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Tiny home community

Getting a mortgage for a tiny home?

What is a tiny house?
What defines a tiny house is, of course, its size. A tiny house is considered a home under 400 square feet (the average traditional home was 2,301 square feet in 2019). Some are built on permanent foundations with a septic tank and solar panels, but most often they’re built on trailers so they can be hauled from one location to another. This has led to some municipalities labeling tiny houses as “recreation vehicles” unsuitable for a primary dwelling.

Why get a tiny house?
They’re affordable, they consume less energy, and (if they’re on wheels) you can pick up and move where the wind blows you. They cost about the same per square foot as a standard home, but because there’s less square footage, they can be a great option for people who don’t want or can’t afford a large mortgage. In the last few years, they’ve been very popular with 25-40 year-olds that use them as a step towards buying a traditional home. But they’re equally popular with people over the age of 55 who use them as a way of downsizing, a mobile home for visiting family, or as a second home on their property for visitors.

Can you build my tiny home wherever you want?
Despite the growing enthusiasm with tiny houses, it’s still hard to find a place to build one for full-time use. Zoning laws and building codes have minimum size restrictions that most tiny homes won’t meet. Some cities have begun to create tiny house-friendly zones, but they’re rare. Your best bet? Keep your tiny home on wheels or don’t use it as your full-time residence. If that’s not an option, be sure to talk to your local mortgage originator or other housing expert that understands your local building codes and zoning restrictions to see if you can live in a tiny home or not.

Can you get a home loan to purchase a tiny house?
Maybe. If your tiny house is on wheels (and most are) it’s almost always classified as a recreational vehicle (RV). You can’t get a home loan for an RV even if you plan to live it in full-time – you’ll need an RV loan. But, if you build your tiny home on a permanent foundation, you may be able to get a home loan for it. Home loan originators (your bank, mortgage company, or credit union) will likely have a minimum amount they can loan for a home, usually around $50,000. So long as you meet their minimum requirements, you may be able to get a mortgage for the tiny home of your dreams. Your best bet is to reach out to your loan originator directly to see whether you would qualify for a tiny house home loan.

Other options for purchasing a tiny house
If you already own a home and want to add a tiny house to the property it’s on, consider getting a home equity line of credit to finance it.

The future of tiny houses
Job losses due to Covid, stagnant wages, and increased property prices all make it more difficult for first time homeowners to break into the market. There will certainly be a market for tiny affordable houses, but the real hurdle is the lack of legal places to live in one. The American Tiny House Association and the Tiny Home Industry Association are both working hard to promote best practices in home construction and recognize them as a safe and permanent housing option. If you have any question about tiny homes in your community or whether you’d be eligible for a home loan for your tiny home, contact your local mortgage expert at Mann Mortgage today.

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