Financing Barndominiums: Exploring Your Options

As with any real estate purchase or construction project, financing is a key component that potential owners must navigate. This article explores the various financing avenues available for those interested in owning a barndominium, highlighting the nuances of securing funds for a property that defies traditional classification.

Understanding Barndominiums

Before exploring financing options, it is useful to clarify what a barndominium entails. Typically, these are steel or wood frame buildings that have been converted or designed to include living spaces along with large, open areas which may serve as workshops, garages, or storage spaces. Their appeal often lies in their versatility, spacious layouts, and the potential for lower construction costs compared to standard homes.

Challenges in Financing Barndominiums

The unique nature of barndominiums can present certain challenges when securing financing. Traditional mortgage lenders often have strict criteria for lending that might not always align with the unconventional aspects of barndominiums. For example, a lender’s requirement to appraise the property might be complicated by a lack of comparable sales in the area or the mixed-use nature of the building.

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Mortgage Options for Barndominiums

  1. Conventional Mortgages: These are typically available through banks and mortgage brokers but may require a more detailed appraisal process to assess the value of a barndominium. Applicants might need to demonstrate that the structure complies with local zoning and building codes as residential property.
  2. Construction Loans: For those building a new barndominium, a construction loan might be appropriate. These loans cover the cost of building and then convert into a standard mortgage once construction is complete. Lenders will review the construction plans and often require inspections throughout the building process to release funds.
  3. FHA Loans: While Federal Housing Administration (FHA) loans are generally more flexible regarding borrower credit scores and down payments, getting approval for a barndominium might require additional steps. Ensuring the building meets all FHA habitability and safety standards is crucial.
  4. USDA Loans: If the barndominium is in a rural area, a USDA loan could be an option. These loans offer no down payment and low-interest rates but include stringent criteria on income levels and property location.
  5. VA Loans: Veterans and active military members might qualify for a VA loan, which can be used to purchase or construct a barndominium. No down payment is required, and terms are often very favorable.

Non-Traditional Financing Options

When traditional mortgage options fall short, prospective barndominium owners might consider alternative routes:

  • Owner Financing: Sometimes, the property seller might agree to finance the purchase themselves, bypassing conventional lenders. Terms can be flexible and negotiated between the buyer and seller.
  • Credit Unions: Local credit unions might offer more flexibility than larger banks and could be more willing to finance unique properties like barndominiums.
  • Private Lenders: Private lenders or hard money loans can be viable for short-term financing, though they often come with higher interest rates.

Preparing for Financing

Securing financing requires careful preparation:

  • Credit Score: Ensuring your credit score is high can help in securing better terms for your loan.
  • Down Payment: Saving for a significant down payment often improves loan terms and can make qualifying for a mortgage easier.
  • Documentation: Gathering detailed documentation about the property, including construction plans and compliance with local regulations, will be critical when applying for loans.

Moving Forward

Once financing is secured, building or purchasing a barndominium follows similar steps to buying a traditional home but with some additional considerations regarding construction and zoning. Working with a realtor who specializes in such properties can provide valuable guidance throughout the buying process.


Financing a barndominium is indeed possible, though it may require exploring a variety of funding sources and preparing thoroughly for the application process. By understanding the unique challenges and solutions associated with financing barndominiums, potential owners can better navigate the path to owning their dream home. Whether through traditional loans, government-backed programs, or more creative financing methods, the dream of living in a barndominium can become a reality with the right approach and resources.

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