Are you interested in buying a tiny home either to live in or rent out for a profit and wondering what types of loans you can qualify for? FHA loans can cover the purchase of a tiny home in most circumstances if a borrower is eligible. If you are interested in learning more about buying a tiny home in Jacksonville, Florida, North Star Mortgage Network, Inc. can help. Read on to learn more about using an FHA loan to finance a tiny home.
Using an FHA Loan to Help Finance a Tiny Home
Tiny homes range from approximately 100 to 600 square feet and are becoming a popular option for many homebuyers who are interested in downsizing their lifestyle, opting for a more eco-friendly home, freeing up finances, or investing in a rental property. Tiny homes are typically built on a permanent foundation, and have a living space, kitchen, bathroom, and loft bed. Sometimes funding these types of homes can be challenging because obtaining a traditional loan can be difficult, but fortunately, an FHA loan can be used to purchase a tiny home that is 400 square feet or larger. An FHA loan is a mortgage that is insured by the government, and is one of simpler types of loans to qualify for because it has more lenient credit requirements and requires a lower down payment.
What Are the FHA Loan Requirements For a Tiny Home?
In order to obtain an FHA loan to help you purchase a tiny home, there are certain requirements that need to be met. First of all, the home cannot be less than 400 square feet and requires that the home is marketable in your location. It must have adequate space for living, cooking, sanitation, dining, sleeping, etc. The house also must meet both state and local building code standards. For example, it must meet the minimum safety standards for system upkeep, being in good repair, and having sufficient plumbing, water heater, etc. Additionally, the tiny home must be attached to a permanent foundation.
How Do I Qualify For an FHA Loan To Purchase a Tiny Home?
In order to qualify for an FHA loan, certain eligibility requirements must be met, for example:
- Credit Score – You must have a credit score of at least 500 – 580.
- Down payment – If your credit score is 580 or higher, a down payment or 3.5 percent will be required. If your score is between 500 – 579, you will need to put down at least 10 percent.
- Credit history – You cannot have a 30 day late payment within the past year and cannot have had a previous foreclosure or bankruptcy in the past 3 years.
- Closing costs – You will need to pay for closing costs, which typically cost between 2% – 5% of the loan amount.
- Debt-to-income ratio, (DTI) – You need a DTI of 43% or less.
If you are interested in purchasing a tiny home with an FHA loan in Jacksonville, Florida, contact North Star Mortgage, Inc. today for a consultation.