What’s the Cost of a Tiny House?

Cost of a tiny house

The cost of a tiny house is naturally significantly lower than that of a traditional home. And that applies whether you’re building a new one or buying an existing one.

But it’s more complicated than that. So read on as we dig into the details of actual tiny home costs, explore how you can finance one, and weigh out whether it makes sense to get one.

In this article (skip to...)

• Cost of building a tiny house
• Types of tiny homes
• How to finance a tiny house
• Tiny house restrictions
• The bottom line

The cost of a tiny house: buying

Most people define a tiny house as one smaller than 500 square feet, often between 100 and 400 square feet. That compares with a median American home size of 2,273 square feet in 2021, according to Statista.

As you can imagine, the range of prices for tiny houses is vast. When we searched the web, we found one listing with an asking house price of $499,999. But it was an architect-designed, luxury, 465-square-foot gem in the Blueridge Mountains in South Carolina. And its views were truly spectacular.

Going into the sub-$100,000 range, you’ll find more and more examples of small homes on wheels, which are often called manufactured homes. And many of those don’t come with land.

But there are plenty of non-wheeled alternatives, with land, for around $50,000 and many down into the $20,000s and below. However, you may need to do work on some of the much less costly ones. Forbes estimates the average price of an existing tiny home in 2023 to be $50,000.

The cost of a tiny house: building

You probably won’t be surprised that it often costs more per square foot to build a tiny house than a larger one. But the overall cost is much lower because you’re requiring fewer square feet.

We’re looking here only at construction costs. So, you need to add on the amount you’re going to pay for land.

Prefabricated

Many people opt for prefabricated homes, not least because they tend to be less costly. If that’s your choice, you’ll have to decide whether you want it delivered in sections for on-site construction or ready-built so it’s craned off the truck in one piece. You’ll also have to select the level of amenities and finishes you want.

HomeGuide estimates the average costs for each prefabrication option as follows:

• Unassembled kit for exterior shell: $4,000 - $30,000
• Assembled exterior shell: $15,000 - $40,000
• Assembled and fully finished, with appliances and fixtures: $25,000 - $80,000

Why such wide ranges in pricing? Well, the size of the home will make a big difference. And HomeGuide reckons a really tiny, 90-square-feet assembled and fully finished unit might be yours for $15,000. But the same with a 400-square-foot footprint could cost you $100,000.

In addition, if you opt for a fully finished unit, you’ll be making lots of choices about countertops, bathrooms, appliances and so on.

Custom-built

You’d expect to pay more for something that’s designed just for you. And construction tends to be more costly on a site than in a factory. So, we’re typically looking at $50,000 - $140,000 for a tailor-made tiny home.

Again, a big factor is the size of the home. The tiniest could cost $50,000, while a 400-square-foot one might come in at $150,000. And you’ll likely have even more choices about finishes, amenities, and appliances than a fully finished prefabricated unit.

Types of tiny homes

Tiny homes fall into two broad categories: those originally built on wheels (aka manufactured homes, which used to be called mobile homes or trailers) and those built on permanent, traditional house foundations.

The latter are typically smaller versions of traditional, single-family homes. And, just like those, they come in two flavors: prefabricated and site-built.

To count as a manufactured home, a wheeled home must have been built after 1976 and carry a “HUD tag,” which is a quality mark issued by the U.S. Department of Housing and Urban Development (HUD). That means the unit complies with standards for design, construction, energy efficiency and installation.

To be eligible for a mortgage, a manufactured home must meet other requirements. And those are coming up next.

How to finance a tiny house

You may find it odd that it can be easier to get a mortgage on a manufactured home (on wheels) than a traditionally built tiny house. Perhaps mortgage companies haven’t yet cottoned on to the tiny house movement, which is more recent than the demand for manufactured homes.

Traditionally built tiny house

You’ll likely find it hard to get a mortgage for a tiny house. Many lenders set a minimum value on the loans they offer and may impose a minimum square footage. Unfortunately, tiny houses often fall short of both those thresholds.

Of course, that doesn’t mean you can’t finance a tiny home. But you’ll probably have to look at alternatives to a mortgage. Those include:

1. Personal loans — These are unsecured loans offered by banks and specialist lenders, many of which operate online. Your credit score will largely determine whether you’re approved and the interest rate you’ll pay
2. Contractor financing — Sometimes, the contractor who builds your tiny home may offer to lend you the financing you need. But get competitive quotes from personal loan lenders before you commit. Otherwise, you risk paying too high an interest rate
3. Cash — Of course, this isn’t an option for most of us. But, if you’re a homeowner downsizing to a tiny home, paying cash is a way to avoid all financing costs

Manufactured home

Various federal departments and agencies offer mortgages for manufactured homes, including the Federal Housing Administration (FHA loans), the Department for Veterans Affairs (VA loans), and the Department of Agriculture (USDA loans). And you may be able to get a conventional mortgage for a new home that complies with Fannie Mae and Freddie Mac’s rules.

Of course, you’ll have to meet your lender’s requirements for your credit score, existing borrowing burden, and down payment. And, the manufactured home you’re buying must meet certain tests. It has to:

1. Be on land you own and be anchored to a compliant, permanent foundation
2. Provide at least 400 square feet of living space
3. Be “real property,” meaning you pay property taxes to your local authority rather than taxes to the DMV

Get more details by reading our Manufactured Home Loan Guide.

Tiny home restrictions

There are numerous financial and other upsides to tiny house living. But there can also be downsides.

Here are some examples:

1. Many local authorities impose minimum square footage requirements as part of their zoning laws. Make sure the one where you want to build has moved with the times
2. Some tiny houses are more vulnerable to natural disasters than bigger homes. And insurers might charge you higher premiums
3. If you want your tiny home to be somewhere remote, don’t forget you’ll have to pay either to have utilities connected or for your own alternatives. You’ll need, at a minimum, access to plentiful, safe water and a way to treat sewage
4. If you see your tiny home as a do-it-yourself project, be sure you know about all the building permits you’ll need. If you have a contractor, getting permits is typically part of the service

Of course, the biggest restriction you face is living in a small space. Americans are used to sprawling homes that can easily accommodate both people and their numerous possessions.

So, think carefully about whether you’ll be able to adjust to a relatively cramped existence. And, if you’ve doubts, try renting a tiny home for your next vacation.

Cost of a tiny house: The bottom line

Whether you’re buying or building, the tiny home cost is much lower than that for an average-sized home. And the financial savings keep coming because tiny homes are typically much cheaper to heat or cool and maintain.

It can be difficult to get a mortgage on a traditionally built tiny house. But it’s much easier to get one to buy a manufactured home, which was originally built on wheels. Of course, you can still finance a non-wheeled tiny house if you qualify for a personal loan or contractor finance. And paying cash is great, if you can.

Living in a smaller space doesn’t suit everybody. But, if you’re a minimalist ready to make the move off-grid, why not get started today?