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How to Finance a Tiny Home on Wheels

More people today are preferring life in a mobile home, mainly influenced by the cost of land the possibility of just packing up and leaving if you want to.

Whether you opt for a smaller house on your land, among a community, or on the road, you will need a way to finance your life.

Earlier, living on the road would have seemed impossible as jobs mainly required people who were constantly at one place, plus it was mainly associated with poor people. However,  the world has changed, and what generates income has become more diversified, allowing for the thriving of a minimalistic work-from-home lifestyle on a tiny home on wheels.

In this article, we will take a look at how you can finance a tiny home on wheels.

Let’s take a look!

History of Mobile Homes

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Mobile homes came on the rise during the great depression of the thirties, where mobile carriages used mainly for vacationing were turned into mobile homes due to the rise of the cost of living in the U.S.

During this time, mobile home living was alienated to the working class and impoverished people, which saw discrimination regarding mortgages as mobile homeowners were not considered.

Zoning laws saw them pushed to the farthest parts of the State.

Fast forward to the 2007 economic crash, which left the whole world reeling; the economic collapse destroyed the housing market and, taking a huge population of people down with it, saw an increase in mobile homeownership.

You will find plenty of older people whose pension could not support life as a homeowner and opt for a mobile home.

However, according to an article on BBC news, it should be noted that not everyone living in trailer parks is poor. Actors like Mathew McConaughey and Pamela Anderson live in Paradise Cove, a trailer park in Malibu, where a house can cost upwards of $1.2 million.

Currently, most of the younger generation is going for mobile homes, which can be backed up with a certain interest in outdoor equipment and its increased popularity. Younger people have devised new ways of making money that allows them to live a mobile life.

Also, with the increased interest in the minimal lifestyle, a new movement of young people who prefer smaller cars and smaller houses has come up. This new movement is more associated with convenience than affluence, creating a shift in norms.

With more and more people looking for peace of mind over the hectic environment in Cities and Towns, mobile homes have become an in-thing with camping gears and outdoor equipment increasing in demand.

What is a Mobile Home?

A mobile home is a prefabricated unit to live in rather than one that is built on site. Often referred to as manufactured homes/homes on wheels, they come in all sizes, with different interiors, and can be purchased as a retail store and driven to the site.

You can also choose to build your own mobile home and buy the necessary equipment.

Factors to Consider Before Financing a Mobile Home

To understand how you can finance your mobile home living, there are a couple of important factors to consider.

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1.       Credit Report

America’s credit system may not be as harsh as China’s, but it still goes a long way in deciding the amount of loan you can get to finance your tiny home on wheels.

Your credit score represents your financial health in America and informs the lender as to whether you are good for the loan or a risk to their investment. Between a score of 0 – 999, good credit history is between 720 – 999.

The lower your credit card score is, the less money you can receive as a loan.

A couple of factors will influence your credit score, including:

·         Payment history

Here lenders look at whether you pay your debts on time. This includes your credit card debts and housing debts, among others. Lenders want to know how competent you are at paying debts before they can trust their money with you.

·         Amounts owed

This is one of the most important factors for credit card score, as it tells the lender how much you owe divided by the amount of revolving credit you have. If you have $200 in credit from two cards and have used up $100 in one card, your credit utilization is 50%.

·         Length of Credit History

Generally, the longer your credit history, the more potential you have for a loan. This is due to increased trust from the lenders who can assess how good you are with debt over a longer period.

·         Credit Mix

Most people with good credit scores often have diverse portfolios with credit accounts where they have several loans, including car and student loans. They account for at least 10% of your credit score and help inform the lender how well you manage your debts.

2.       Whether You Are Buying The Mobile Home Alone Or With Land

Another thing most lenders will look at is the stability of the asset being financed. This means that if your tiny home on wheels is constantly on the road, it may be a bit riskier to lend to than a tiny home on wheels parked in your piece of land.

If you decide to purchase a piece of land where you will park your tiny home on wheels, more lending institutions will be open to the idea of financing.

Even people renting a plot to park their mobile homes are not eligible to most loans land buyers get, plus the mobile home.

3.       The Type of Mobile Home you want to Purchase

The specific type of mobile home you want to purchase will affect the kind of financing you can get. Some institutions will not finance older types of mobile homes due to their potential future decrease in value.  

At the same time, if you decide to go for a state the art expensive tiny mobile home, some institutions may decline to finance it as it may not be worth it for them.

4.       The Financing Institutions

Although mobile homes have been available for decades, the financial institution is still relevantly new, meaning it is not well streamlined. Different institutions will have varying financing options, which may be far apart from what their competition offers.

Ensure you shop around and get to learn what different institutions are offering before making a final decision.

5.       Zoning Laws

These are the laws that determine where you can set up your tiny home on wheels, depending on where you are located.

Certain areas will dictate the square feet limitations and construction codes, which will influence where you settle.

Zoning laws will go a long way in ensuring you get the best outcome from your tiny home investment.

6.       Appreciation and Depreciation

Every homeowner looks to appreciate the value of their house over time, which helps fetch a high resale price. This is mostly not the case with tiny houses, which mostly depreciate over time.

Before making a decision, consider the financial hit you may take from a depreciating value, which may influence when you sell it for another.

Financing your Tiny Home on Wheels

There are several ways you can finance your tiny home on wheels, so let’s take an in-depth look at each option.

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1.       FHA Loans

You can get your hands on a Federal Housing Administration Loan program which will include both tittle1 and title II loans.

·         Title I Loans

Title I loans are available for both wannabe mobile home buyers and manufactured home buyers.

The title I loans are amazing because they can be offered to individuals who don’t plan on buying a piece of land where their tiny homes on wheels will park. However, if they want the loan, they will have to provide at least three years’ worth of lease signed by both the landlord and tenant.

·         Title II Loans

As long as you meet the requirements, you can apply for a title II loan that involves both the mobile home and land purchase.  This means that real estate developers cannot get it

There are also a couple of other requirements for you to be eligible for this type of loan, including:

·         A minimum of 400 square feet

·         The mobile home must have been manufactured after June 15, 1976.

·         Must be categorized under real estate, although this is not for the reason of State taxes.

·         Must have a permanent chassis

·         The loan must be for both the home and the land where the mobile home is.

In comparison to the title I loan, this one cannot cover mobile homes on leased lots.

2.       Fannie May

To qualify for this type of loan as a mobile homeowner, there is a criterion you will first have to satisfy. The loan requires an applicant to have a sidewalk and driveway that connect, a carport, or a detached garage. There are also certain architectural requirements to qualify for the loan.

A good example of what the loan type prefers is the previously mentioned Oak Heaven Mobile Homes which is more like a normal home with a driveway.

The amazing thing with this kind of loan is its terms; it comes with at least 30 years of financing, with down payments as low as 3%.

3.       Freddie Mac

A Freddie Mac loan is another way for you to finance your mobile home, where you get at least two options of financing, which include fixed-rate mortgages and adjustable-rate mortgages.

You get up to 3% in terms of down payment.

4.       VA Loans

These are veteran loans that can help cover the cost of your tiny home on wheels. If you have previously served in the military, you may qualify for a loan from the department of veteran affairs. You have a couple of options, including:

·         Buying a mobile home

·         Buying both the land and mobile home

·         Refinancing a home you want to buy

You have to reach an eligibility criterion; otherwise, you may get up to 100% financing on your mobile home.

5.       Chattel Loans

Chattel loans are property loans that can help finance your tiny home on wheels. They allow you to take a loan whether or not you own the; land, making it popular among people renting lots or pieces of land.

Chattel loans may seem attractive but come with a higher interest rate than normal mortgages, between o.5 and 5% on average. They also typically have a shorter repayment period, which translates to higher payments.

On the bright side, they are easier and less restrictive on the closing process than typical mortgage loans.

6.       Personal Loans

Personal loans are the best and most popular option for people opting for tiny mobile homes. With the huge flexibility mobile homes come with, you can use them to finance your tiny home on wheels. However, personal loans will be a bit more expensive compared to typical mortgagees, and you will end up paying more in interest.

On the other hand, personal loans come in handy as you don’t have to put up anything to get the loan, meaning you won’t lose your land or house if you default. The paperwork is also faster and the application process faster.

You can get up to $100,000 in personal loans, which can be enough to finance your tiny home on wheels.

7.       Home Equity Loans

There are certain kinds of mobile homes that can be financed through home equity loans. If you already have some built-up equity, you can be eligible for financing if you pass certain criteria.

On these kinds f loans, lenders will mainly impose a certain minimum loan amount that can be borrowed.  People looking to add a tiny home to their property as a guest house or an extra place t stay are best suited for home equity loans.

Adding a tiny home to your property will increase the value of your property, which will help you recoup on investment and even make some profit.

8.       Home Equity Lines of Credit

These are similar to home equity loans and except they work more like a credit card. Successful applicants are given lines of credit where they can withdraw funds if they want to.

If you are looking to build a tiny home on wheels, this may be a nice way of financing, as you get o to withdraw money depending on the stage of building you are at.

It helps ensure you don’t over-borrow, making it an easier time paying back.

9.       RV Loans

You can also get your hands on an RV loan if your tiny house on wheels qualifies to be labeled as an RV. The only bad thing about RV loans is that you won’t get them if the RV is your primary home. However, for a part-time dwelling, you are welcome to try.

10.   Family  and Friends Loan

Don’t overlook how many families can play a part in helping you finance your tiny home on wheels. For one, you can get some cash help from family and better repayment terms than any bank or lending institution.

On the other hand, they may provide you with certain things that may go a long way in helping you finance your mobile home, including land you can settle on or use as collateral for a loan.

Point To Note

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It should be noted that just because a house is on wheels does not make it necessary to move from place to place.  Plenty of people live in a mobile house on wheels, in a park where they spend their whole lives.

American housing is quite expensive compared to buying a mobile home and some land to settle on. Getting some land and a trailer may run-up to a couple of a thousand dollars, while getting a house may run anywhere from hundreds of thousands to millions.

People will choose to buy some land and settle on their trailers and save some money, rather than spending their life savings on the house and end up broke, with property taxes pressuring them.

It is not odd to find career people and permanent workers living on a trailer on some purchased land.

A place like Oak Heaven Mobile Home, just on the outskirts of Martinsburg, has around 22 semi-permanent mobile living homes. The trailers are not like the ones you are used to as they are modified to be a bit bigger in terms of rooms and built.

Conclusion

Before deciding to start a life on a mobile home, one of the best options to look at is the decision’s longevity. Please do not make such a huge decision only to regret it when older and less energetic.

Saving money and convenience should be at the top of the list when making such a decision. Get all the advice from people who live on mobile homes and organizations such as manufactured homeowners associations.