Do you dream of moving to a peaceful, rural setting in the countryside, far away from the hustle and bustle of the city? Perhaps you relish the idea of owning a couple horses, goats, or chickens, or having your own workshop where you can focus on your personal hobbies. If so, then a barndominium could be perfect for you! But first, you’ll need to secure financing. Here’s everything you need to know about home loans for barndominiums.
A barndominium (also referred to as a “barndo”) is a type of dwelling in which a person’s living quarters are incorporated into a barn or similar structure used on a farm. Usually, the person’s living area is built above the barn, on the second floor of the building and the area beneath is used to house animals or as a workshop space. While most barndominiums are made from steel, some incorporate other materials such as wood, brick, and stone.
While barndos have been around for quite some time, they have become increasingly popular in recent years due to the higher availability of remote work. Barndos are not only faster and cheaper to build, but are also lower maintenance and more eco-friendly.
Barndominiums have become increasingly popular in recent years as a unique and affordable way to build a home. A barndominium combines the aesthetic and durability of a barn with the comforts and amenities of a residential home. With their metal structures, rustic appeal, and open floor plans, barndominiums offer a one-of-a-kind living experience. However, financing the construction of these unique structures can seem daunting to some. So can you actually get a loan to build a barndominium? The short answer is yes!
Overview of Barndominium Loans
Despite their unconventional nature barndominiums are treated no differently than regular homes when it comes to financing. You have many of the same loan options available to finance the construction of a barndo as you would a conventional stick-built house. Lenders evaluate barndominium loans based on creditworthiness income, debt levels, and the appraised value of the home – not on the fact that it is a barn structure.
The most common types of loans used for barndominiums are
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Conventional loans – Requires a down payment of 3-20%, with the lender financing the remainder. Can be used for construction or purchase.
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USDA loans – Government-backed loans for rural areas that require no down payment.
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FHA loans – Government-backed loans that only require 3.5% down payment.
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VA loans – No down payment required for veterans and active military.
Many lenders like local banks, credit unions, and national lenders offer financing options for barndominiums. As long as you meet the lender’s qualifications, there are plenty of loans available to fund your dream barn home.
The Barndominium Appraisal
The biggest potential hurdle when securing financing is the appraisal. Appraisers are sometimes unfamiliar with valuing barndominiums if comparable sales are scarce in the area. However, this is becoming less of an issue as more barndos are built and sold.
There are a few things that can help ensure an accurate appraisal:
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Select a lender familiar with barndos – Local lenders will know the market better.
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Provide detailed plans – This helps the appraiser understand the high-end finishes and features.
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Research recent sales – Provide data on other barndos sold nearby recently.
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Work with an experienced appraiser – Ask lenders to assign an appraiser familiar with barndominiums.
With some preparation, you can often get an appraisal that accurately values the unique aspects of a barndo home.
Meeting Lender Qualifications
While loans are readily available, you still need to meet the lender’s qualifications to secure financing. Key criteria lenders evaluate are:
Credit score – Most lenders require a minimum score in the mid 600s. A higher score will yield better loan terms.
Debt-to-income ratio – Your total monthly debt payments compared to gross monthly income. Needs to be under 50% in most cases.
Down payment – Varies based on loan type, from 0% to 20% typically.
Stable income – You’ll need 2 years of steady employment income documented. Self-employment income can also qualify.
As long as you meet the lender’s benchmarks for credit, income, and down payment, you should be able to qualify for a barndominium loan just like you would any other mortgage.
Tips for Getting Approved
Here are some tips to ensure financing goes smoothly:
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Shop multiple lenders to compare rates and loan products. Get pre-approved before selecting a lender.
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Review your credit report and resolve any errors or issues beforehand.
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Verify income with tax returns and financial statements. Have all documentation ready.
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Save up for any required down payment.
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Choose an experienced builder with a proven record.
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Get quotes for all surfaces and finishes to determine accurate construction costs.
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Provide detailed plans and specs to your lender for the appraisal.
With proper preparation and shopping around for the best loan, you should absolutely be able to get approved and financed to build the barndominium of your dreams! The process is very similar to obtaining financing for a conventional home. Don’t let the less common barndo style deter you from pursuing this unique homeownership opportunity.
Home Loans for Barndominiums
Getting a home loan for a barndominium can be tricky since many lenders are unfamiliar with these types of structures. However, it is far from impossible. You just need to be able to fulfill your lender’s requirements as well as the stipulations set out by your particular loan program. Here are some possible avenues that may be available to you:
- USDA Loans: It may be possible to purchase an existing barndominium with a USDA loan. Keep in mind, you’ll need to meet the income requirements for this loan program and purchase a property in an eligible rural location. Furthermore, the barndo that you buy will need to meet the HUD’s minimum property requirements and pass an appraisal inspection.
- Construction Loans: If you want to build a custom barndominium from scratch, you may be able to finance the operation with a construction loan. These short-term loans can be converted over to permanent mortgages once construction is complete.
- Other Options: It may be possible to purchase a barndominium with other means of financing such as a conventional mortgage. Keep in mind, this is a unique purchase that will need to be assessed on a case-by-case basis. It’s important that you inform your lender of your plans so that they can guide you in the right direction.
FINANCING Your BARNDOMINIUM | Loan For Your Barndominium
FAQ
How do people finance barndominiums?
Why won’t banks finance barndominiums?
Can you build a barndominium with an FHA loan?
What credit score do you need for a barndominium?
Can you get a loan to build a Barndominium?
One of the challenges of building a barndominium is finding a lender who is willing to approve a loan for construction. The lending requirements are often strict, such as requiring a large down payment and a high credit score. Luckily, the United States Department of Agriculture (USDA) may have a solution.
How much does a Barndominium construction loan cost?
Construction loans obtained through traditional financing often require a 20% down payment. The average cost of new barndominium construction ranges from $73,000 to $228,000, requiring a down payment between $14,600 and $45,600. FHA loans are an alternative option for those with poor credit or limited income.
How much money do you need to build a Barndominium?
With an FHA loan, you may need a down payment of $2,555 to $7,980. A USDA loan for barndominium allows you to build with no money down, which may give you more time to prepare your finances. The eligibility requirements are relatively lenient compared to traditionally financed loans.
Can I finance a Barndominium?
The more detailed your plans are, the more likely you are to be able to finance a barndominium. After all, the Farm Credit lenders will want to ensure that the barndominium can be built on the plot and that you are capable of paying the loan back.