Solving the Post-Close Challenge with Intelligent Automation

Join our upcoming webinar as SoftWorks AI CEO and Avanze CEO explore the advances in tech that allow for greater levels of automation and cost reduction, especially in support of post-close and pre-fund review.

Spruce’s Patrick Burns on innovation in title technology

In the season finale of Housing News season 5, Spruce CEO discusses heightened investor interest in title tech, innovation and fintech adoption.

Top CFPB official “hates” QM rules, jeopardizing safe harbo

A top CFPB official in charge of the rule-making process has heavily criticized the agency's own qualifying mortgage rule, jeopardizing safe harbor.

How borrower education can make housing more attainable

The current housing market is making it difficult for prospective buyers to afford a home. Housing professionals need to find ways to better meet buyer needs.

MortgageReal Estate

Can you afford to finance a tiny home?

You won't be able to use a traditional loan

The dream of homeownership has taken on a new meaning for many Americans struggling to afford traditional housing.  

The latest Case-Shiller report indicated that home prices increased two to three times the rate of inflation across the U.S. Furthermore, renting reached an all-time high nationwide.

As more and more people buckle under the weight of mortgage and rental rates, alternative housing has become a viable option.

Specifically, tiny homes have piqued the interest of those wanting to ditch the picket fence and fat loan.

But how exactly affordable is a tiny home? In an article for HuffPost, Casey Bond highlights some factors that could determine the likeliness of moving into a home the size of a shed.

If you wanted to use a mortgage loan to finance a tiny home, unfortunately there is no way to appraise the property, according to Bond.

From the article:

Tiny homes differ from traditional homes in ways beyond just size. And those differences can make it tough to appraise the property ― a key step in mortgage underwriting.

“The appraisal is based largely on square footage,” explained Corey Vandenberg, a mortgage banker in Lafayette, Indiana. He said that often, there is a minimum square foot requirement to get a mortgage.

Further, said Vandenberg, lenders evaluate comparable properties sold within the previous 12 months. Since tiny homes are still a pretty new trend, there may not be enough data for your neighborhood. “This is particularly a challenge in rural areas,” said Vanderberg.

Even if by some chance the tiny home was appraised, it still would not qualify for a loan because of its mobility. Simply put: If you don’t own the land underneath your home, you won’t be getting any help from a bank.

“That makes it a mobile home or a titled trailer, not a permanent foundation-affixed home, which a mortgage requires,” explained Vandenberg. “Even if your tiny home is sans wheels, you’d need to own the land underneath it to potentially qualify for a traditional mortgage.”

Lastly, if someone wanted a professionally pre-made tiny home, the loan cost would be much too large for a bank to approve, according to the article.

Whether a potential buyer is looking to rent or buy, they will probably be digging a little deeper into their pocket books.

Most Popular Articles

Mortgage forbearance drops to 4.36%, exits pick up steam

The downward trend of borrowers in forbearance picked up speed in the last week of April, falling 11 basis points to 4.36% of servicers’ portfolio volume.

May 10, 2021 By
3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please