Here at Barndominiums.co, we know that building a barndominium is a rewarding experience for anyone who has the vision and wherewithal to follow through on the project. Being able to build your own home is something that not everyone gets to do and those who can get to live in a house that is built to their exact specifications. However, one of the most difficult parts of any home build is going to be getting the financing to do the actual construction.
This is especially true with a barndominium, since it is a different type of house than what many banks are going to be familiar with. It takes a little bit of extra work and preparation to get the barndominium financing you need in order to get this project up off the ground. In this article, we have laid out some of the best ways to get barndominium financing so you can get started on your custom dream home.
What to Have Ready Before You Look for Barndominium Financing
Before you start to look for barndominium financing, you should have quite a bit of your project already planned out. By being prepared, you can come to the bank and show that you have put together everything you need to successfully complete the project. Lenders want to be sure that you will get the build completed before they lend you the money to get it started. Having everything ready will show them that you are serious and will not abandon the construction halfway through.
Some of the things you should have with you when you go to get barndominium financing include a detailed floor plan, interior specifics, a land survey and a list of deadlines. While many banks aren’t going to be as familiar with the barndominium build process as they will be with a traditional house, it is becoming a more popular type of home and having these things ready will help them understand what the project is and how you plan on accomplishing it. If you are prepared, you immediately raise your chances of getting approved for a loan.
Types of Loans for Barndominium Financing
When you are building your own home, there are a couple of different loan types that you will have to get to get your project started. Knowing the difference between these loans can help you understand what you need to get in order to start construction. For example, since you are building a new home from scratch, you will need to get a construction loan instead of a traditional mortgage. Construction loans tend to be more difficult to obtain no matter what, so you should make sure you make enough income and that your credit is in good condition.
The main difference between a mortgage and construction loan is that a construction loan is for a much shorter period of time. Generally, construction loans are for a year and you will not incur interest until the loan is converted to a permanent loan. This is to ensure that all your contractors are paid and that the home actually gets built.
Once your home has been built, your loan will then turn into a permanent loan and mortgage just like a traditional home. You can set your mortgage time to either 15 years or 30 and will then be responsible for paying the loan back along with the interest that is incurred.
How to Get Barndominium Financing
There are a number of different ways to get financing for your barndominium and how you decide to go about it will be entirely up to you. By taking a good look at all the different options open to you, you can make the right decision for your particular situation as well as your financial ability. Only you can really know which barndominium financing option will be the right one for you and your home build project.
Many people choose to go the route of getting a construction loan through a traditional bank. This can be a great option for people who may not have the best credit but are able to pay a little extra interest on their loan in order to build that credit back up. Traditional banks will also have a wider variety of options open to you when it comes to the types of barndominium financing packages you can get.
Credit unions function much in the same way as traditional banks, but have a little bit of a tougher point of entry. For the most part, you must have excellent credit to be able to get barndominium financing from a credit union. However, you are more likely to get a better deal on interest rates and other benefits.
Agricultural banks are focused on ag projects in their state and will be very likely to help you with barndominium financing if you plan on doing any farming on your property. This could also be a good option if you are building a barndominium with the intention of having stables attached to the main living area. Agricultural banks are also backed by federal entities, which makes them a very safe bet for your barndominium financing.
Mortgage banks are third-party mortgage lenders that transfer your loan to a traditional bank after they have secured the funding. This could be a good option if you want to work with somebody who knows how to search for the best possible funding for your barndominium and the specific circumstances that you are facing.
One of the newest forms of home and barndominium financing are online lenders. Online lenders are becoming much more common for people who are first-time home buyers and home builders. If you are interested in using an online lender for your barndominium, be sure to read reviews and do as much research as possible on each specific lender you plan on contacting. One of the benefits of these lenders is that they are incredibly varied in their interest rates and the types of projects they are interested in financing.
For the most part, members of the VA can get construction loans through the organization. These loans are usually secured through the VA but they are not actually provided through them. Instead, the VA helps borrowers get financing and then transfers the loan to a traditional bank. One of the differences, though, is that you usually do not have to put down a down payment, which could help ease some of the stress of the process.
USDA loans are a great option for barndominium financing since they are usually given to people looking to build in rural areas. This is perfect for barndominiums and, just like with a VA loan, the borrower will often not have to put down a down payment as long as the area they are planning to build in meets the requirements set forth by the organization.
Securing barndominium financing is one of the most difficult aspects of building a project like this. However, by being properly prepared, you can give yourself the best possible chance at getting the funding you need to build your custom dream home. By understanding the different types of loans available to you, you can also find the option that is going to be the most sustainable and make your barndominium project a success.