Land a Good Deal When Buying a Houseboat

You don't have to be a millionaire to own a house on the water -- as long as you are willing to live in a home that floats.

If you can picture yourself waking up to the sound of seagulls in the morning, love a relaxed lifestyle and don't mind walking a few extra steps to carry your groceries down to the dock, a floating home may be an option to consider when shopping for a house.

Floating homes can sell for as little as $100,000 to more than $1 million, depending on the location and the size. In some parts of the country, many first-time homebuyers find it cheaper to buy on water than land, says Denise Carlson of Seattle Metropolitan Credit Union in Seattle, home to some of the largest floating home communities in the United States.

"There are a lot of first-time homebuyers and young adults who are getting down payments from their parents and are looking at houseboats," she says.

Houseboats vs. Floating Homes

Carlson works with borrowers who seek financing to buy houseboats and floating homes. Yes, there is a difference between the two. A houseboat is actually not a house. It's a vessel and it moves. Therefore, when you get financing for a houseboat, it's normally a recreational vehicle loan. It's almost like you are financing a car.

A floating home, which looks more like a house, is a stationary structure that sits on water and cannot propel itself. A floating-home loan is an actual mortgage that allows you to finance the property over a longer period. RV loans generally have shorter terms, but some lenders offer 20-year financing on houseboats.

Getting a Mortgage

Financing a houseboat or getting a mortgage for a floating home is not as much of a hassle as it may sound. But you'll have to look harder for lenders, as few of them offer these loans. Real estate agents who specialize in selling these types of homes should be able to refer you to lenders. Homeowners associations can offer referrals, too.

Loans used to purchase floating homes or houseboats will cost you more in interest than a traditional mortgage. "A lot of banks don't understand or don't want to deal with these loans, and because of the lack of supply, the lenders that do offer them charge you more in interest," says Stan Barbarich, president of the Floating Homes Association in Sausalito, Calif.

Expect to pay 1 to 2 percentage points more for a mortgage on a floating home than on a loan for a house on land. For houseboats, it's more likely you'll pay 3 percentage points more.

Unlike with traditional mortgages, lenders can't sell loans on floating homes to Fannie Mae and Freddie Mac. Banks view these loans as a long-term commitment because they have to keep these loans on their portfolio until you repay, so they charge more.

For floating homes, some lenders will offer 15-year fixed mortgages or 15-year balloon loans with payments scheduled over 30 years.

Most lenders will require a minimum 20% down payment and a minimum credit score of 680, Carlson says.

"There's no such thing as a zero-down payment" for houseboats or floating homes, she says.

Other Costs to Consider

It's also important to consider various other costs associated with this unique lifestyle, says Graham Marden, a real estate broker in Portland, Ore., who specializes in water homes.

When buying a houseboat, you'll likely have to pay a monthly fee for the slip. Sometimes, the slip or the dock is included in the purchase, but often, you'll have to pay rent. If buying a floating home, you'll probably have a fee similar to a homeowners association fee. These monthly fees can range from a couple of hundred dollars to more than $700, Marden says.

There are costs associated with maintenance and repairs. A house that sits on water will have more wear-and-tear issues than a home on land.

"Living on water is very attractive to some people, but you have different challenges to consider than with a regular home," Carlson says.

So Why do People Choose to Live on Water?

Living on water is a lifestyle you either love or hate, says Rachelle Dorris, a floating-home resident and an agent with Frank Howard Allen Realtors in Marin County in the San Francisco Bay area.

"When I first moved in, I thought 'this is a pretty cool place. Maybe I'll stay here for a couple of years,'" she says, referring to the Waldo Point Harbor, a floating-home community in Sausalito, Calif.

That was 30 years ago. Since then, she has moved six times to different floating homes in the same area.

What has kept her there all these years? "The living style," she says. "You know your neighbors. If you are sick, they bring you chicken soup. We have nice informal get-togethers with other people on the dock. Plus, you're right there with nature."

Having the bay as her "backyard" also helps. Birds, seals and sea lions are just some of the creatures she gets to see from her bedroom.

"I watched a leopard shark swim around about a half hour once," she says. A downside to living on the water and something many residents complain about is "you have to carry your groceries all the way down the dock, but it's totally worth it."