A house that costs $20k

America is big.

Things are spread out in most cities and towns. When living in the city, one gets value in exchange for giving up the privacy of owning your own home and land. And, it is not realistic for people who are poor, or even middle class, to own a home in a major metropolis, and so they often do live in an apartment or townhome (a mini-house that shares walls with one or more other townhomes...somewhere between a condominium and a real house). I would accept that kind of lifestyle if living in a densely populated city. I wouldn't if living in most mid-sized cities in the US...but, housing is still expensive. A tiny house on a plot of land fits the bill perfectly for me. I don't need more living space than an apartment provides, I just need more space than having neighbors on the other side of the wall provides. I also want a garden.

Americans who grew up in rural areas have an even more extreme view of how much space is the right amount than I do (I grew up in the suburbs, and still hate apartments).

Also, I want to own where I live, by the time I get close to retirement age (which I'm still a few decades away from, but it's part of the usual retirement plans for most Americans, and they start working on it during middle age).

If you're interested in knowing why, it's because mortgages are sold as securities these days (and have been since before the Big Collapse). If your mortgage is significantly not like the other mortgages, it can't be bundled and sold into the pool of other securitized mortgages. That means your lender has to carry the note itself and the overwhelming majority of lenders--banks and brokers--don't do that.

The other problem: banks need a property that, if foreclosed upon, can be sold to recoup their investment. A friend of mine is having this exact problem. He has a house that could withstand a bomb being dropped on it but it is built to his preferences and the banks he has visited to inquire about refinancing have all said that a sale would be difficult. Too risky to use as collateral since they can't be relatively certain of recovering against loss.

What you're looking for is a "portfolio loan," where the financial institution keeps your loan on its own books. Some credit unions do this (mine does) in situations like yours. The interest will be commensurate with the credit union's guess of how easy your property will be to resell (both in the opinion of the underwriter and of the outside, independent appraiser) to pay for the risk but it can be done.

I would be scared to buy a house that uses non-standard construction methods. Not because I don't trust the plans, but because even with cookie cutter houses, the construction people mess up a lot of things and you really have to pay an additional person to check the construction. Trying to get construction companies to build a house using novel techniques and do it without major errors is, I imagine, quite an undertaking.

That loan situation sounds incredibly frustrating. The banks are like, "come on man, it's cool, borrow more money from us," because that's in their interest ... but if you don't wanna play by their rules, then you get shot down.

Sorry to hear it -- both "sorry" in the sense that I wish it hadn't happened to you, and sorry because I myself have had pipe dreams of buying my own land and building on it, so here is some evidence against that being possible.

UK: we had big problems with 'system build' council housing in the UK in 1960s and early 1970s. Google 'Bison' and 'Ronan Point' for background.

I'd hope that we have (all) learned a bit about pre-manufactured sections and assembly since then and perhaps pre-manufactured units with quality control/JIT manufacturing techniques would be better than the current bricks on site based construction.

UK: the problem would be the land to build on anywhere near population centres and utilities by the way...