Tiny House Financing: Step-by-Step Guide


You’ve decided to take the plunge…

…but do you need tiny house financing to live the dream?

financing tiny house

In this guide:

+ Getting yourself prepared to get financing

+ 3 different options to get financing

+ Obstacles to watch out for

Tiny houses are a lot cheaper than conventional homes.

But while the price tag for a tiny house is a breed apart, doesn’t mean you won’t find yourself maybe needing to borrow money or incur credit card debt, depending on what you’re after.

There are many factors involved in determining what kind of financing you need and WHY you’ll need it.

We’ve worked our buns off on this tiny house financing guide to give you all the answers you’re looking for.

Have any questions?

You’re more than welcome to contact us, so that we can add any missing information to the guide.

What Kind Of Tiny House Do You Want?

Choosing between a tiny house on wheels and a stationary home with a conventional foundation is a big decision for you to make.

One of the absolute lowest barriers to entry would be the school bus house.

We’ve checked around on numerous online classified sites and the average cost for a full-sized bus is $3500 to $4K.

Pretty affordable.

Depending on what furniture and other equipment you might already have for the bus, you could have to spend up to $4K to have a fully livable space.

An entire home for $8K? Not too shabby, kimosabe!

Freehold Vs. Leasehold – What Kind of Land Do You Need?

Most people will tell you right off the bat that freehold is the ONLY way to go when it comes to land.

If your property is rooted in the property, then yes – freehold is the only logical solution.

After all, you’re moving into a tiny home to get more financial freedom, so why would you want to own a home, but still pay rent?

Doesn’t make sense, does it?

Well it does if you’re in a tiny house that is mobile (or can be towed).

Tiny houses on wheels have a lower financial barrier to entry than most other options.

Therefore, most first-time tiny house owners opt for a THOW to save on rent and sock that money away for a more stationary model built on freehold land.

That’s when Leasehold land makes all the sense in the world.

When you’re done with the tiny house on wheels, no need to find a buyer for the land – once you’re done, you’re outta there and on to your next adventure.

Will You Be Monetizing Your Property?

airbnb financing

In buying land for your tiny house project, not only are you opening yourself up to the freedom of having your own home on your own land, but with even a modest acreage, you open yourself up to opportunity.

Why did we add the pic of the Hobbit house above?

To show you what kind of unusual structures can be rented on AirBnB for sweet revenues.

Once you’ve built your own tiny house, there are a number of ways to use your backyard to build tiny yet charming rental structures.

If you do choose to buy land for the purpose of both living on it as well as generating revenue income, there is good news and bad news.

Good news: the larger the acreage, the more you’ll need to find some tiny house financing for your project.

Bad news: If you can follow instruction, you can build rental structures by hand using only natural materials, which will allow you to recoup your costs a lot faster.

Seeking Sources of Tiny House Financing Begins

DISCLAIMER: We are NOT financial advisors, nor do we purport to be. The advice you find below is based on life experience and knowledge gained from industries in which we’ve worked. If you are unsure about any of the advice found below, please consult with your family attorney or a licensed financial advisor.

Now that we’ve covered the steps in determining exactly what you want and need, the search for financing begins.

Checking your credit is definitely the first step.

I’ll never forget the time I applied to live in an apartment and had to get a credit report, only to find out that my business woes had dwindled my rating down to “fair”. Ouch!

The good news is that two years later, when I had to obtain another credit report for a new prospective landlord, my rating had climbed back to “Very Good” status, so it goes to show that if you did have issues in the past, your credit CAN be repaired.

A word of wisdom: If you visit FICO, you have the option of choosing between the three major credit bureaus.

You really don’t need all three, just pick ONE credit bureau and you’re good to go.

Picking The Right Credit Reporting Agency

Second word of wisdom, since you can choose between the big three credit bureaus, AVOID Equifax.

Let us not forget about the data breach that compromised the personal information of millions of its clients.

Just get your credit report from Experian or TransUnion and you’ll have all the info you need regarding your credit status.

After seeing where you stand with your credit report, you’re going to have to address any outstanding debt you have, as it does play a role in your credit rating.

Most lenders will be skittish about lending you money if you have existing debt.

CuraDebt is a company that was set up to address this issue and can help you reduce your debt a lot faster than if you went about it alone.

You can get a free debt assessment here.


Tiny House Financing via Credit Cards

Earlier on, we talked about the school bus house.

If your total debt incurred for building such a house is only $8K, choosing to finance your build with credit cards or a line of credit might not be the worst option.

After all, let’s say that you happen to pay $1500 of rent for your present abode.

By committing your savings on rent entirely to repaying your credit card debt, you can repay the total cost of your school bus house in just under six weeks.

This is a double-edged sword, so proceed carefully.

Earlier in the piece we talked about the need to know where your credit rating stands right now.

If you already have debt by way of a mortgage, auto loan or credit card debt… that could prevent you from accessing new credit cards.

But wait, there’s more! If you do apply for a credit card and they decline your application because of your existing debt, the application will further bring down your credit rating.

That’s why it is always smart policy to check up on your credit rating before applying for any new loans.

Tiny House Financing via Home Builders

tiny house builders

Manufacturers of pre-fabricated homes know it’s well within their interests to provide tiny house financing.

We’ve checked out several tiny home builders and the average going rate for a tiny you can feel good about living in is $45K.

A lot cheaper than a ‘conventional home’, but not too many people we know have $45K tucked away in their back pockets.

There are a number of factors to consider when taking out financing with home builders.

1) If your grandpa could chime in on this convo right now, he’d probably start gumming about the interest rate – and he wouldn’t be wrong.

Be diligent and shop around for the best rate. This simple, but effective personal loan calculator will show you what you can expect to pay in interest.

2) Transportation costs: the tiny house movement (despite its apparent popularity) isn’t quite mainstream yet, which means manufacturers are still scattered.

If the closest manufacturer is 250 miles from your building site, that will result in hefty shipping fees.

3) Reputation: As mentioned in point #2, there aren’t enough tiny home buyers yet for some of these companies to have built a reputation as quality merchants.

If your luck is bad, THIS could be the type of tiny home manufacturer you’re dealing with.

Once you’ve pulled all the finances together, you might want to check out our Tiny House Plans guide in which we walk you through the options.

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