Rebecca Richardson - Mortgage Consultant
Can You Finance That?
Homes can come in all different shapes and sizes beyond the stereotypical single-family home at the end of the cul-de-sac that you see on your TV. When it comes to those more unconventional homes, can you still finance with a conventional loan?
In this blog, we’ll break down three of the most common uncommon properties that I’ve helped people finance and the nuances of each.
Buying or Building a Barndominium
If you’ve spent any time watching the show Fixer Upper, you’re probably aware of barndominiums, or barndos. If not, they’re exactly what they sound like—a barn that’s been converted into a home.
Barndos have risen in popularity recently due to their general style, affordability, and efficiency. However, there are plenty of rumors out there that you can’t use a traditional mortgage to finance it.
The truth is, you can, but it depends on how it’s built.
If you buy or build a modular barndo or a stick-built barndo (which means it’s framed with wood the same way as a traditional home) it’s treated like any other home, meaning you won’t run into any issues trying to get it financed.
Where you’ll run into issues is if it’s built with a pole barn method. That’s where the structure is supported by poles in the ground and anchored by concrete. This is a very popular method due to its cost-efficiency. However, you’ll face issues financing barndos built with the pole barn method because they’re not as structurally sound as the previously mentioned methods.
The most important thing to consider when you want to build or buy a barndo is the way that it’s built rather than the way that it looks.
Single-Family Residences with a Rental Property
You’ve probably heard of buying a multi-family property that has 2-4 total units where you can live in one and rent out the other for extra income. These are great ways to generate supplemental income while also securing your own residence.
But sharing walls with your tenants isn’t for everybody. Did you know that there’s another option where you buy a primary home that has an accessory dwelling unit to rent out? Before we get into the details, let’s talk about accessory dwelling units, or ADUs.
An ADU is typically smaller than the primary home but exists on the same plot of land. Examples of an ADU could be a loft above a garage, a living area in a basement, a small addition to or near the primary dwelling, or even a manufactured home.
It’s possible to use your standard loan types to buy a property that has an ADU, but there are also some restrictions. You’re typically limited to just one ADU, and it must have its own entrance and exit, separate features for kitchen, sleeping array, and bathing/bathroom facilities.
Real estate is an incredible investment for yourself, but also a great way to generate some supplemental income. If you’re looking for a way to generate rental income while still having your own space, purchasing a single-family residence with an ADU is a great option.
Tiny Homes, Big Differences
Have you ever considered buying a tiny home? If so, the first thing you need to understand before you try to secure financing is that ‘tiny home’ is more of a marketing term than a property type.
When you’re shopping for your tiny home, there are three things that matter most when you’re trying to get a mortgage: how it was constructed, the type of dwelling that your local zoning laws allow, and if there are other similar properties to establish value.
For example, there are tiny home models that are less than 400 square feet. These are not considered ‘real properties’ and will likely need an RV loan to purchase.
However, you can use a traditional loan, such as a conventional loan or even a VA loan, once you’re above that 400-square-foot threshold because they’re then considered a modular home. Modulars are regarded as single-family homes for mortgage purposes.
So, when you’re shopping for a tiny home, you need to be focused on the smaller details. There are plenty of differences, and just like everything else in a tiny home, those small details have big impacts.
No matter what kind of dwelling feels most like home to you, there are plenty of nuances that go into getting your mortgage. My team and I have helped clients from all sorts of backgrounds buy all sorts of different kinds of homes. If you have any questions, let’s get started!