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Tiny House Financing: Get a Loan for Your Tiny Home

Steve NicastroFebruary 21, 2020

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The market for tiny homes may be getting bigger, but financing options are limited to personal loans from online lenders and credit unions, loans through a builder and home equity loans.

When buying a standard home, you’d typically get a mortgage. If you’re in the market for a tiny house — commonly defined as a home that’s 400 square feet or smaller — qualifying for a pint-size mortgage is unlikely.

The mortgage you need for a tiny home may be smaller than a traditional lender’s minimum loan amount, which can start at $50,000. Tiny homes typically cost between $30,000 to $100,000. An additional challenge: The lender may require that your tiny home have a foundation on land you already own.

Here are options for financing a tiny home:

  • Personal loans from online lenders and credit unions.

  • Financing through lenders partnered with tiny home builders.

  • Home equity loans, if you own a primary residence.

Summary of Tiny House Financing: Get a Loan for Your Tiny Home

Our picks for

Tiny house personal loans

Lightstream

on LightStream's website

LightStream

Lightstream

Min. Credit Score

660

Est. APR

5.49 - 20.49%

Loan Amount

$5,000 - $100,000

on LightStream's website

Min. Credit Score

660

Key facts

LightStream personal loans can be used to purchase a tiny house or fund related expenses, such as land or a trailer. APRs for its tiny house loans range from 5.95% to 16.79%.

Pros

  • No fees.

  • Rate discount for autopay.

  • Low starting rates.

Cons

  • Does not offer pre-qualification on its website.

  • Requires several years of credit history.

Qualifications

  • Minimum credit score of 660.

  • Enough income to pay existing debts and a new LightStream loan.

  • Maximum debt-to-income ratio varies depending on existing assets and the reason for the loan.

Available Term Lengths

2 to 7 years

Fees

  • Origination fee: None.

  • Late fee: None.

Disclaimer

Your loan terms are not guaranteed and may vary based on loan purpose, length of loan, loan amount, credit history and payment method (AutoPay or Invoice). Rate quote includes AutoPay discount. AutoPay discount is only available when selected prior to loan funding. To obtain a loan, you must complete an application on LightStream.com, which may affect your credit score. You may be required to verify income, identity and other stated application information. Payment example: Monthly payments for a $5,000 loan at 12.8% APR with a term of 3 years would result in 36 monthly payments of $168. Some additional conditions and limitations apply. Advertised rates and terms are subject to change without notice. SunTrust now Truist is an Equal Housing Lender. © 2020 Truist Financial Corporation. SunTrust®, Truist, LightStream®, the LightStream logo, and the SunTrust logo are service marks of Truist Financial Corporation. All rights reserved. All other trademarks are the property of their respective owners. Lending services provided by SunTrust now Truist Bank.
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Marcus by Goldman Sachs

on Goldman Sachs's website

Marcus by Goldman Sachs

Marcus by Goldman Sachs

Min. Credit Score

680

Est. APR

6.99 - 19.99%

Loan Amount

$3,500 - $40,000

on Goldman Sachs's website

Min. Credit Score

680

Key facts

Marcus loans can be used for any purpose. The lender lets borrowers choose monthly payment amounts and loan terms that fit their budgets.

Pros

  • No fees.

  • Flexible payment options.

  • Directly pays creditors for debt consolidation loans.

  • Rate discount with autopay.

Cons

  • No option to include co-signer.

  • Reports payments to one of the three major credit bureaus.

Qualifications

  • At least 18 years old (19 in Alabama; 21 in Mississippi and Puerto Rico).

  • Valid U.S. bank account, Social Security number or tax ID.

  • 680+ credit score.

  • For debt consolidation loans, you may be required to send part of the loan directly to your creditors.

Available Term Lengths

3 to 6 years

Fees

  • Origination fee: None.

  • Late fee: None.

Disclaimer

Your loan terms are not guaranteed and are subject to our verification of your identity and credit information. To obtain a loan, you must submit additional documentation including an application that may affect your credit score. The availability of a loan offer and the terms of your actual offer will vary due to a number of factors, including your loan purpose and our evaluation of your creditworthiness. Rates will vary based on many factors, such as your creditworthiness (for example, credit score and credit history) and the length of your loan (for example, rates for 36 month loans are generally lower than rates for 72 month loans). Your maximum loan amount may vary depending on your loan purpose, income and creditworthiness. Your verifiable income must support your ability to repay your loan. Marcus by Goldman Sachs is a brand of Goldman Sachs Bank USA and all loans are issued by Goldman Sachs Bank USA, Salt Lake City Branch. Applications are subject to additional terms and conditions.
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FreedomPlus

on FreedomPlus's website

FreedomPlus

FreedomPlus

Min. Credit Score

620

Est. APR

7.99 - 29.99%

Loan Amount

$7,500 - $40,000

on FreedomPlus's website

Min. Credit Score

620

Key facts

FreedomPlus loans can be used for major purchases, including buying or building a tiny home.

Pros

  • Offers co-signed and joint loans.

  • Offers direct payment to creditors with debt consolidation loans.

  • No prepayment fee.

Cons

  • May charge origination fee.

  • High minimum loan amount.

  • Charges late fee of $15 or 5%, whichever is greater.

Qualifications

  • Minimum credit score of 620. Borrowers' average is 690. The company uses the FICO 8 credit scoring model.

  • At least $40,000 in annual income. Borrowers’ average is $80,800. Joint applicants’ average is $107,200 combined.

  • Debt-to-income ratio: Less than 40%, not including mortgage. Average borrowers have a DTI of 20%.

Available Term Lengths

2 to 5 years

Fees

  • Origination fee: 1.99% - 4.99%.

  • Late fee: $15 or 5% of amount due, whichever is greater.

  • Unsuccessful payment fee: $15.

Disclaimer

The loan terms presented are not guaranteed and APRs presented are estimates only. To obtain a loan you must submit additional information and documentation and all loans are subject to credit review and our approval process. The range of APRs is 7.99% to 29.99% and your actual APR will depend upon factors including your credit score, usage and history, the requested loan amount, the stated loan purpose, and the term of the requested loan. To qualify for a 7.99% APR loan, a borrower will need excellent credit on a loan for an amount less than $12,000.00, and with a term equal to 24 months. Adding a co-borrower with sufficient income; using at least eighty-five percent (85%) of the loan proceeds to directly pay off qualifying existing debt; or showing proof of sufficient retirement savings, could help you also qualify for the lowest rate available. All loans are made by Cross River Bank and MetaBank®, N.A., Members FDIC.
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Lending Club
See my rates

on NerdWallet's secure website

LendingClub

Lending Club

Min. Credit Score

600

Est. APR

10.68 - 35.89%

Loan Amount

$1,000 - $40,000

See my rates

on NerdWallet's secure website

Min. Credit Score

600

Key facts

LendingClub allows borrowers to use funds toward a home purchase or other expenses. It also accepts joint loan applications.

Pros

  • Offers direct payment to creditors with debt consolidation loans.

  • Joint loan option.

  • Soft credit check with pre-qualification.

Cons

  • Charges origination fee and late fees.

  • Does not offer mobile app to manage your loan.

Qualifications

  • Minimum credit score of 600. LendingClub uses FICO 8 credit scoring model.

  • Minimum credit history of three years.

  • Debt-to-income ratio of less than 40% for single applications, 35% combined for joint applicants.

Available Term Lengths

3 to 5 years

Fees

  • Origination fee: 2% to 6%

  • Late fee: Greater of $15 or 5% of payment after 15-day grace period.

Disclaimer

*All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage and history. The APR ranges from 10.68% to 35.89%. The origination fee ranges from 1% to 6% of the original principal balance and is deducted from your loan proceeds. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at the time of application. The average origination fee is 5.49% as of Q1 2017. In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,025 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months. Borrower must be a U.S. citizen, permanent resident or be in the United States on a valid long-term visa and at least 18 years old. Valid bank account and Social Security number are required. Equal Housing Lender. All loans are subject to credit approval. LendingClub’s physical address is: 595 Market St suite 200 San Francisco Ca 94105. **Based on approximately 60% of borrowers who received offers through LendingClub’s marketing partners between Jan. 1, 2018, and July 20, 2018. The time it will take to fund your loan may vary.
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Personal loans for tiny homes

The online lenders listed above offer personal loans in amounts that can be used to finance all or a portion of a tiny house purchase. Loan repayment terms are shorter than for mortgages — up to seven years, which means you may pay off your tiny home faster, but monthly payments can be almost as high.

Your credit score and income are among the factors that determine if you’ll be approved for a personal loan and the interest rate you receive. Annual percentage rates on personal loans generally range from 6% to 36%; only borrowers with excellent credit (720 and above on the FICO scale) will qualify for rates at the low end of that range.

Personal loans are unsecured and don’t require collateral, so you won’t lose your tiny house or another asset if you can’t repay the loan (although your credit score may take a hit).

Use a personal loan calculator to determine your potential monthly payment and total interest of a tiny house loan.

Personal loans from credit unions

Credit unions can be a good source for an unsecured tiny house loan, and building a relationship with a credit union can increase your chances of approval, says John Kernohan, chairman of the United Tiny House Association.

Credit unions are not-for-profit organizations that serve members who live or work in a particular area. You have to meet the requirements to join and pay a small fee (up to $25) before you can apply for a loan.

Two options are First Tech Federal Credit Union and Navy Federal Credit Union. Both offer unsecured personal loans up to $50,000 that can be used for any purpose, with APRs capped at 18% and repayment terms up to seven years.

Loans through a tiny house builder

Tiny houses may be financed through a lender that partners with a builder. The loans are either unsecured (based primarily on your credit score) or secured by the tiny house, according to Kernohan.

The potential benefits include low starting rates (typically under 10%) and longer loan terms (10 to 20 years or longer) than personal loans.

But this option may require a down payment of up to 20% of the purchase price, and if the loan is secured, you can lose the tiny house if you can’t make payments.

Tiny homes on wheels may qualify for RV loans, but only if the vehicle is certified as an RV by the Recreational Vehicle Industry Association.

Home equity loans

Home equity loans and lines of credit are available if you own a home and want to add a tiny house to the land as an accessory dwelling unit or buy a mobile tiny home.

The benefits of home equity loans may include low rates and long repayment terms (typically up to 20 years), which allow lower monthly payments. But you’ll need home equity to qualify (determined by an appraisal), and you can lose your primary home if you can’t make payments.

Using home equity to finance the purchase of a tiny house can be risky and works best if the property generates income as a rental, Kernohan says.

“You’re taking equity away from your home, and there’s no guarantee that adding the tiny house to the land will boost its value,” he says.

Tiny house financial risks

A tiny house can have a positive or negative impact on your finances. The benefits may include lower housing expenses and less upkeep. But factor these costs into your budget:

  • Purchasing land or leasing a lot.

  • Parking fees at campgrounds and fuel if you take your tiny home on the road.

  • RV insurance, construction insurance or homeowner’s insurance, property taxes and permit fees.

  • Propane tanks for a tankless water heater.

  • New appliances that fit the home.

  • Typical housing maintenance and repairs.

Tiny homes also don’t have wide resale appeal, and there are few listed on the multiple listing service used by real estate brokers. If you want to sell at some point, your options may be limited to a niche marketplace, such as Tiny House Listings. Renting your tiny home may be another option if there’s demand in your area.

Last updated on February 21, 2020

Methodology

NerdWallet's ratings for personal loans award points to lenders that offer consumer-friendly features, including soft credit checks, no fees, transparency of loan rates and terms, flexible payment options, accessible customer service, reporting of payments to credit bureaus and financial education. We also consider the number of complaints filed with agencies like the Consumer Financial Protection Bureau. This methodology applies only to lenders that cap interest rates at 36%, the maximum rate financial experts and consumer advocates agree is the acceptable limit for a loan to be affordable. NerdWallet does not receive compensation of any sort for our reviews.

To recap our selections...

NerdWallet's Tiny House Financing: Get a Loan for Your Tiny Home