them more challenging to finance.
Tiny homes cost a fraction of conventional homes; most range between $30,000 and $60,000. However, that doesn’t mean the option of tiny home living is off the table. Some types of tiny home financing options to consider are:
• RV Loans
• Unsecured Personal Loans
• Home Equity Loan
• Home Equity Line of Credit
• Builder Financing
New vs. Pre-existing Tiny Homes
There are pros and cons to both new and pre-existing tiny homes. But it comes down to personal preference.
Some people feel more comfortable purchasing a new tiny home, allowing for more personalization. However, a higher level of customization also translates to a much higher price tag.
You can often find pre-existing tiny homes for less. These prebuilt homes are available for a fraction of the price of a new tiny home. The downside is that you might need to compromise on aspects of your dream tiny home since you’ll be working with someone else’s pre-existing design.
Other Tiny Home Considerations
Tiny homes also come with special considerations that differ from conventional homes. For example, the resale value will vary. These homes can have a resale value of up to $60,000. Yet, this also depends on how many interested buyers there are for your home.
While tiny homes offer many savings elements, you might get less of a return on your investment should you later decide to sell.
You’ll also need to buy a parcel of land, which might cost as much as a traditional house; it depends on location and how much land you need.
Utilities are also necessary. What this looks like for you depends on your situation, but it might include electricity, water, septic, and more. Alternatively, you could opt for greener options like solar instead of connecting to the local power grid.
Finally, storage and space will present additional challenges. The furniture you now have in your house or apartment might not fit in a tiny home. You might need to reduce furniture or consider some convertible options to maximize your limited space.
The Final Word
Tiny homes present a unique set of considerations for those looking to purchase. From the cost of the house to the cost of land to the necessary utilities, tiny homes have challenges that differ from those associated with traditional housing options. So, it’s essential to carefully consider everything before deciding whether a tiny house is right for you.
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Sources
1. https://www.mortgages.com/buying-house-and-owning-home/pros-and-cons-owning-tiny-home
2. https://www.investopedia.com/articles/personal-finance/050515/financial-considerations-buying-tiny-house.asp
3. https://www.bobvila.com/articles/tiny-house-cost/
4. https://www.experian.com/blogs/ask-experian/whats-the-lowest-mortgage-amount-you-can-get/
5. https://themortgagereports.com/44716/do-mortgage-lenders-have-minimum-mortgage-amounts
6. https://www.bankrate.com/
7. https://www.fixr.com/costs/build-tiny-house
8. https://www.greenmatters.com/