The financing challenge
Traditional banks don't know what to do with tiny houses. They don't fit neatly into "mortgage" or "auto loan" categories, and most lenders haven't caught up to the movement yet.
This was one of the most frustrating parts of our process. We had the income and credit to qualify for a traditional mortgage many times over, but no bank would finance a 300-square-foot house on wheels.
Options that exist
- Personal savings -- the simplest path if you have it. No interest, no approval process.
- Personal loans -- unsecured loans from banks or credit unions. Higher interest rates but available.
- RV loans -- if your tiny house is RVIA-certified, some lenders will finance it as an RV.
- Builder financing -- some tiny house builders offer payment plans or financing partnerships.
- Home equity loans -- if you own property, you can borrow against it to fund the build.
- Peer lending -- platforms like LendingClub or Prosper for smaller amounts.
What we did
We used a combination of savings and a personal loan. It wasn't ideal -- the interest rate on the personal loan was higher than a mortgage would have been. But it got us into our home years before we could have afforded a traditional house in the Bay Area.
The math still worked in our favor. Our total housing cost dropped from $30,000/year in rent to a fraction of that, even accounting for loan payments, insurance, and land rent.