Taking your tiny-home dreams and making them a reality will likely require more footwork than traditional home buying. Tiny-home financing includes some unique considerations: zoning regulations, whether to certify the tiny home as an RV, how many square feet you can live with, and whether the home should be mobile or on a foundation.
Throw in the possibility of having to move this dwelling in the future, and you may find yourself bogged down in the weeds rather than enjoying the process of thrifting and building your tiny homeâs dream interior. Letâs walk through the hurdles and considerations of tiny-home financing so you can get to the fun.
Tiny houses have become increasingly popular in recent years as more people look for affordable and sustainable housing options. A tiny house typically ranges from 100 to 400 square feet and allows homeowners to live a minimalist lifestyle. Many people wonder if they can get a mortgage to finance a tiny home, and the answer is yes, you can get an FHA loan for a tiny house under certain conditions. In this article, we will explore FHA loan requirements, benefits, and steps for financing a tiny house.
What is an FHA Loan?
An FHA loan is a government-backed mortgage insured by the Federal Housing Administration (FHA) Key features include
- Requires a low down payment of just 3.5%
- More flexible credit score requirements as low as 500
- Lower mortgage insurance rates
- Can be used to finance stick-built tiny homes, DIY build tiny houses, and RV/trailer tiny houses
FHA loans make homeownership accessible for first-time buyers and those with lower incomes or credit scores. The low down payment and flexible credit guidelines make FHA loans one of the few mortgage options for financing tiny homes.
FHA Loan Requirements for Tiny Houses
While FHA loans can be used for tiny houses, there are requirements tiny homes must meet to qualify:
- Minimum of 400 square feet
- Built on a permanent foundation
- Hookups for electricity, water, sewer/septic system
- Kitchen with stove, oven, refrigerator, and sink
- Bathroom with toilet, shower/tub, and sink
- Sleeping loft area or bedroom
- Meet state and local building codes
Additionally, you must meet general FHA loan eligibility standards:
- Minimum credit score of 500
- Debt-to-income ratio below 43%
- Can only finance one FHA loan at a time
- Property must be owner-occupied primary residence
- Have stable income, employment, and credit history
As long as your tiny home meets space foundation, and amenity requirements, FHA loans provide a viable tiny house financing option.
Benefits of Using an FHA Loan for a Tiny House
There are many advantages to using an FHA loan to finance your tiny house
- Low Down Payment – Only 3.5% down payment required, lowering upfront costs
- Lower Credit Score Requirements – Qualify with a credit score as low as 500
- Lower Monthly Payments – Long loan terms up to 30 years for lower payments
- Lower Mortgage Insurance – Around 0.85% of loan amount per year
For first-time and low-income buyers, the FHA loan makes tiny living achievable. FHA loans open doors that are closed with conventional mortgages requiring 20% down and higher credit scores.
Steps to Getting an FHA Loan for Your Tiny Home
If you’re considering using an FHA loan for your tiny house, follow these steps:
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Find a tiny house – Search listings for completed tiny homes or tiny home builders if custom building.
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Get prequalified – Talk to a lender to get prequalified and understand your options and price range.
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Make an offer – Make an offer once finding a tiny house within your approved loan amount.
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Inspect the property – Hire a professional tiny house inspector to evaluate wiring, utilities, appliances, foundation.
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Finalize loan details – Supply documents for income, employment, and undergo full underwriting.
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Close on your loan – After loan approval, set a closing date to sign paperwork and get the keys!
While the process takes time, an FHA loan simplifies buying your dream tiny home.
Common Concerns when Using FHA Loans for Tiny Houses
Some common concerns homebuyers have about using FHA loans for tiny houses include:
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Finding eligible tiny houses – Not all tiny houses meet FHA criteria, so search listings carefully about foundation and amenities.
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Qualifying for the loan amount – Tiny houses can be lower cost, make sure your income, credit, and debt levels qualify for the loan amount needed.
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Identifying land to place the tiny house – FHA loans require the tiny home be installed on owned land, not rented.
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Meeting building codes – Especially with DIY builds, confirming to meet state and local codes.
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Having a higher interest rate – FHA loans can have slightly higher interest rates than conventional loans.
While these are valid concerns, FHA loans remain one of the best financing options for tiny homes. Speaking to a lender early on can help navigate these issues.
Alternatives to FHA Loans for Tiny Houses
If for some reason an FHA loan does not work for your situation, some alternatives to consider include:
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Conventional loans – For those with good credit and income, a conventional loan may offer lower rates.
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VA loans – For veterans and military members, a VA home loan with zero down payment.
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USDA loans – For properties in rural locations, USDA loans offer subsidized low rates/payments.
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Renovation loans – FHA 203(k) or homestyle renovation loans to finance DIY tiny house.
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Personal loans – Banks and credit unions may offer personal loans for tiny home construction.
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Hard money loans – Private lenders may provide short-term financing for those with poor credit.
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Owner financing – Some tiny home sellers may directly finance the purchase.
Always discuss options with a lender to find the best tiny house loan for your needs.
Wrap Up
Can You Move Your Tiny Home?
Letâs say youâre living in your tiny home, financed with the best-case option for your circumstances â but a couple of years down the road, you decide you want to move or your employer wants to relocate you. Well, youâre on wheels, so it shouldnât matter, right?
Unfortunately, it does. If itâs a domestic move, the American Tiny House Association has pulled together a state-by-state directory of tiny-home rules and regulations. Every municipality, town and state can have different laws and codes. Essentially, thereâs no national policy.
For instance, in most counties across the U.S., county-wide building restrictions say you must build homes over 1,000 square feet, unless youâre somewhere like Park County, Colorado that has a building code variance.
If youâve decided to move or youâre faced with a relocation opportunity, you have options for your tiny home. Your domestic options are better if you have a mobile, RVIA-certified tiny home. You can advocate for temporary living quarters at a campground or RV park until you can find land or a backyard to accommodate your home.
If you have a tiny home on a foundation and itâs not RVIA-certified, the situation becomes more challenging. Ask yourself these questions:
- Is the place Iâm moving to tiny-home friendly?
- Is there land to accommodate my move?
- If so, will my employer help me locate or find land?
- Is moving the house part of my relocation benefit package?
Technically, a tiny home on a foundation is considered in many communities to be an Accessory Dwelling Unit (ADU), and it can only be built if a primary home preexists on the land. You therefore have the option of purchasing a home in your new community and applying for an ADU permit.
However, tiny-home communities have cropped up all over the country, allowing owners of tiny homes to rent land for a few hundred dollars a month and enjoy a more communal living arrangement. When researching for the right place, try to find a tiny-home community or co-op thatâs already established and with land thatâs up to code.
Unless your home is a storage container, moving a tiny home overseas might present a quandary. Youâll need to determine cost and weight, whether the country youâre moving to has tiny-home regulations and if thereâs a place to plop down your home. Be sure to research different areas before planning an international move.
Building: Finding A Tiny-Home Contractor
Hiring a contractor isnât just for the less construction-savvy. Contractors are experts in local laws and coding requirements to ensure any new home is above-board. The tiny-home movement may take up most of your social media feed, but itâs far less federally regulated than typical single-family homes. That means ordinances can vary greatly by city, county and state.
The tiny-home construction community has flourished in recent years, and these specialized contractors are now located in nearly every state. Thereâs an abundance of books, resources and even festivals to attend that can help you determine the ideal look, size and contractor for your tiny home.
Tiny homes can even come with enhanced financing benefits when built with a builder or contractor. Lower starting rates for loans and longer loan terms are just some of the potential upsides of partnering with a tiny-home builder versus using a traditional personal loan.
Can you get an FHA loan for a tiny house?
FAQ
Can you use an FHA loan on a tiny home?
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