Whether this is your first time buying a home or you are a seasoned home buyer, getting financing for a barndominium is getting easier, but there are still some hurdles to overcome.
Building your dream home can be expensive. Barndominiums can cost anywhere from $150-400+ a square foot. They are not always a cheaper residential option; however, if you do some of the work yourself, it is a cost-effective solution to save thousands of dollars.
In this blog, we will outline what challenges you might face getting financing for a barndominium vs. stick-built home, what documents you need to provide, and a list of lenders we recommend.
Depending on the bank or credit union you choose, the type of home construction loan may vary. Some lenders will make a loan for the entire process, and others will require separate loans. If you don't have the land or money to buy the land outright, you may need a separate loan.
Conventional loans are starting to accept more barndominium projects. To qualify for these loans, you must have:
Another alternative is a USDA Construction loan. A USDA Construction loan is a government-backed loan offered by many banks and private lenders that requires $0 down, has government-regulated interest rates, and has a 15 or 30-year term.
USDA stands for the United States Department of Agriculture, and it's only available in certain rural areas, so check with your lender to see if your property is in an eligible zone. If so, you could use a USDA loan to finance your barndominium with $0 down if your plan appraises for its cost.
A significant advantage of USDA construction loans is that they are single-close mortgages. Many other construction loans require two separate lending processes: one in which the borrower receives the construction loan and another in which the construction loan is refinanced into a traditional mortgage.
USDA construction loans, on the other hand, transition seamlessly into a 30-year USDA mortgage. This means USDA borrowers only undergo the lending process once, allowing them to streamline their home financing process.
A construction loan is typically a one-year loan for the construction process and costs. Then, the remainder becomes a permanent Loan. This will pay the remaining costs and set your new monthly payment based on the amount remaining on the construction loan plus the traditional loan on the property itself.
With the rise in living costs and inflation, saving money for a down payment for your project can be hard. For your down payment, you can use cash, but you also can use equity. Equity can come from your current residence or the property on which you plan to build your new home.
Another factor in the project cost is interest. Each lender will vary in what your interest will be.
Seven factors influence interest rates, which include:
Many customers look into a DIY pole barn kit as another way to save money. If you have money saved to buy the land and supplies upfront, you might be okay, but trying to save or cash flow a personal residence project is not easy.
Some local codes and lenders will limit what you can do yourself. Lenders want to ensure your project is completed, so we’ve broken down some things you will need to provide before you walk into your local lender.
Verify the following with your lender:
It is important to note that not all post-frame builders are the same. You might get a quote from one of our competitors that is less costly, but we encourage you to talk to your project sales consultant to understand any difference.
Do they use less quality materials? Did they not include perma-columns? Whatever the reason, when it comes to post-frame structure quotes, there are six factors you must consider.
Regarding getting a loan, we have had customers say that because FBi Buildings is a structural engineering company, their lender was more confident in giving their loan.
Compared to traditional home mortgages or construction loans, pole barn homes require additional paperwork. You can't just walk into your bank and expect to get a loan like you might with a traditional home.
Typically, no two barndominiums are the same. Their customization is a selling point for many homeowners. However, for banks, this makes it harder to put a value on the custom build. A bank wants to appraise all facets of your project, so if they loan you $400,000, they can ensure that your project is worth it.
Some items you may need to provide to a lender to help in this process include:
After learning about the factors to consider when obtaining a barndominium loan, we hope you are ready to find a lender.
Below, we suggest several banks that specialize in post-frame construction loans and explain how one might differ from another. Contacting a few and getting multiple quotes might help ensure you get the best interest rate for your project.
First Federal Bank of Kansas is a prominent lender of barndominiums. They offer financing for the construction period and the permanent mortgage following construction.
First Federal has a national lending footprint to fund your barndo build in all 48 continental United States. They offer Post and Steel Frame Construction Lending Specialists on staff to assist you from the design stage through securing a competitive fixed-rate mortgage loan.
FBi Buildings has partnered with First Federal Bank of Kansas City to offer financing options for your residential home project.
Why First Federal Bank of Kansas City?
We all have a bank or credit union we know and trust. A good place to start is going to your local bank and asking if they do pole barn home financing. A perk of going to the same place you bank at is that they can pull your finance records with them.
A con is that if they do not do many pole barn construction loans, they might not approve the loan, or they won’t have the experience other banks listed below have with working with post-frame construction vs. traditional.
Compeer Financial has been an ag lender for over 100 years! They finance many FBi pole barn projects every year. However, not all projects may qualify for a pole barn house.
You may qualify if your lot is also for backyard chickens, homesteading, and beekeeping. Watch this video with Angi from Compeer to learn more about the pole barn home loans they do.
Farm Credit supports rural communities and agriculture with reliable, consistent credit and financial services. It serves approximately 46 percent of agriculture’s credit needs. In 2023, it lent 398.2 billion dollars, 6% of which was for rural home loans.
As part of Farm Credit's mission to serve rural America, it provides financing for people to buy homes in rural communities with a population of less than 2,500. It has many locations across the United States of America.
Post Frame Buildings or Post and Beam Barns are a specialty of New Century Bank.
If you label your project a barndominium, shed-home, shouse, or barn-home, New Century Bank is interested in sharing its expertise on what mortgage products apply to your situation. They try to accommodate more project styles than any other lender.
When financing your barndominium, choosing the right lender is crucial. Whether you select a local bank or one of the above companies that have specialized barndominium loan officers, each has pros and cons.
Arrive to your lender prepared with the land, post-frame floor plan, general contractor and subcontractor estimates, and personal financial records. Remember that this doesn't happen overnight, but having all the documents outlined above will help move this process along.
Building a barndominium is a long-term investment and typically takes around a year from start to finish.
Have more questions about pole barn financing not covered in this article? Please contact FBi Buildings at 1.800.552.2981 or click here to email us. If you are ready to get a price, click here to request a quote and a member of our sales team will call you.