Financing a Barndominium in Five Steps
Owning a Barndominium is something you’ve always dreamed of, but the steps to make it all happen aren’t super clear. Fortunately, there are several ways you can finance a Barndominium and Farm Credit specializes in loans for exactly these types of properties.
What is a Barndominium?
A Barndominium, also known as a barndo, is an open concept building with large square footage that combines living space and a working area. The structure is typically made of metal, but can also be made of other finishes such as wood, stone, or vinyl. From simple, one-story buildings to luxury, multistory structures, Barndominiums can be anything you make them.
Barndominiums have many advantages over conventional homes, including their affordability. In some areas, Barndominium prices can be as low as half the cost. The process of financing a Barndominium is similar to the process of financing any other construction project. We’ve put together these 6 Steps to help you improve your financing experience as you realize your Barndominium dreams.
- Be Aware of the Upfront Financial Obligations.
Unlike a traditional mortgage that requires at least 5 to 10 percent as a down payment, barndominiums require closer to a 25 to 40 percent down payment because they are a specialized building. Make sure you plan for larger down payment than a typical, standard home.
- Check your Credit Score
Many aspects of applying for a Barndominium loan are the same as any other type of loan you might apply for. So, before you apply, you should check your credit score and your credit report. If there are errors in the report (which is very common), it could impact your score. Prior to applying, you should contest those errors and take other steps to boost your score.
- Contact a Farm Credit Loan Officer
To give yourself the best chance of getting approved you will want to have these items ready for the lender:
- Floor plans and blueprints with schematics
- A list of the supplies you will need for the project
- What utilities are in place on the construction site
- The bids or estimates you have received from contractors
- Any documentation of approvals from your local regulator
- What Financial Documents Do I Need?
A Farm Credit lender can help you assess your financial lending plan, or you can start by utilizing this Required Document Checklist.
- Photo Identification
- Proof of Income
- Two recent years of tax returns & W2’s
- Recent bank statement
- How Does the Loan Process Work?
Once your loan has been processed and pre-qualified, you’ll be issued a list of any additional documentation needed.
- Once these requirements are received by the lender, the loan will be transferred into underwriting and the appraisal and title work will be ordered.
- Underwriting will review the documentation provided and let you know if any additional documentation is required. The appraisal and title work will also be reviewed to make sure there are no issues.
- Once underwriting has reviewed the borrower supplied documentation, as well as the appraisal and title work, and determined they have all the needed documentation for loan approval, the loan will be cleared for closing..
- The loan package will be sent to the attorney.
- Throughout the loan process, you will hear from your Loan Officer about the status of your Barndominium loan or if you have questions, applicants are encouraged to contact your loan officer
- Have Realistic Expectations About Construction Timelines.
When the correct resources are available, Barndominiums can typically be constructed in a year or less.
When you choose Farm Credit, we help home buyers understand the process from start to finish while securing the Barndominium of their dreams.
Sources:
https://barndos.com/can-i-finance-a-barndominium/
https://www.metalbuildings.org/faq/financing/
https://www.barndominiumlife.com/usda-loan-for-barndominium/
https://carolinafarmcredit.com/sites/default/files/PDFs/2174-CFC-HomeLoanDocumentsForWebsite-Loan%20Checklist.pdf