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Tiny Home & Alternative Housing Glossary
We've created some plain-language definitions for the financing, legal, and construction terms tiny home buyers run into most. If you have questions about other specific terms that you're seeing as you do your research or plan your journey, please be sure to ask.
A little clarification early can prevent big problems later down the road!
Click the buttons below to jump directly to specific sections.
Types of Tiny Homes
Financing / Loan Types
Key Legal & Financial Terms
Codes / Certifications / Standards
Tiny Home on Wheels (THOW): A small, fully livable home built on a towable trailer instead of a foundation. Because it's built on a chassis, it's legally treated as personal property (like an RV), not real estate, which is the single biggest reason THOW financing works differently from a regular mortgage. To be towed without special permits, it generally has to stay under 8.5 feet wide and 13.5 feet tall.
Park Model RV (PMRV): A trailer-style RV meant to stay parked in one place long-term or seasonally, rather than travel the highway often. It's built on a single chassis, capped at 400 square feet, and has to meet the ANSI A119.5 safety standard.
Accessory Dwelling Unit (ADU): A second, independent living space on the same lot as an existing house — sometimes called a granny flat or in-law suite. It can be detached, attached to the main house, or built over a garage, but it needs its own kitchen, bathroom, and sleeping area.
Junior Accessory Dwelling Unit (JADU): A smaller version of an ADU (500 square feet or less) built inside the walls of an existing house, often converting a garage or spare room. Unlike a full ADU, a JADU can share a bathroom with the main house and only needs a small efficiency kitchen.
Modular Home: A house built in sections inside a factory, then trucked to the site and assembled on a permanent foundation. Because it's built to the same local building code (IRC) as a site-built house, banks treat it like traditional real estate for financing and appraisal purposes.
Barndominium: A home built using steel-frame or pole-barn construction that combines living space with a large garage, workshop, or barn area. Popular for its open floor plans and faster build times.
Stick-Built Home: The traditional way of building a house: framed piece by piece with lumber, on-site, on a permanent foundation. It's the baseline every other construction type gets compared against for financing and appraisal purposes.
Chattel Loan: A loan for personal property rather than real estate — the standard way to finance a THOW. The lender's lien is against the home itself, not the land underneath it, which usually means faster closing but a higher interest rate and shorter term than a mortgage.
One-Time Close (OTC) Construction Loan: A loan that bundles land purchase, construction, and the permanent mortgage into a single closing instead of three separate loans. The rate is locked in before construction starts, and it automatically converts to a regular mortgage once the home is finished and gets its Certificate of Occupancy.
Home Equity Line of Credit (HELOC): A line of credit against the equity in a home you already own, often used to fund a backyard ADU. You draw money as you need it during construction and only pay interest on what you've actually used.
DSCR Loan (Debt Service Coverage Ratio Loan): A loan qualified using the rental income a property is expected to generate, rather than the borrower's personal income or tax returns. Common for investors building an ADU or tiny home to rent out.
USDA Rural Housing Loan: A federal loan program for homes in eligible rural areas that can offer no-down-payment financing. Some modular homes qualify if they meet USDA's construction and location requirements.
Land Loan: A loan used to buy raw or undeveloped land before construction begins. Land loans typically require a larger down payment and carry higher rates than a mortgage, since undeveloped land is riskier collateral for a lender.
Unsecured Personal Loan: A loan with no collateral behind it, often used by DIY builders or people who already own their land. Approval leans heavily on credit score (typically 700+) and comes with a shorter repayment window, usually 3 to 7 years.
Seller Financing / Rent-to-Own: An arrangement where the builder, dealer, or landowner finances the purchase directly instead of a bank. It can help buyers who don't qualify for traditional financing, but terms vary widely and should be reviewed carefully before signing.
Real Property vs. Personal Property: The legal line that determines what kind of financing a home qualifies for. Real property is land and anything permanently attached to it (like a modular home on a foundation), eligible for a traditional mortgage. Personal property is anything movable, like a THOW, which needs a personal loan, RV loan, or chattel loan instead.
Vehicle Identification Number (VIN): The 17-character code stamped on a THOW's chassis, used the same way a car's VIN is used. Lenders register their lien against this number with the state DMV instead of a property deed.
Loan-to-Value (LTV) Ratio: The loan amount compared to the home's appraised value, expressed as a percentage. A lower LTV usually means a smaller down payment requirement and better loan terms.
Debt-to-Income (DTI) Ratio: The share of a borrower's monthly income that already goes toward debt payments. Lenders use this to judge how much additional loan payment a borrower can realistically handle.
Prequalification vs. Pre-Approval: Prequalification is a quick, informal estimate of what you might be able to borrow, based on self-reported numbers and a soft credit check. Pre-approval is a formal, underwritten commitment based on verified income, assets, and a hard credit pull. It carries much more weight with a seller or builder.
Escrow Account: A neutral third-party account that holds funds during a purchase or build, releasing money to the builder only when agreed-upon milestones are met.
Lien: A lender's legal claim against a property or asset used as collateral. If the loan isn't repaid, the lien gives the lender the right to repossess or foreclose on the asset.
Appraisal / Comparable Sales Gap: A common roadblock for tiny homes and THOWs: appraisers rely on recent sales of similar nearby properties ("comps") to set a value, and in many areas there simply aren't enough tiny home sales to compare against. This can make it harder to get an accurate appraisal, which in turn can affect loan approval.
ANSI A119.5: The national engineering and safety standard specific to Park Model RVs, covering structure, electrical, and plumbing. Lenders and insurers use it as proof a unit was built to a recognized standard.
NFPA 1192: The fire and life-safety standard for recreational vehicles, covering things like emergency exits, smoke and carbon monoxide detectors, and propane systems in towable homes.
RVIA Certification: A seal from the RV Industry Association confirming a builder's units meet ANSI and NFPA safety standards. It's often required to park in RV resorts, register with the DMV, or qualify for RV financing and insurance.
IRC Appendix Q: A section of the International Residential Code with adjusted rules for homes under 400 square feet, things like shorter ceilings and ladder-style loft access that wouldn't otherwise meet code. It gives permanently-built tiny homes a legal path to permitting.
Zoning Ordinance: Local rules that determine what can be built on a piece of land, including whether tiny homes or ADUs are allowed at all. This is usually the first thing to check before buying land or planning a build.
Setback Requirement: The minimum distance a structure must sit from property lines, roads, or other buildings. Setbacks directly affect where a home can physically go on a lot.
Deed Restrictions / HOA Covenants: Private rules attached to a property or enforced by a homeowners' association. These can ban tiny homes or restrict exterior materials even in areas where city zoning would otherwise allow it, so they're worth checking separately from zoning.
Minimum Square Footage Requirement: A local rule setting the smallest floor area allowed for a primary residence. Many cities are relaxing or removing these minimums specifically to allow smaller and more affordable homes.
Site Preparation: The work needed to get land ready for a home to be placed or built: clearing, grading for drainage, excavating, pouring a foundation or setting tie-downs, and running electrical, water, and sewer lines.
Foundation System: The structural base that anchors a home to the ground. Options include concrete slabs, helical piers, or earth anchors. In many places, the type of foundation determines whether a home can legally be classified as real property.
Septic System / Well Water: Common alternatives to city sewer and water hookups for rural or off-grid properties. Both usually require their own permits and inspections, and their cost should be factored into a land and site-prep budget.
Utility Hookup & Impact Fees: Fees charged by a city or utility provider to connect a new home to water, sewer, electric, or to cover the added strain on local infrastructure. These are easy to underestimate and can add thousands to a project's true cost.
Grid-Tied vs. Off-Grid: Grid-tied homes connect to municipal electricity, water, and sewer. Off-grid homes generate and manage their own utilities using solar power, water catchment, and a composting toilet or septic system.
Greywater System: Plumbing that captures and lightly filters wastewater from sinks, showers, and laundry (not toilets) so it can be reused for irrigation instead of going to waste.
Composting Toilet: A waterless toilet that breaks down waste biologically instead of flushing it away. Common in off-grid tiny homes, and sometimes required to meet off-grid zoning rules.
Transport Insurance: Short-term coverage that protects a THOW against damage during the highway move from the factory to its final site separate from the home's regular homeowner's or RV insurance.
Curbside Delivery: A delivery arrangement where the manufacturer drops the home off at the edge of the property, and final placement and setup is on the buyer or a separate contractor.
Skirting & Tie-Downs: Skirting is the material that closes the gap between a home and the ground, hiding the chassis and blocking pests and drafts. Tie-downs are the anchoring straps or hardware that secure a home against wind. Both are often required for financing, insurance, or park placement.
A quick reference for how each housing type is typically classified and financed.
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