There's more than one way to get a loan for a shipping container home. Here are some of your options for financing this unique and affordable type of home.
Shipping container homes have become popular in recent years as unique, eco-friendly, and affordable housing options. But unique houses sometimes have unique financing challenges, meaning it can be more difficult to get a home loan to purchase them.
Not so with shipping container homes, though. Technically, shipping container houses are modular homes, and you can purchase a modular home with a conventional loan. We’ll tell you how to get a loan for a shipping container home and why these properties have gained so much appeal.
- You can buy a shipping container home with a conventional loan
- Shipping container homes are creative, affordable, and eco-friendly options for homeownership
- If you’re having a shipping container home built, you will need to ensure you are also able to purchase land and get the relevant permits, approvals, and utility hook-ups for the property
What's in this Article?
There are a couple of ways to approach purchasing a shipping container home:
- A land and construction loan: Some lenders offer a loan that allows you to purchase the land and finance the construction of the home. Not all lenders offer these loans, and if the land isn’t permitted or cleared for a home, you will need to pay to get the property set up as well
- Construction loan: If you already own the land, you may qualify for a construction loan to finance the materials and actual build of the home
- Conventional home loan: You can use a conventional home loan to purchase a shipping container home. This may be an option if the home is an existing property (one that is already built and installed on a piece of land) or you are purchasing the finished home after someone else has paid for the upfront costs
Bryan Booth, a branch manager with Fairway Independent Mortgage Corporation, recently helped a couple purchase a shipping container home in the Boise, Idaho, area.
In that case, the couple asked a parent to cover the upfront building costs. After the home was complete, they refinanced to a conventional loan in the couple’s name.
“It turned out to be a great project,” Booth said of the home, which the owners designed uniquely for their family’s needs.
The option to use a conventional loan is particularly attractive because it’s a more widely available loan type, and there are low down payment options available.
You can qualify for a conventional loan with:
- 3% down payment as a first-time homebuyer
- 5% down as a repeat homebuyer
- Credit score of 620 or higher
One of the advantages shipping container homes have over other unique types of homes is that it’s considered a modular home. As such, appraisers can use stick-built and other modular homes when looking at comparable properties in the area, Booth said – a key factor in getting approved for the loan.
Appraisers need to determine the fair market value of a property, and part of that process involves looking at recent sales of similar homes. If the house is of such a unique character that they cannot find comparable sales, it can cause the loan to fall through.
That’s why it’s sometimes difficult for homebuyers to get approved for a mortgage on another type of unique home: the barndominium. There just aren’t that many out there right now, and they aren’t considered modular the way shipping container homes are.
Pros and cons of buying a shipping container home
Now that you know how to get a loan on a shipping container home, let's go over the pros and cons of this option.
- Creative and affordable way to become a homeowner
- Total cost can be below average home price
- Strong, durable, upcycled materials
- Blank slate to create a unique, custom floorplan
Shipping containers are a creative and affordable way to become a homeowner, according to Booth.
The total cost for land, building, and materials for the couple he helped with their shipping container loan was $325,000, he said. That was in 2018, prior to the housing boom set off by the coronavirus pandemic. At the time, the total cost was still well below the average home price in the Boise area, Booth noted.
Another advantage to shipping container homes is that you’re using existing materials to build your home – and strong ones at that. Shipping containers are designed to be stacked on top of one another and shipped, so they make for strong, heavy frames for a house.
Booth recalls seeing his clients’ home and being impressed by its resilience.
“It’s a solidly built home,” he said. He added that because of the nature of the building materials, there is less maintenance to do on a shipping container home than a traditional house.
You can also use your imagination when it comes to the layout of the home. By combining multiple containers in different layouts, you can create the ideal floor plan for your lifestyle.
Check out these decked-out shipping container homes:
- Need to purchase land and pay construction costs
- Traditional home loans don't cover DIY projects
- Need to clear and prepare land with utility hook-ups
- High demand for these home already
The drawback to having a shipping container home newly built is that you have to purchase the land on which it will sit, plus the construction costs. And if you choose to DIY the shipping container build, you won’t be able to get a traditional home loan to cover the costs of buying, moving, and renovating the containers that will be used.
If you purchase the land on which the home will sit, you’ll need to consider whether it’s already been cleared and whether it has utility hook-ups. Municipalities will require that the property have street access, along with hook-ups for electricity and natural gas, if needed, as well as water and sewage services.
You can pay to have the land cleared and prepped for residential use yourself, but you’ll need to budget for those expenses, as well as secure the appropriate permits for building the home.
There’s also high demand right now for shipping container homes, so you may not be able to move as quickly as you might like if you go this route. If your builder is booked out several months, or even years, you’ll have to continue renting or find alternative housing while you wait for the home to be complete.
The hack for getting around these issues is finding a shipping container home that’s already been built and installed on a piece of land. You can purchase the home with a conventional loan (assuming you meet the borrower criteria and the property meets all of the loan program requirements).
Shipping container homes offer many advantages to prospective homeowners, especially those interested in upcycling materials and building a home on a budget. Conventional loans enable homebuyers to purchase shipping container properties more easily than some other unique housing options out there.