Tiny homes have become increasingly popular as people seek a simplified lifestyle and embrace minimalism. Many are also adding an ADU at an existing home address that will serve as an Airbnb rental, She-Shed, backyard cottage, and so on. If you are hoping to find an affordable tiny home, then instead of spending hours searching on the internet, come to TinyHouseMe. We connect you with not one but several tiny home builders under one platform and make your search easier and simpler. Moreover, you can save time and check out the varied options of tiny cabins for sale, ADUs, tiny homes on wheels, and those built on a foundation. However, before falling in love with the latest models showcased on our platform, you must understand how to buy and finance these homes. Buying a tiny house is easy when you have TinyHouseMe to assist you.
Location
Firstly you will need a piece of land to place the tiny cabin kit. You need to be well aware of the zoning laws of the land and what property will sit on that piece of land. The good news is that land mortgages are available that require at least 20% of the minimum down payment on the standard 20-year loan. However, the land prices vary by location, state, size, and acreage and need to include water rights and utility hookups. If the land is sorted, the next step should be finding and buying the tiny cabin for sale. TinyHouseMe can help you by connecting you with multiple builders across the U.S. and Canada.
Tiny Home Shopping
Many tiny home shoppers build high-quality homes from a kit or model, but most opt for prefab structures from a trusted builder, as these homes come with a warranty and are designed to be functional, durable, and aesthetically appealing. TinyHouseMe can help you connect with the right builder who will offer you a warranty that travels across different state lines. This is a legit factor, especially when you buy out-of-state or move the home to another location. Again depending on finishes and features, tiny homes vary in price and are less expensive to purchase than conventional larger homes. Moreover, the tiny cabins for sale are energy efficient and require less maintenance than traditional houses.
The only catch here is that the mortgage is an issue. You cannot get a mortgage loan for a tiny home, and even if you manage to get a loan, it’s not secure. As per Christian Science Monitor, two-thirds of tiny home buyers do not finance the tiny home purchase with a mortgage. Instead, people usually save cash for making the purchase or take a home equity loan against the existing property before investing in tiny houses. The remaining ⅓ tiny home lovers seek alternative financing options to get their desired tiny cabin homes.
Financing Options for Tiny Homes
Financing a tiny home is difficult but not impossible, especially when you have experts to assist you and give advice throughout the process. However, if you are looking for a tiny home loan, several options can help.
Personal Loans: These are unsecured loans and the most common financing for tiny homes. You do not need to hold any collateral for a personal loan, although you need a good credit score to qualify. Personal loans are up to a term of 7 years and can fund some of the tiny home costs. Personal loans can help you pay off the tiny home quickly, but the monthly payments are high because of the short loan term. The rate of interest you qualify for will depend on your credit score, and the annual percentage rate on personal loans ranges from 6% to 36%, as per Bankrate. However, borrowers with good credit scores have access to lower interest rates.
V. Loans : If you get a tiny house on wheels, you can finance the structure with an R.V. loan. For an R.V. loan, the tiny structure needs to be certified by RVIA (Recreational Vehicle Industry Association). Also, the tiny home must comply with the quality set by the U.S. Department of Transportation National Highway Traffic Safety Administration. Moreover, the tiny home needs to be your primary or permanent residence when you want an R.V. loan. The USP of R.V. loans is that since the tiny homes are on wheels, you get a more manageable loan term than you get for personal loans, although here, again, you are required to make a down payment. As per Bankrate, many banks offer loan terms of up to 20 years for R.V. loans, and the interest rates are around 4.5% to 7.5% which is higher than the ordinary mortgage loan rate.
Contractor or Builder Financing: Getting in touch with a good builder can help you get finance for the tiny home project. There are builders who not only offer tiny cabins for sale but they will also help you secure financing for the project. The builders can connect you with a lender and help you secure a home loan for the tiny home. For example, some builders will build a tiny home for you and offer R.V. loan financing. These builders are RVIA certified and sell the models as if they have an R.V. dealership. That’s why you must thoroughly research the financing offered before you agree on any terms like the rates and other clauses. Moreover, with R.V. loans, the tiny house is collateral for the loan, meaning if you are a defaulter, then the lender will take possession of the house.
Pay cash: Payment in cash is ideal for buying a tiny home. However, this option is not feasible for everyone, which is why you need expert help financing the tiny home to avoid any potential risks.
Using credit cards: You can use credit cards to charge the cost of the tiny home, but it’s not recommended. You need a high credit balance to cover the cost or get a cheap model. Also, keep in mind the interest rates; if you haven’t saved enough, interest will accrue over time and become increasingly expensive to pay later.
How to apply for tiny home financing?
The process of applying for tiny home financing varies, but here are a few things to consider.
- Check the credit: Lenders review credit to assess the risk factor, which is why you can review your credit report and improve the credit score before applying to get better interest rates and positive responses from lenders.
- Compare financing options: Before buying a tiny home, you should explore the financing options. Contractor or builder financing might not be affordable, but a low-rate personal loan from another lender can work well.
- Prequalify online: Personal loan lenders allow you to check customized rates via prequalification. Although this process can take a few minutes, your credit will remain unaffected.
- Get an estimate about the costs related to borrowing: You can review some offers and then get a personal loan calculator to estimate the long-term interest costs and the monthly payments. Fees, loan terms, and interest rates should be considered before deciding on the most affordable tiny home loan.
- Submit an application: Once you have the loan offer of your choice, fill out a complete application. The lender will run a credit inquiry to check the credit score, which can temporarily decrease the score by a few points.
- Receiving the funds: Once you get the application approved, the lender will deposit the funds in your account, and then you can use the money to purchase the tiny house. However, always review the loan agreement to determine when payments are due. Otherwise, you can consider automating the payments directly from the bank to ensure you don’t miss any bills.
To get expert assistance in buying and financing a tiny home, become a member of TinyHouseMe. We connect you to multiple tiny home builders and offer expert assistance to finance the project.
