Barndominiums are quickly gaining in popularity, and for a good reason: they are a great alternative to traditional houses. They offer maximum space at affordable prices and are highly customizable. Barndominums also make a fantastic investment. Converting a barn into several income-producing apartments is an excellent investment.
Most people finance their traditional homes with a mortgage from a national lender; those looking to buy a Barndominium might have to get more creative. While it’s not impossible to obtain a traditional construction loan through a national lender, it may be a bit more complicated. Initially, a lender might be wary of Barndominiums because they are considered unconventional builds. While this is likely to change as Barndominiums become more common, there are many ways to obtain financing.
In some cases, the challenge stems from confusion in terms. If you are working with a large national lender, consider referring to your build as a custom home instead of calling it a Barndominium. You may still be able to get a conventional construction loan.
You have other options if your lender is still hesitant to provide financing.
First, find a lender who is open to financing non-traditional construction. Usually, those will be lenders that keep their mortgages in-house. The two most successful ways to get a loan for your Barndominium are through your local bank or a Farm Credit lender.
Small Banks –
While there are fewer and fewer small, local banks around these days, they still exist and are excellent places to start looking for financing. If there is a bank like this in your area, you’ll want to open an account with them (if you don’t already have one) to gain trust and so they can get to know you before you ever go in asking for a loan.
Farm Credit Lenders –
The other place to look is with a Farm Credit lender. Farm Credit, a nationwide network of customer-owned financial institutions, provides loans and financial services to U.S. farmers, ranchers, agribusinesses, and rural homebuyers. They are a great place to look for financing on a Barndominium.
No matter what type of lender you use, you need to be prepared for your first meeting. The more you have prepared, the better your chances of obtaining your loan. One of the best things you can do is to calculate, to the best of your ability, the entire cost of building your Barndominium. You should have solid plans to show the lending officer.
You’ll want to show blueprints with schematics and interior details. It will also help if you have a contractor bid ready to go, along with a list of supplies and a realistic timeline. Anything you can bring to the meeting that will raise the confidence level of the lender about your ability to see the project to completion will help you. You want the bank to know that they are financing a well-thought-out project and that you know how to complete this build.
As with any loan, the loan officer will consider your income history, credit score, and the amount of capital you can invest as a down payment.
Your lender will be able to talk you through the different loans and options available to build your 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.
A USDA construction loan is an outstanding choice if you qualify and are trying to build in one of the eligible rural areas designated by the USDA. You can buy land, build a Barndominium, and finance the home with a single loan. The loan will cover everything: buying a lot, inspection fees, administrative fees, builder’s insurance, and even landscaping. Not only do you get the benefit of one loan and one closing, but it’s a government-backed loan with $0 down.
Financing your Barndominium is possible.
No matter where you start — farm credit, local bank, or large national lender — make sure you shop around for the lowest interest rate, best terms, and different types of loans before making a selection.