HW Media connects and informs decision makers across the housing economy. Professionals rely on HW Media for breaking news, reporting, and industry data and rankings. Moving the Housing Market Forward.
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

3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please