Home Loans for Barndominiums: Everything You Need to Know (2024)

Home Loans for Barndominiums: Everything You Need to Know (1)

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.

What Are 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.

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.

Learn More about Home Loans for Barndominiums

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Home Loans for Barndominiums: Everything You Need to Know (2024)

FAQs

How hard is it to get a loan to build a barndominium? ›

Difficulty obtaining USDA loan: Though far from impossible, obtaining a USDA loan for a barndominium may be challenging. Many USDA lenders are unfamiliar with these structures and may be reluctant to finance their purchase.

What credit score do you need for a barndominium? ›

While criteria varies between institutions, ideal credit scores for the best barndominium loan rates start around 720+ or higher. This provides more assurance to lenders given barndos don't yet have comprehensive comparable sales data that appraisers prefer.

Why do lenders not like barndominiums? ›

Most financial institutions will not provide mortgage loans for barndominiums, largely due to a lack of comparable sales during the appraisal process.

Can you get an FHA loan to build a barndominium? ›

Some of the more common loan types (FHA, VA) may not be available if you're trying to build a Barndominium. The lack of comparable sales (for the appraisal process) in the market usually prohibits the use of these types of loans. Luckily, conventional construction loans are available, as are a couple of other options.

How do people finance barndominiums? ›

You can apply for a traditional mortgage loan to finance your barndominium, but it's essential to meet the lender's requirements, such as credit score, income, and down payment. Your property appraisal will play a significant role in determining your loan amount.

How to save money while building a barndominium? ›

5 Ways to Save Money on Your Barndominium Build.
  1. Be strategic about where you put your framed openings: ...
  2. Use concrete floors. ...
  3. DIY finish work (Stairs, Barn Doors, Light Fixture Installation) ...
  4. Ask for “builder grade”/“build program” or scour the remnant yard for countertops.

Why is it hard to get insurance on a barndominium? ›

While a barndominium is very similar to a traditionally built home, insuring them can be much more difficult. There can be several reasons why insurance companies are hesitant to insure these structures. The primary reason is that these homes are non-standard construction, which means they lack historical data.

Is buying a barndominium worth it? ›

Barndominiums can make fantastic homes for a fraction of the cost of traditional homes. This makes them an especially great option for those looking to purchase: A large home for less.

Are barndominiums a good investment? ›

Strong Resale Prospects

While scarcer than traditional homes currently, barndominiums gain desirability and buyer competition in rural locales pushing values up. Their Large open Floor Plans, conversion potential and durable commercial steel construction attract future owners even if unconventional initially.

What is the downside to a barndominium? ›

However, there are a few downsides to barndominiums, including: Challenges in securing financing. Potential for shifting, cracking, and corrosion over time. Restrictions by some cities.

How much cheaper are barndominiums than houses? ›

Cost of Barndominium vs.

The most common estimate asserts that a new barndominium with basic amenities will cost about $30 to $40 per square foot to build, compared to the cost of building a traditional home is around $100 to $200 per square foot.

Why are barndominiums so expensive? ›

The biggest cost of building a barndominium comes from purchasing and building the metal shell, including the roof, doors, and windows.

What credit score do you need for a construction loan? ›

FHA construction loan requirements

Credit score: At least 580, or as low as 500 if putting down at least 10 percent. Debt-to-income (DTI) ratio: No more than 43 percent (with some exceptions) Down payment: 3.5 percent with a credit score of at least 580, or at least 10 percent with a credit score between 500 and 579.

Does Fannie Mae lend on barndominiums? ›

Permit singlewide manufactured homes in a Fannie Mae PERS approved project in compliance with Fannie Mae and Freddie Mac requirements. Added co-ops as an ineligible property type. Added barndominiums and shouses as ineligible, unique property types.

What is the FHA loan limit for 2024? ›

The FHA loan limits for 2024 allow homebuyers to borrow up to $498,257 for a single-family home in most parts of the country. Those purchasing a home in an area designated as “high-cost” may be able to borrow up to $1,149,825.

How fast can you build a barndominium? ›

All the finishing touches – drywall, paint, built-in furniture, moulding, roofing, siding, and fascia – can take 1 or 2 months, depending on the level of extravagance and detail. Minimalists will save time in this stage! All in all, most barndominiums take about 6 months to build.

Is building a barndominium a good investment? ›

A barndominium is a wise investment if you plan on entering the Los Angeles real estate scene. Barndominiums are cheaper and easier to build than conventional houses, are low maintenance, and are more durable against earthquakes and fires. They are also unique and will set you apart from other real estate investors.

Does NC allow barndominiums? ›

NC Specifics For Barndo Construction

North Carolina's property laws dictate that any construction, including barndominiums, must comply with zoning regulations and building codes. Builders should obtain the necessary permits before commencing construction.

Are barndominiums bad investments? ›

As such, it is more difficult to assess the resale value of a Barndominium. Unlike modular homes and trailers, Barndominiums maintain their value and are likely to increase over time. If you are purely looking for a quick resale investment, a Barndominium may not be your best option.

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