What is a Barndominium?
A barndominium, or “barndo”, is a single-family residence that has a similar look and feel as a barn on the exterior but has all the amenities of a home in the interior. Generally, barndominiums have open floor plans, which allow for a wide range of customization. They are constructed primarily of a metal shell with wood, stone or brick accents. Barndominiums have gained popularity over the last few years, particularly in more rural areas. The most significant advantage of building a bardominium is the cost, which is generally 20-30% less expensive than a traditional stick build home.
Can You Finance the Construction of a Barndominium ?
Recently, there has been a reduction in the number of lenders that offer one-time close construction financing or interim construction financing for any property type. For barndominiums, there are even fewer construction financing options since most lenders simply refuse to offer barndominium construction financing.
Barndo’s are unique, which is what folks love about them, but that can make it tough for traditional construction lenders to lend on. For the few lenders that do, most will require a minimum of 20% down payment, which makes bardominium construction challenging for many borrowers. In addition to the down payment, borrowers will be required to qualify for the loan just as they would on a home purchase. Lenders will review your income, assets, liabilities and credit scores. With this information, they will make a determination as to whether or not you can “afford” the mortgage payment and make the loan. The most significant hurdle, and the reason most lenders will not offer a bardominium construction product, is meeting the appraised value.
What is the Appraised Value and Why is it so Important for Bardominiums?
Before a lender will provide the financing for a home construction project, they have to determine the complete appraised value of the property. The appraised value will determine how much money the lender will lend. The appraised value is determined by reviewing the sale prices of recently sold comparable properties in the area. The problem with bardominiums and other unique construction types is that there are not many comparable properties available. In other words, it is relatively easy to find traditional stick built single family homes that have recently sold in the area, but generally much more difficult to find comparable bardominiums that have sold in the area.
Although appraisers can make building material adjustments to stick-built homes to get a fair value of a barndominium, lenders are simply reluctant to use properties that do not more closely match the subject property. For this reason, lenders simply refuse to offer bandominium financing. But good news! Hurst lending offers barndo construction financing.
Who Can Build a Barndominium?
There are many traditional builders that have added bardominium construction to their portfolio of offerings due to the growing interest in this style of home. There are even builders that specialize in bardonimium homes,specifically. Regardless of who you choose to build your home, make sure you do your homework. For most of us, our house is the most expensive item we will purchase. You want to make sure that the builder will complete your project on-time, within the budget you agreed, and with the quality and craftsmanship you expect. Always check the builder’s references of past clients, view other homes the builder has completed and talk to the homeowners regarding their experience with the builder. Lenders do not allow for “self-build” construction projects; so you will need to hire a general contractor.
Hurst Lending’s Offer for Barndominium Construction!
Hurst Lending is excited to announce that we are now offering Single Close Construction-Perm (also known as a One-Time Close) and Two-Time Close Construction only loans for barndominiums!
Based on the volume of inquiries that we receive for barndominium construction financing, it is clear there is a strong need for this product. So, we expanded our product offering.
You can now build your barndominium using a VA, FHA or Conventional Construction loan. You can finance up to 100% of your project with a VA construction mortgage, 96.5% with FHA construction mortgage, and 95% for Conventional construction mortgage (including the land). We do NOT require the traditional 20% down payment that most lenders do. Yes, 100% financing is available for veterans!
The maximum land that can be included in the loan is 10 acres; however, if you have more than 10 acres there are ways to divide the property to meet this restriction.
Call us today to discuss how we can get your barndominium construction project financed. Please reach out to Chris Jandrain at 512-536-0102.