Tiny House Photo: Tammy Strobel/Flickr 

Many people are fascinated by the idea of moving into a tiny home measuring less than 500 square feet, either to benefit the environment or save cash. Not only has the Tiny Home movement emerged as a viable home ownership option, but it’s also influencing other industries to think outside the box (literally!). 

Eilene Zimmerman’s recent piece in The New York Times, “Moving Into a Shipping Container, but Staying Put,” profiles Montainer, a Missoula-based company that transforms shipping containers into modular tiny homes. People use Montainer’s products as standalone structures, additions to existing homes, and even office spaces.

But purchasing one of these tiny structures can be complicated. Zimmerman reports that Montainer is gearing its products towards house hunters who can’t afford to buy a full-size house, but it’s difficult for these people to obtain a mortgage from the bank.

Most customers have to pay in cash because traditional bank loans aren’t usually available for tiny houses. Regulation of their size and zoning is still unclear because the homes are so new to the market.

When customers can’t pay with cash, they use home equity loans. This limits the possibility of tiny structure ownership for young people who typically do not already have property to borrow against.

Greg McBride, chief financial analyst at Bankrate.com, explained why the process is so sticky.

“Many lenders won’t do a home loan for anything less than $100,000 because it’s not profitable. It is not always possible to securitize loans for tiny homes. Lenders are unable to sell the loans to an investor as part of a mortgage-backed security, because the homes are so unconventional — and they are so much cheaper than traditional homes,” he said.

McBride also noted that the bank is wary of lending money to finance these homes because the tiny home market isn’t well enough established yet.

Montainer is in the process of seeking special agreements from credit unions to provide tiny home-specific financing to prospective buyers.

Patrick Collins, Montainer’s chief executive, said that the company is willing to wait for the market to gain more traction.

“We know it’s going to take time for these kinds of homes to gain acceptance from the standard mortgage underwriting market, but as clients buy and then resell them, that will change.” In the meantime, he said, “there’s no shortage of people willing to buy one with cash.”

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