Financing a Tiny Home

If you have considered building a tiny home, you may have considered financing as an option to pay for your future home on wheels. For some, purchasing a tiny home may be a simple as paying with cash you may have saved over the years or cashed in on all or part of an investment account.  Some people have sold their traditional foundation built home and used the money left over to pay for a tiny house on wheels.  

But for others, frustration may be a feeling you share with the rest.  If you don't have cash on hand or access to cash, you may have tried to figure out ways to finance your tiny home.  Financing options becoming available specifically for THOWs is minimal and even slower to come about then the acceptance of the tiny house movement itself.  Also, financing may not even cover the entire cost of the increasing prices of tiny homes.  In any case of financing, you will still need somewhere between 3-25% down.

Financing isn't the first thing most people will have running through their minds when joining the tiny movement.  After all, the point is to minimize the number of things you own and reduce debt and all the symptoms that are associated with it. The thought of having a tiny house loan can be daunting, but if you consider the amount you may actually need to finance is just a fraction of the cost of a traditionally built foundation home.  Along with the other savings that will help you after going tiny, for example, utilities that are almost next to nothing, no HOA fees, taxes, costly repairs and more, you still will more than likely end up in a much better position financially after making the switch.  So don't fear financing, besides with all that extra money you will have in your pocket, you can always apply it to the principal and pay off your loan even faster.  In sticking with the tiny culture and the idea of minimalism, you necessarily wouldn't want to add to your debt, but it may be a necessary step in order to go tiny and reach your ultimate goal.

If you need to finance, there as some, but limited options.  Most of your options will depend on how good your credit score is, and of course, the higher the better.  You may find some builders who have in house financing as an option, although not readily available, an option for some, but still a rare find. I would recommend doing your research extensively if this is an option you'd like to pursue.

LightStream, an online lending division of SunTrust Bank offers tiny home loans to homes with RVIA certification and also in many cases not. We are aware of tiny homes that have been financed through this company that did not have RVIA certification.  This could be because of credit scores too, so the best thing is to reach out to them and ask these types of questions before applying.  LighStream offers APR's from 5.74% to 15.14% with loan terms from 24 to 84 months. Obviously, with a higher credit score and shorter term for your loan, you will have a lower APR, with a lower credit score and or longer loan terms, your monthly payment will be lower but at a much higher APR.  Let's keep in mind the RVIA certification, this is a controversial subject in the tiny home community. It can be polarizing among the community as a topic for discussion and it poses a tough decision, especially when choosing a builder and it could greatly affect the price of your home.  This would be a personal decision before trying to secure financing with any tiny home loan lender. 

Another option that has become available recently is Koala Financial Group (KFG), which was formerly Sunrise (China) Technology Group Limited. Many tiny home builders have partnered with or are affiliated with Koala to more easily help their clients get financing with their builds.  They offer great loan terms with up to 25 years and for people with credit scores just above 600.  However, it seems that recently that many of these loans have been on hold.  Our sources report that clients have not yet received their approved funding from even mid-2018, and have left tiny home build contracts between client and builder to fall through.  We could not confirm any information regarding what is holding up the loan company, but hope it is resolved quickly for the sake of the many waiting to build.  These terms open up the possibilities of tiny home ownership.

SouthStar bank out of Austin, TX offers tiny home loans up to 10 years with 25% down.  They are certainly worth looking into.  Rock Solid Funding is also a financial institution mentioned frequently when researching tiny home financing. They too are also located in Texas, however, Charles Clark, Finance Director, confirmed with me that as of January 2019, they are no longer financing tiny homes. 

Ask your builder or other builders who they recommend or if they are affiliated with any lenders.  It seems like if financing is the only option, you may also need to look at securing a personal loan through your bank or credit union, however, these types of loans typically require higher credit scores and have higher interest rates as well.  Sofi is an online lending institution issuing personal loans.  There are many personal loan services available online, you won't have any trouble finding any, but do your research when it comes to terms and early payoffs.

Otherwise, it seems good old fashioned saving, selling off items, securing a part-time job, or even fundraising may need to be some of the creative avenues to explore when it comes to obtaining enough money to build.  There are lots of creative online fundraising platforms from Kickstarter, Fundrazr and GoFundMe to many more that have been used for all kinds of projects.

You could always buy a trailer and build as you go. Obviously, this isn't always ideal but could save you thousands, even tens of thousands in the long run, and it will be paid off when you are ready to move in.  You would need a good workspace with electricity and hopefully protection from the elements.  There are lots of online tutorials and some tiny home builders and enthusiasts who offer building classes for those brave enough to tackle their build themselves.  I think it's a great way to learn the most about your tiny home, the systems, and the appliances.  You will know first hand how to approach any issues that could possibly arise.  You could have build parties on the weekends, invite some talented friends, who may have a construction, electrical or plumbing background to come over and have some drinks and food, and before you know it, you have your frame up. Start a Meetup on Meetup.com, you never know who may volunteer their time. As stressful as it might seem to do your own construction, this kind of work can be very satisfying and stress-free to someone who enjoys this type of work but doesn't get the chance often to build or do things with their hands. The tiny home community is close and people are always willing to pitch in knowledge, advice or a helping hand. Take advantage of building and contractor auctions, you can really score some savings on siding, roofing, flooring, windows, doors, and appliances at times. This could save thousands in materials and potentially labor. Don't count out building your own tiny. If you're new at building, then using guidelines from NOAH will help you make sure your build is safe and roadworthy.

Don't give up, if you don't have the cash right away or can't immediately obtain financing. Be patient if you can, try and build if you so desire, fall in love with the process and have a deeper appreciation for a home that you built with your own two hands.