Can You Get a Mortgage on a Barndominium?

A barndominium, often called a “barndo,” is a residential structure combining elements of a barn with a condominium. It features a barn-like exterior and a finished living space inside. These structures are typically steel or metal-framed buildings, though some may use wood or a hybrid construction. They are known for open floor plans, high ceilings, and customizable interiors, offering a unique blend of rustic aesthetics and modern amenities.

While barndominiums have gained popularity for their affordability, durability, and versatility, prospective owners often wonder about financing. Securing a mortgage for a barndominium is indeed possible, but it involves unique considerations that differentiate it from financing a traditional home. This article guides readers through the specific requirements, available loan options, and application processes for these distinctive properties.

Understanding Barndominium Mortgage Eligibility

Lenders assess barndominiums differently from traditional stick-built homes due to their non-standard construction. The primary concern for lenders is property classification: whether it’s a single-family residential dwelling or includes mixed-use elements. Properties intended solely for residential use generally face fewer hurdles.

For a barndominium to be mortgageable, it must demonstrate structural integrity and comply with local regulations. This includes having a permanent foundation, a standard requirement for most mortgages to ensure long-term stability. The structure must also adhere to all local building codes and possess proper permits for residential occupancy, confirming it meets safety standards.

Appraisal considerations present a common challenge for barndominium financing. Appraisers rely on comparable properties, or “comps,” to determine a home’s value. Since barndominiums are less common in many areas, finding recent sales of similar properties can be difficult, potentially complicating the loan process. A professional appraisal report, thoroughly documenting unique features and construction quality, is important to support the property’s value.

Zoning and land use regulations also play a significant role. The property’s land must be zoned for residential use, preventing issues with legal occupancy. Lenders verify the barndominium aligns with local zoning ordinances, as properties in non-residential areas may not qualify for conventional financing. Researching these local requirements early can prevent delays.

Beyond property-specific criteria, borrowers must meet standard mortgage qualifications. Lenders evaluate an applicant’s credit score, which typically needs to be in a good range for favorable terms. The debt-to-income ratio (DTI) is also assessed to ensure the borrower can manage monthly payments alongside existing debts. Stable employment and consistent income history are universal requirements.

Available Mortgage Options for Barndominiums

Financing a barndominium often begins with construction loans for newly built structures. These loans cover building costs, with funds disbursed in phases (“draws”) as construction progresses. Upon completion, these short-term construction loans typically convert into permanent financing through a construction-to-permanent loan, streamlining the process by avoiding two separate loan applications.

Conventional mortgages are a common financing route once a barndominium is completed and meets residential property standards. These loans are not backed by a government agency and generally require a good credit score and a down payment, typically ranging from 5% to 20% of the purchase price. For barndominiums, conventional lenders may impose stricter appraisal requirements due to non-traditional construction, emphasizing comprehensive comparable sales data.

Government-backed loans, such as FHA, VA, and USDA, are viable options. FHA loans offer lower down payment requirements, often as low as 3.5%, and are more flexible regarding credit scores. However, barndominiums must meet FHA’s strict property standards, which can be challenging for non-traditional construction unless classified under specific manufactured home guidelines.

VA loans provide benefits for eligible service members, veterans, and their spouses, including zero down payment options and competitive interest rates. Barndominiums can qualify for VA financing if they meet all VA property standards, including being a primary residence and passing a VA appraisal to ensure the home’s value and safety.

USDA loans support homeownership in eligible rural areas, offering zero down payment options and favorable terms. Barndominiums located within USDA-approved rural zones meeting program and income requirements may be financed. USDA financing requires adherence to specific appraisal guidelines and property standards.

Some smaller banks and local credit unions offer portfolio loans, which can be more flexible for financing unique properties like barndominiums. Unlike conventional loans, portfolio loans are held by the lender, allowing the institution to set its own lending criteria. This flexibility is advantageous when a barndominium does not fit traditional or government-backed loan requirements.

Refinancing options are also available for existing barndominium owners. Owners may refinance their current mortgage to secure a lower interest rate, change loan terms, or access home equity. The eligibility for refinancing will depend on the property’s current value, owner’s equity, and financial standing.

Navigating the Barndominium Mortgage Application

The initial step involves finding a lender experienced with non-traditional properties or construction loans. Not all financial institutions are familiar with barndominiums, so seeking out lenders who have successfully financed similar projects can streamline the process. Local banks and credit unions may offer more flexibility.

Once a lender is identified, the pre-approval process begins. This involves submitting various financial documents, such as income and bank statements, to assess financial readiness. While pre-approval does not guarantee a loan, it provides an estimate of how much one can borrow, useful for setting a realistic budget and demonstrating purchasing power.

Following pre-approval, the formal loan application requires submitting a complete package of documentation. This typically includes signed application forms, detailed construction plans if building new, and any additional financial disclosures requested by the lender. The submission process ensures all necessary information is provided for a comprehensive review.

A key phase in the application is the appraisal and underwriting process. The lender arranges a professional appraisal of the barndominium to confirm its value and ensure it meets loan program requirements. During underwriting, the lender verifies submitted documentation, evaluates financial stability, and assesses property eligibility. This review culminates in a final approval decision or request for more information.

The final stage is closing, where all parties sign the necessary legal documents. This includes the promissory note, outlining the loan terms, and the mortgage or deed of trust, which secures the loan against the property. Borrowers will also pay closing costs, which typically range from 2% to 5% of the loan amount and cover fees for services like origination, appraisal, title insurance, and recording. Upon signing and payment, funds are disbursed, and the property officially transfers ownership or construction loan proceeds are released.