Understanding Mortgage Options for Your Barndominium
What is a Barndominium?
A barndominium (or “barndo”) is a versatile home built using a metal barn frame, often customized with living spaces like kitchens, bedrooms, and garages. They’re popular for their affordability, durability, and open layouts—perfect for rural lifestyles or hobby farms.
Barndos can cost 20-50% less to build than traditional homes, but lenders sometimes treat them differently because they’re not “standard” houses.
Barndominiums are one-of-a-kind homes that blend rustic charm with modern living. Whether you’re building from scratch or buying an existing one, navigating the world of mortgage products can be challenging due to their unique design.
Here, we’ll break down the complexities into simple, actionable steps, covering the pros, cons, and expert tips to get you started on your journey to barndominium ownership.
The Challenges of Financing Barndominiums
Appraisal Issues
Few similar properties (called “comps”) make it hard to value your barndo accurately.
Lender Familiarity
Not all mortgage companies, banks, or credit unions know barndos well, so you might need specialists.
Zoning and Codes
Ensure your property meets local rules for residential use.
Construction Risks
Building loans involve more steps and higher rates.
Key Mortgage Products
Here’s a breakdown of the main loan types; use the table below for a quick comparison. For any of the options, you’ll need proof of a steady income with documents like W-2s, recent pay stubs, 1099s (for self-employed, contractors, etc.), and 1-2 years of tax returns.
Conventional Loans
These are everyday mortgages from banks or lenders, not government backed.
Pros: Flexible terms; good rates for solid credit; works for buying or refinancing
Cons: Appraisal hurdles are common
Who It’s For
• Minimum credit score 620
• Minimum of 3% down
• Fixed rate and adjustable-rate loan options
• No BK in the last 3 years and no foreclosures in the last 7 years
FHA Loans
Government-insured for easier qualification.
Pros: Low down payment; flexible credit
Cons: Mortgage insurance required; strict home standards
Who It’s For
• Minimum credit score 500
• Minimum of 3.5% down
• Fixed rate and adjustable-rate loan options
• No BK in the last 2 years and no foreclosures in the last 3 years
VA Loans
For veterans and military families – backed by the VA.
Pros: Zero down; lenient credit; low rates
Cons: Must be primary residence; fewer construction options
Who It’s For
• Minimum credit score 580
• No down payment required
• Fixed rate and adjustable-rate loan options
• No BK or foreclosures in the last 2 years
USDA Loans
Government-back for rural homes – great for Barndos!
Pros: Zero down; low rates; no private mortgage insurance (PMI)
Cons: Rural areas only; income caps
Who It’s For
• Minimum credit score 580
• No down payment required
• Fixed rate loan
• No BK or foreclosures in the last 3 years
One-Time Close Construction Loans (OTC)
If you want to build from the ground up, the OTC option is likely the best option for you. OTC loans combine construction financing with permanent mortgage funding into one process, avoiding the complexities of separate loans.
Pros: Pays in stages; good for your builder
Cons: Can be higher rates; strict timelines (12 months)
Loan Products
• Conventional: Minimum credit score 680, minimum of 5% down
• FHA: Minimum credit score 580 with 10% down or 620+ with 3.5% down.
• VA: Minimum credit score 580 with 10% down or 620+ with no minimum down payment
• USDA: Minimum credit score 640 with no minimum down payment
Important Considerations
Credit
Income
Down Payment
Location
Build Timelines
Tips for Success
Check Credit Early
Fix errors on your report for better rates.
Get Pre-Approved
Know your budget before shopping.
Barndo Mortgage
New American Funding can help get you the right mortgage.
Gather Docs
Income proof, plans, and tax returns speed things up.
Budget for Extras
Include appraisals, inspections, and closing costs.
Ask Questions
Don’t hesitate—lenders want to help!