Financing a Container Home

Homes built from shipping containers are becoming increasingly popular, and that should make it easier to obtain a conventional home loan for one.  It should anyway, but that’s not always the case.

In the late 1990's it was often a challenge to secure financing on a log or dome house, anything off the grid and in many cases modular or prefab (short for prefabricated) housing was also a difficult property to underwrite.  However, due to increasing popularity and a greater degree of comfort on the part of banks and their underwriters, there are a great number of options available to borrowers.  I suspect the same will hold true for container housing as well.

The initial funding question that needs to be address is how will you fund the construction.  Lenders typically don't disburse money on properties that are not yet, so you'll need to investigate what options are available to you:

• Out of Pocket: Can you fund the construction out of pocket, and refinance it when the construction is complete?
• Construction Loan: Finding a bank, most times a local branch, to provide a short term construction loan, typically broken into disbursements based on progress, could be available in your market.  However, at the end of construction you'll need to refinance the short term loan into a long term mortgage, which may carry a second set of fees.
• Single Close Construction Loan: Some banks offer single close construction loans. These loans give you all of the flexibility of a construction loan, and automatically modify into a mortgage at the end of the construction period.

Addressing how to finance the construction phase is the first hurdle, but this is typical for any convention or nonconventional new home construction. 

After speaking with several mortgage professionals that lend nationwide in the United States, the general consensus comes down to the following factors:

• Credit worthiness: This applies to all loan programs, however it should be said that borrowers with a strong credit rating will be give the underwrite slightly less concern of the bank having to deal with a default on a non-conventional property type.
• On the Gridâ it's perfectly acceptable to have alternate power sources, and it's fine if the power the majority of the power and water to the house, however the house must be connected to the power grid.
• Comparable Properties: It's very important, if not vital, to have the appraiser look for comparable properties within a reasonable distance. Ideally, the comparable properties would also be container housing. If no container housing is in the immediate area, the next best bet is modular or prefab housing. Any type of property that illustrates similar houses are marketable in the area. The big concern of the underwriter is if the borrower defaults on the mortgage can the bank sell the property and regain the capital? It's important to note that just because you feel that you are able to meet all of the criteria; it's up to the final judgement of the underwriter. From my experience, it's always best to approach mortgage underwriters with a how can I make you comfortable with this property?, as opposed to an adversarial and argumentative approach.

Finding a bank to lend on a home built from shipping containers may not be as simple as obtaining a conventional mortgage, however the end result will surely be worth the effort. If you have any experiences that you'd like to share feel free to post your comments below, or email our office directly and let us know if we can share them anonymously. As always, any questions are welcome.