Homebuyers

Love Rustic Homes? How to Get a Mortgage for a Barndominium—Yes, it’s Possible

Once relegated to off-grid dreamers, barndominiums—aka barndos—have officially graduated into the mainstream. These hybrid home-barns, often built from steel or pole-frame structures, offer generous square footage, open layouts, and rustic-modern charm. 

But while the aesthetic is easy to love, financing a barndominium takes a bit of extra work. The path may involve more paperwork and additional lender education than a standard mortgage typically requires. 

If you’re eyeing a barndo as your next primary residence, vacation home, or rental investment, here’s what you need to know about getting a home loan.

What is a barndominium, exactly?

A barndominium is part residence, part utility space. It’s basically living quarters tucked inside what might look like an aircraft hangar or workshop. 

“Imagine a barn and a single-family residence had a baby,” said Anthony Ray Ramirez, a senior loan consultant at New American Funding based in San Deigo, Calif.

Interiors often have a rugged yet chic look: high ceilings, exposed beams, polished concrete floors, and big windows are all part of the structure’s design.

“Many times, you’ll find these properties in rural areas such as around Michigan, Utah, or Colorado,” said Ramirez. “Or you can find them in the outskirts of the city.”

Why it may be tricky to get a mortgage for a barndominium

Lenders like predictability. Barndominiums, by often combining live and work spaces, don’t always deliver it.

Securing a mortgage for a barndominium can be a bit more challenging than you might expect. This is especially true if the structure is new, partly finished, or there aren’t many similar homes in the area. 

 “If you’re the only property in the vicinity, then you may have a unique property type that can be very difficult to lend on if there are no comparables for the market,” said Ramirez.

That doesn’t mean getting a loan is impossible. It simply means you may need to think outside the box.

Option 1 for a barndominium mortgage: A construction-to-permanent loan

For buyers building their own barndos from scratch, a construction-to-permanent loan is one of the most common routes to securing financing. This loan covers the cost of construction and then converts into a traditional mortgage once the build is complete and meets residential codes.

The caveat? Lenders often require detailed plans for the home, a licensed contractor, and proof that the home will be used as a primary residence for an extended period. You’ll also likely need a larger down payment—20% is standard—to offset the risk.

Option 2 for a barndominium mortgage: FHA, Conventional, VA, and USDA loans

Government-backed loans, such as those offered by the Federal Housing Administration (FHA) and U.S. Department of Veterans Affairs (VA), can be used to purchase a barndominium in certain circumstances. Some lenders may also offer Conventional Loans for these properties.

However, the property must meet strict rules for living and appraisals. You will also need to prove the barndo is a home, not a business or workshop.

“[These] programs allow for barndominiums to be lent on– however the property must conform to local housing standards and be marketable as a residential property,” said Ramirez. “The property must meet all construction codes and standards.”

For buyers in rural areas, U.S. Department of Agriculture (USDA) loans can also offer a path forward—with zero money down, in some cases. However, the structure must pass muster as a single-family dwelling.

 The appraisal is key

One of the main steps in securing barndominium financing is the appraisal. Lenders want to know if the home is worth what you’re paying and that depends heavily on finding similar homes nearby.

“A barndominium could be the ultimate getaway location up in the mountains for off-grid living,” said Rameriz. “But that can pose a number of lending hurdles, the biggest one being comparables.”

If you can’t find comparables, there are some workarounds to nailing down financing. Include detailed cost breakdowns, builder records, and examples of nearby properties that may not look like barndominiums—but are functionally similar—in your mortgage application.

“Have proof of livability (septic permits, HVAC plans, zoning approvals, etc.) early in the process,” said Karen Watts, a real estate strategist and founder of DomiSource.com based in Virginia Beach, Va. “The more your build looks like a traditional home, the behind-the-scenes financing gets easier.”

The bottom line for getting a mortgage on a barndominium

You don’t need to pay cash to live in a barndominium. But you do need to be prepared. 

“Be sure to reach out to the lender in advance before purchasing or building one. They may have additional [restrictions] that you will need to consider,” said Ramirez. “And check with your real estate agent for information on additional comparables in the market.”

In short, help your lender connect the dots to show how a barndominium will serve as a home.

Anthony Ray Ramirez NMLS# 249819