Financing Tips for Buying Unconventional Homes
Alternative and unconventional homes are gaining in popularity. From tiny houses to eco-friendly homes, unconventional houses offer the chance to own a more affordable home, even if it’s a tiny one. Homeowners are gravitating toward unconventional homes for many reasons: they’re less expensive to buy and maintain, can be built on or put on wheels, and can be environmentally friendly, just to name a few. However, they also have their cons. Many alternative houses can be significantly smaller than a traditional home. Not only are you loosing square footage with an unconventional home, but it can also be hard to finance them.
Types of alternative houses
Tiny houses are what come to mind for many people when they hear the term “unconventional home.” A typical tiny house is a substantially smaller than your average home. Since a tiny house is a fraction of a house, you can usually purchase one for a fraction of the cost. You’ve probably heard of a fixer upper, or seen someone flip one on TV. DIY home projects and home renovations are becoming more common.
If you’re willing to put in some legwork, a fixer upper could be the right alternative housing option for you.
For less than you’d spend on a ready-to-move-in home and a little hard work, you could turn a fixer upper into your dream home. Have you ever heard of a modular home? This alternative housing option is a home that’s built in sections inside a factory, versus a manufactured home, which is built on site. Each section of a modular home moves through a factory, and is checked for quality control along the way. Once your modular home is complete, it’s taken to your home site or piece of land, where professionals build a foundation and then set the house down on top of it. Then, builders or contractors make the finishing touches and it’s ready for move in. An eco-friendly home is also considered an alternative house, and it doesn’t have to be a massive home covered in solar panels and expensive eco-friendly technology. Many smaller and tiny homes can be made eco-friendly, and can even be completely powered by solar or wind power. Common eco-friendly features include solar panels, composting toilets, and rainwater harvesting and purification systems, water retention tanks, programable thermostats, and energy efficient appliances. Some creative “homeowners” are even renovating RVs and busses into houses. The plus side to having an RV or bus tiny home is that it’s already on wheels — so, you can take your home with you wherever you go. For less than the cost of a house, you can convert an RV or bus into a cozy little home.
Financing your unconventional house
Even though your unconventional home may be smaller than a traditional house, you’ll still need to figure out how much home you can afford. It’s important to consider a few things when you it comes to financing your alternative house:
Your credit score is important. Any time you borrow money, your credit score will come into play. Monitor your credit score so that it’s where it needs to be when you’re ready to take out a loan.
How much work can you do yourself? Investing your own time and labor can save you a lot of money. Will you be able to do the construction without hiring a builder? The more you can do on your own, the more you’ll potentially save.
Will your property qualify for a home loan? Do some research. If you can’t get a home loan, consider an RV or automobile loan. What about your savings? Do you have enough to fund your alternative house without a loan?
A renovation loan is a great option if you want a fixer upper, and could help turn an old house into the home of your dreams. Each different loan options has its own borrower qualifications and requirements, so talk with your mortgage banker about what’s right for you and your house. There are a few different mortgage loan options for fixer uppers.
You can think about tiny home financing like this: if it has a foundation, you can probably get a home loan for it. However, many lenders have a minimum loan amount. For example, let’s say your lender’s minimum loan amount for a home loan is $50,000. That means if your tiny home is less than $50,000, your property won’t qualify, and if it’s $50,000 or more, it will. Unfortunately, tiny houses sometimes don’t meet that minimum, and you will have to finance your nontraditional home another way. For tiny houses that do qualify, there are many different mortgage loan option for borrowers in different financial situations.
The same thing applies to a loan for your modular home. Since your modular home will be stationary (on a foundation), it may qualify for a mortgage loan. Again, check with your mortgage lender and talk about your financing options.
Financing for alternative houses that can move is a little different. Unconventional homes on wheels can often be financed through automobile or RV loans. An RV loan can be used for RVs, trailers, campers, and some other recreational vehicles (like boats). Automobile loans are another possible option if your unconventional home is drive-able. Each bank and lender differs in what and who qualifies, so do your research and chat with a professional.
Alternative homes are becoming more and more popular. Whether you’re trying to downsize and simplify or buy your first home, an alternative home could be the right option for you.