Not everyone using a USDA loan needs to or wants to buy a standard house. There are many other options including condos, manufactured homes, and even barndominiums.
For those looking to make a home in a rural area, a barndominium is an increasingly popular choice. But what is it?
Barndominiums are becoming an increasingly popular housing choice, especially for rural homebuyers These unique structures combine the openness of a barn with the comforts of a modern home.
But when it comes to financing a barndo, securing a mortgage can be tricky. Many conventional loans don’t work with these non-standard properties.
That’s where USDA home loans come in. The USDA mortgage program is specially designed for rural areas, making it a natural fit for barndominiums
In this complete guide, we’ll break down everything you need to know about getting a USDA loan for a barndominium, including:
- Barndominium loan guidelines
- Construction vs purchase financing
- The pros and cons of barndos
- USDA eligibility requirements
- How to find a lender who offers barndo loans
Let’s start with an overview of what exactly barndominiums are all about.
What Is a Barndominium?
A barndominium is a home built inside a steel agricultural-style barn frame. These are typically large, open floor plan structures with high ceilings.
Barndos allow for flexible use of space. Many have shops, garages or workspace built into the design.
They are faster and less expensive to build compared to a conventional home. But barndominiums require land zoned for residential use.
Overall, these barn-inspired houses blend the utility of agricultural buildings with modern residential finishes and amenities.
Can You Get a USDA Loan for a Barndo?
The good news is yes – USDA loans can be used to purchase or construct a barndominium.
These mortgages must meet certain eligibility standards, which we’ll cover next. But the USDA program provides a great financing option for these unique rural homes.
Here are the two main ways to use a USDA loan for a barndominium:
Purchase financing
- Buy an existing barndominium
- Must meet USDA property standards
Construction loan
- Build a new barndo from scratch
- One-close loan for land + construction
Now let’s look at the specific USDA loan guidelines.
USDA Loan Guidelines for Barndominiums
To qualify for a USDA mortgage, both the property and borrower must meet eligibility criteria set by the USDA.
Here are the key requirements when it comes to barndominium financing:
Property eligibility
- Located in USDA-eligible rural area
- Meets minimum USDA property standards
- Is primary residence, not investment property
Borrower eligibility
- U.S. citizen or qualified resident alien
- Income within 115% of area median
- Credit score typically 640+
The property standards help ensure the barndo is a sound residential structure. This includes having essential utilities and functional systems.
As for borrowers, income limits and credit requirements apply just like any USDA loan.
The Pros and Cons of Barndominiums
Before pursuing USDA financing, it’s important to weigh the unique pros and cons of barndominiums:
Pros
- Large, open floorplans
- Lower cost to build
- Blends home and workspace
Cons
- Less resale value
- Noisy exterior
- Need land zoned residential
Barndos offer versatility and budget-friendly construction. But they aren’t ideal for everyone.
Carefully consider whether the barndominium lifestyle is right for your needs.
How to Find a USDA Lender for Barndos
The challenging part is connecting with a lender who is willing to finance barndominiums.
Many mortgage lenders shy away from non-standard properties like barndos. But options do exist if you know where to look:
- Ask your real estate agent for lender referrals
- Search online for “USDA barndominium loans”
- Connect with specialized rural lenders
The ideal lender has specific experience with barndo financing. This streamlines the mortgage process.
Applying for a USDA Barndominium Loan
Once you find a lender, the application process is similar to any USDA purchase or construction loan:
- Submit loan application and documents
- Lender verifies income, credit, and eligibility
- Underwriting reviews property appraisal
- Close on mortgage once approved
It’s critical to work with an experienced lender familiar with barndo loans. This helps ensure quick approval.
Choose the Barndo Lifestyle With a USDA Loan
Barndominiums enable modern home life within the framework of a classic barn. The USDA mortgage program provides a fitting financing solution.
While securing a barndo loan takes some research, the opportunity is there. Connect with USDA specialists who can make your dream barndominium a reality!
USDA Property Eligibility for Barndominiums
To get a USDA home loan approved, the property needs to meet a few basic requirements. Barndominiums should:
- Fall within a designated USDA rural area
- Be your primary residence
- Not be a commercial investment—farms, rental homes or other income-producing properties aren’t eligible unless they are no longer in commercial use
- Be accessible from a paved or all-weather road surface
- Be structurally sound
- Have an adequate roof
- Have fully operational heating and cooling systems
- Have electrical systems that are fully operational and safe
- Have suitable plumbing and water flow for waste removal
- Use a USDA-approved contractor if being built from the ground-up
USDA Credit and Income Eligibility for Barndominiums
Like any home loan, you must meet credit and income eligibility criteria.
Fortunately, the USDA does not set a minimum credit score requirement. However, most lenders will need a score of at least 640 to approve a loan. This is the minimum score needed to qualify for automatic approval through the USDA’s Guaranteed Underwriting System (GUS).
To get approved for a USDA loan, you must prove you can repay the loan. Lenders will look closely at current expenses and debt. You must typically have no more than a 41% debt-to-income ratio, and your monthly housing expenses cannot exceed 29% of your income.
Because the program is designed to help those with low-to-moderate income, USDA loans also include income limits
These limits will vary by location and household size but are typically:
- 1-4 member household: $110,650
- 5-8 member household: $146,050
USDA Construction Loan Requirements 2024 Full Guide!
FAQ
How hard is it to get a loan to build a barndominium?
Why won’t banks finance barndominiums?
Will an FHA loan cover a barndominium?
What credit score do you need for a barndominium?