Everything You Need to Know About Buying a Tiny Home

Q: Can you use a personal loan to buy a tiny home?

Yes, you can use a personal loan to buy a tiny home. A traditional mortgage is generally not an option with a tiny home, so a personal loan may help you get the money you need. The rate and loan terms you qualify for will depend on factors like your credit score and income.

Q: What financing options are available for buying a tiny home?

Options for financing a tiny home include personal loans and construction loans. If your tiny home is movable, you may be able to get an RV loan.

Q: What should you consider when buying a tiny home?

When buying a tiny home, you’ll need to consider the location you want to put it on, your budget, and whether you want a tiny house that sits on a foundation or one on wheels that’s movable. In addition, there may be special zoning laws for tiny homes in your area, and you’ll need to figure out the utilities your home will use.

Kenny ZhuUpdated February 24, 2023

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

The movement for buying a tiny house has gained traction in recent years, partially due to lower costs, numerous customization options, and the lure of a simpler lifestyle. Tiny homes come in all shapes and sizes, with prices to accommodate different budgets. But there are a number of factors to consider when buying a tiny home that can impact the cost. Here are some of the key things you need to know in order to buy a tiny home.

What Are Tiny Homes?

A tiny home is typically 400 square feet. It’s a fraction of the size of a median single-family home, which is 2,300 to 2,500 square feet. There are two different types: Tiny homes that are movable (they have a trailer as their base), or tiny homes on a foundation. Depending on your budget, tiny homes can include many of the conveniences of a traditional home. Recommended: Moving Across the Country in Six Steps

What Is the Average Price of a Tiny Home per Square Foot?

If you’re considering buying a tiny home, know this: The average price per square foot is $300. In comparison, the price of a traditional home averages $150 per square foot. But because a tiny home is so small, it typically saves you money whether you build it yourself or buy one that’s prebuilt. The average price of a tiny home ranges from $30,000 to $60,000. Building a tiny home yourself is the less expensive option, but it can be a lot of work. If you’re planning to buy a tiny home that’s prebuilt, prefer to hire professionals to build it, or want special features, expect to pay significantly more. Prebuilt tiny homes may cost $75,000 or more.Recommended: 9 Ways to Borrow Money

Additional Costs Associated With Buying a Tiny Home

While many of the same costs of traditional home ownership apply to tiny homes, there are also some key differences you need to be aware of.

Insurance

Most tiny homes won’t qualify for traditional home insurance. If your tiny home is movable, you may be able to get RV insurance. If your tiny house is built on a foundation, you may qualify for mobile home insurance. Expect the cost of your tiny home insurance policy to vary depending on the home’s location and construction type, among other things.

Permits

Depending on where you live, there may be local zoning laws governing the construction of tiny homes in your area. For example, some localities only permit a tiny home to be built as an accessory structure to your main property. And it can be illegal to place a tiny home on a friend or family member’s property for free.If your tiny home is on wheels, local ordinances may prevent you from parking it in certain areas. Some locales may prohibit the construction of tiny homes altogether.You’ll likely need a building permit for building a tiny home. Check with the government office in your area. Also, you’ll need to follow local building codes. Some codes may not have been modified for tiny houses, however. It may be best to work with a company or contractor who is familiar with the codes in your area.

Utilities

Your tiny home will need water, sewer, and electricity hookups. Depending on your location, you may be able to hook up to local utilities. But if your house is off the grid, you’ll have to find alternative sources. Solar panels, solar water purification systems, and solar septic systems may be necessary investments that will add to your costs.Recommended: Guide to Saving for a House

Factors That Influence the Cost of a Tiny Home

There are a number of other factors that impact the cost of your tiny home, including:

Cost of land: The property you choose to build on can be a major expense, depending on where you live.Make sure the land is in a location you’ll be happy with, and consider zoning laws and any other restrictions that may apply.
Home size: The size of your tiny home and how many stories you wish to build will significantly impact the cost of your materials and construction expenses.
Building material: The type of materials you use will comprise a significant part of your budget. Costs for materials to build a tiny home run about $20,000 to $60,000.
Foundation: If you’re building your tiny home on a foundation, the foundation will cost you approximately $4 to $7 per square foot. The type of land you’re building on (whether its rocky or soft terrain, for instance), can also impact your construction costs. Movable tiny houses, which don’t require a foundation, are less expensive.
Proximity to the grid: You may be building on land that allows you to hook up to local water, sewer, and electric sources. But if you are building in a remote location that’s off the grid, you’ll likely need to invest in things like solar-powered utilities.
Building codes: Local building ordinances may require special adjustments to ensure your tiny home is built up to code. Be sure to check. And you’ll need a permit to build your tiny home. The national average price of a building permit is $1,350. It can be higher, however, depending on the size of your house.

How Does Buying a Tiny Home Work?

The process for how to buy a tiny home will differ slightly, depending on whether it’s prebuilt, new construction, or if it’s a tiny house on wheels. First, you’ll need to determine your budget and what you want in a tiny home. This includes figuring out the land you’ll put it on if you’re building a tiny house on a foundation, and customized features you might want. What you can fit in a tiny home is also important to consider. For instance, unlike a traditional home, you probably won’t be able to opt for a walk-in closet and a kitchen island, which were popular pandemic home improvement projects.Once you’ve decided on what type of tiny home you want, you’ll need to decide how to pay for it. If you don’t have the money to pay out of pocket, there are financing options that can help. Keep in mind that most traditional mortgage companies don’t offer tiny home financing. So you will need to look into other financing, such as personal loans. Recommended: All About Mortgages

Pros and Cons of Buying a Tiny Home

Buying a tiny house has advantages and disadvantages. Here are the main pros and cons to consider before buying.

Pros of Buying a Tiny House	Cons of Buying a Tiny House
Less costly than a traditional home	Offers a lot less space
Energy-efficient	Need to buy land for it
Maximized storage space	Requires design compromises
Can be affordable for new homebuyers	May require solar-powered utilities
Option to make it movable	Can be difficult to finance

Funding for Tiny Homes

Most tiny homes don’t qualify for a mortgage because of their small price tag (mortgages typically have minimum loan amounts). However, borrowers have a variety of loan options for financing their tiny home. This includes applying for personal loans, taking out an RV loan, or getting a construction loan. You may even want to explore home improvement loans. Look for a loan that gives you a sum that will cover the cost of your time home. For instance, personal loans typically range from $1,000 to $50,000, but some lenders offer loans up to $100,000. The loan terms you qualify for, including the amount you can take out, the interest you’ll pay, and how long you have to pay the loan back, will depend on factors like your credit score, your credit history, and your debt to income ratio (your gross monthly income compared to your monthly debts). Shop around and compare terms to find the loan that works best for you.

Personal Loans With Lantern

If you’re buying or building a tiny home, the costs can add up, and taking out a mortgage is usually not an option. A personal loan is a type of financing you may want to explore to help cover your costs. Personal loans are versatile and can be used for almost anything, including building or purchasing a tiny home. Personal loans offer fixed monthly payments, and you repay the loan over time.When you’re shopping for a personal loan, Lantern by SoFi can help simplify the process. In our marketplace, you can compare interest rates for a personal loan from multiple lenders. By filling out one simple form, you can quickly and conveniently find the option that best fits your tiny home needs.

Frequently Asked Questions

Can you use a personal loan to buy a tiny home?

What financing options are available for buying a tiny home?

What should you consider when buying a tiny home?

Photo credit: iStock/imaginima

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About the Author

Kenny Zhu

Kenny Zhu is an active CFA charterholder and former banking and investments marketing manager, and former investment analyst with over a decade of experience in the financial industry. His work has been featured in a variety of publications including LendingTree, MagnifyMoney, Finance of America Mortgage, LLC, and ValuePenguin.

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