09/26 The Tricky Thing About Buying a Tiny Home

exterior of a brightly lit tiny houseHere’s what you need to know about issues that could make buying a tiny home a big deal.

Buying a tiny house is a huge undertaking — particularly from a financing perspective.

Tiny house hunters are typically looking for homes that range from 100 to 500 square feet. Many of these home buyers are millennials, who don’t want the hassle of maintaining a large house, says Matt Parker, a real estate agent in Seattle and author of “Real Estate Smart: The New Home Buying Guide.”

“Owning a large home on a large plot of land is a relic of the American dream,” Parker says.

TV shows like FYI’s “Tiny House Nation” and HGTV’s “Tiny House Hunters” have helped the movement gain traction.

However, these programs don’t delve into the process of procuring a loan for a tiny home, says Todd Nelson, business development officer at LightStream, a lending division of SunTrust Bank that offers loans for tiny-home buyers.

“Many tiny homes are uniquely built and don’t conform to the mortgage requirements for a traditional house,” says Nelson.

If you’re looking to buy or build a tiny home but don’t have enough cash on hand to foot the whole bill, here’s what you need to do to successfully finance your purchase.

Opt for a home on wheels
Tiny homes are frequently purchased using recreational vehicle (RV) loans, which are unsecured, fixed-rate mortgages that typically have two- to seven-year payoff plans. Generally, these loans have no application fees or closing costs.

“It’s a straight installment loan,” explains Nelson, who says that borrowers usually need a FICO score of at least 670 to qualify.

However, RV loans typically have higher interest rates than traditional home loans (LightStream’s loans start at 2.99 percent but go up to 9.94 percent), are often capped at a $100,000 maximum, and — unlike traditional mortgages — are not tax deductible.

Find a mortgage lender that specializes in tiny home loans
Although the tiny home movement is gaining speed, it’s still a relatively niche market.

Read more – http://www.zillow.com/blog/tricky-buying-a-tiny-home-204504/