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8 Ways to Finance Your Alternative Home

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Do you wish to construct a strawbale, mud-brick, or tiny trailer home? Here’s how to finance your alternative home unconventionally.

Alternative Construction Loans are becoming more common but are outside the mainstream for many good reasons. Smaller homes (often under 1,000 square feet) and greener dwellings made of natural materials (or using effective technologies like solar or geothermal heating) are typically healthier for the environment and the financial health of the homeowners.

However, banks and regulatory markets need to adapt more, and financial products need to be tailored exclusively for this industry.

Why? The first step in providing an evaluation for mortgage lending is for banks to locate nearby, comparable residences. Finding a lender to financing your hip new place can be difficult if few or no such properties are available.

Why a conventional mortgage is inadequate

According to Kai Rostcheck, a digital marketing strategist and the creator of Tiny House Lending, a platform that links borrowers with a network of lenders, these loans are “a round peg for the banks’ square hole.” He claims that alternative dwellings, whether small or large, offer a danger that banks can’t yet understand.

Why do you require an unconventional loan?

Tiny houses and eco-castles aren’t always an exception to the U.S. average price per square foot of $95 for new construction. Even a DIY building can easily cost upwards of $10,000 in materials. However, projects like Earthships, cob, or strawbale structures may be less expensive. For instance, a passive solar or geothermal home could cost as much or even more than similarly situated properties.

It is still feasible to secure financing for a different type of residence. It is where to start if you’re prepared to take the plunge.

1. Will you DIY much?

Building your own tiny house, earth dome, or strawbale house will be the most affordable choice. Going the DIY approach will require you to put in your own time and labor, which can save you a ton of money.

DIYers ignore funding from musician Trevor Reichman, who lives in a 250 square foot earth-dome he built in rural Texas. Approximately 90% of the building with free earth materials, according to Reichman, who calculated his construction costs to be less than $1,000.

He continues that it is a blessing in disguise since a bank would never finance your alternative home with a structure like this. “Instead of soliciting money, I asked for labor assistance.”

Only some DIY projects will be this inexpensive, but it still pays to consider your level of involvement.

2. Knowing where you are about everything

Often, a traditional loan pays for eco-friendly upgrades like solar water heating, reclaimed wood, or other environmentally sound materials. Solar, wind, and geothermal power are good ways to get energy, but these sources will need to be expected in your area for construction financing to accept them.

If so, consider utilizing a neighbourhood bank since they may be more familiar with the area. For example, in some parts of New Mexico, local banks lend money for adobe homes, but a national lender might think that’s too strange.

3. Put in your effort

Don’t be shocked if you can obtain a conventional mortgage for the land but not a building financing. Go out and look for similar homes if a lender claims there aren’t any in your community.

Exist any passive dwellings, pre-fabs, or log homes nearby? Anything that goes beyond a standard stick-frame structure might be taken into account. Success will come knocking on your unorthodox front door if you don’t take no for an answer.

4. Investigate personal or portfolio loans.

Many loans are available for non-land-based items, such as auto and boat loans. You may utilize a personal loan to finance the construction of your home as they don’t require assets or money as security. Instead, your credit score, debt, how much you can borrow, and the interest rate and income determine 

Another choice is portfolio lenders, who make loans using their funds rather than selling them on the secondary market, as most other lenders do. They may therefore take into account your crazy (but well-planned, of course) dreams because the same rigid standards do not constrain them.

5. Think about private financing.

Although borrowing from friends or family has its challenges, it can also be advantageous because the individuals involved decide what the conditions of the agreement will be. Or you could use the equity in your properties to pay for your new alternative home. Try raising money for your project on a website like Kickstarter if you have an original idea and strong social networking skills.

6. Investigate unique options

Some pre-fab manufacturers offer their financing for move-in ready or built-to-suit homes if you’re searching for a turnkey pad. Or you could qualify for an RV loan through a credit union if you’re building or purchasing a very compact home that would travel on a flatbed and wheels.

7. Maintain a high credit score.

Your credit history is the last deciding factor for any loans you apply for. Maintaining a good appearance will give you a good chance of receiving your desired loan at the rate you want.

8. Keep going; you’re an early adopter.

Finding the ideal loan could be challenging. Remind yourself how far ahead of the game you are.

Banks will adopt alternative building codes as more cities and towns do. This market is “about shifting economics and correlating values,” according to Rostcheck. He predicts that “it will explode” once forward-thinking home buyers and builders have access to the correct financial tools.

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