Two-thirds of tiny house owners do not have a mortgage, but how do the rest of them afford those small homes? This is how to finance a tiny house without breaking the bank.
Could you live in a 400-square-foot home? How about one that comes with just 100 square feet of living space?
People are doing this. They’re joining the tiny house movement, living in homes that are 500 square feet or smaller. The proponents of this kind of living say that larger homes are wasteful, full of space that no one ever uses. (See also: Mind-Blowing Tiny Houses With Huge Design Inspiration)
There is a challenge, though, with living small. And it’s not just the struggle to fit sleeping, cooking, and dining spaces into a 400-square-foot space. Many who want a tiny home can’t afford to purchase one with cash. They need to finance their tiny home. That’s not always easy.
But your bank might not consider it an actual home, especially if it is portable. And if banks don’t consider your tiny home a real home, it won’t qualify for a mortgage loan.
Even if your tiny home does meet banks’ lending requirements, you might struggle to find mortgage lenders willing to do the work involved in originating a small home loan because they might not earn enough on a home loan of $50,000, $30,000 or less to make the work worth their efforts.
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“Lenders have to go through the same process for a $50,000 mortgage loan as they do for a $400,000 loan,” said Peggy Burke, vice president and mortgage banker with PrivatePlus Mortgage in Atlanta. “The underwriters still have to go through the same steps to approve a borrower. Continue reading “You might want to take out a traditional mortgage loan to finance your tiny home”