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Barndominium Financing Guide
Understanding How Barndominium Financing Works
If you’re thinking about building a barndominum, you might already be dreaming about the rustic look of the building, the high ceilings, and the space for your workshop. But let’s push pause on the dreaming for a second, because first we need to finance the project.
What you might not realize right out of the gate is the complexity of financing for a barndominium or “barndo” because some lenders see these buildings very differently than traditional home builds.
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Why Would Lenders See Barndominiums Differently?
Some banks and lenders will hesitate to finance a project for building a barndominium because of two main factors:
- Traditionally barndominums come as a kit which a contractor then has to assemble on site.
- Some banks see “metal building” and assume it’s a commercial project or storage, and not meant to actually be lived in.
Then there are other factors to think about – where is this new building going? Do you already own that land or is that something that needs to be financed as well? Also, how does the bank run comparative searches on projects that are this… different? That means a lack of appraisal data to go off of when making the approval decision.
Knowing all the options before the project begins
The best advice we can possibly give you is to know all of your options before you sign a contract or break out a checkbook. Barndominiums can qualify for a number of different lending options when the right conditions are in place.
- Some more rural lenders will offer traditional mortgages for barndominiums
- FHA and VA loans are available
- USDA loans offer 100% financing but only if you meet the appraisal requirements.
- Construction-to-permanent loans are a great idea for barndo projects
A couple of things are absolute musts for lenders to even look at your project.
- The home must be on a permanent foundation
- It must meet local and state building requirements
- Many lenders require to have at least 3 comparable properties (comps) within a 3 mile radius of the build.
- Sometimes – the land and home must be titled together
- And in some cases, as in FHA’s – the home has to be a “primary residence” and not a vacation or investment property. You have to be the one living in it.
The One Close Construction Loan
Instead of managing multiple loans from different places across the duration of your barndominum project, a one-close construction loan allows you to finance the land, fully fund the construction during the build, and then roll it all into one permanent mortgage upon completion. It’s all for one structure, so why wouldn’t you roll it up into one loan process? This is a great option for anyone dreaming of a barndominium.
Where People Get Off Track
Proper planning from the very beginning is the best way to avoid unplanned problems and additional expenses during a barndominum project. Your expert, RJ Jaramillo, has seen the full spectrum of experiences: the good, the bad, and the ugly. His guidance can help you avoid:
- Underestimating project costs. The price of the kit is NOT the bottom line price, there’s a lot more involved in a barndominum project.
- Speaking of the kit – it must be what’s called IRC-Compliant (International Residential Code”. If it isn’t, the bank will consider the building just a “barn” and won’t give you home mortgage financing for it.
- Don’t forget equity! If you already own your land, you might be able to use that equity as a down payment.
Start With Financing Plan — Not the Floor Plan
When you understand what's available to you first, you can build a project around it. There’s no point in dreaming of a floor plan and faucets if you cannot get a bank to acknowledge the word “barndominium” over a traditional “stick-built” home.
A better plan of attack:
Define your goal — What is the ultimate goal behind this new building project?
Understand your land situation – Zoning, ownership, and even clearing trees and building roads may be involved.
Know that the kit is not “complete” – it doesn’t include the foundation, the “fit-out” like HVAC or plumbing, or things like custom kitchens or flooring.
AND you need a trusted, experienced contractor that knows how to build a barndominium kit while hitting the “draw schedule” with the bank properly.
Feeling more confused? Totally understandable. But don’t fret. Your next step? Let’s talk about your story.
Book a Free Consultation
If you want help thinking through your specific situation, you can book a free consultation with RJ Jaramillo.
He will walk through your goals, your land or placement plan, and the type of barndominium you’re considering so you can move forward with a clearer understanding of what’s possible.
Disclaimer
Zoning rules, financing availability, and requirements can vary widely depending on location. These can differ from city to city, county to county, and even between nearby areas. It’s important to review your specific plans with the local zoning office, permitting authorities, and any lenders you plan to work with before taking action.
Financing a Barndominium Project Can Feel Overwhelming.
RJ Jaramillo can help you understand what lenders are looking for and help you avoid suprises.