Owning a barndominium—a unique blend of rustic charm and modern living—appeals to many homeowners looking for an affordable, customizable space. But when it comes to financing, barndominiums occupy a grey area that can challenge even seasoned buyers. They’re not classified as traditional homes, making financing options less straightforward. However, with the right approach, it’s entirely possible to secure financing for your dream barndo. Let’s explore how you can do it and what to expect from lenders.
Why Financing a Barndominium Can Be Tricky
Barndominiums are not conventional homes, and most lenders view them as non-standard properties. This can complicate matters for buyers seeking traditional mortgages. Financial institutions tend to favor structures that fit neatly into predefined categories like single-family homes, which makes it harder to secure financing for a barndo—especially if it serves multiple purposes, such as both a residence and workspace​​
Some lenders categorize barndominiums under agricultural or commercial properties, depending on the intended use, which influences loan terms and eligibility. Additionally, zoning regulations in some areas further complicate financing. If the property doesn’t meet local residential codes, traditional mortgage lenders may refuse to underwrite the loan
Financing Options Available for Barndominiums
Despite these challenges, several financing options are available for barndominium buyers. Understanding these options helps you position yourself to get approved with the best possible terms.
1. Construction Loans
Since barndominiums often start as new builds, a construction loan is a viable option. These loans cover the cost of land, materials, and labor. Construction loans generally release funds incrementally, based on project milestones. Once the barndominium is complete, you can refinance the loan into a traditional mortgage or permanent loan. However, you’ll need a detailed building plan and an experienced contractor to secure this type of loan​
2. Home Equity Loans or HELOCs
If you already own a home with sufficient equity, you can tap into that equity to finance your barndominium. A home equity loan or line of credit (HELOC) provides funds based on the value of your existing property. This is a popular route for homeowners who are building a barndo as a second property or rental space​
3. Personal Loans
Although personal loans generally come with higher interest rates than mortgages, they offer flexibility. They can be a good option if you need a smaller amount to cover part of the construction or finishing costs. However, these loans tend to have shorter terms and less favorable rates​
4. USDA and FHA Loans
Some buyers explore government-backed loans like USDA or FHA loans. These loans are attractive because they offer lower down payments and favorable interest rates. However, not all barndominiums qualify—especially if the property does not meet the agency’s specific criteria for residential use
How to Prepare for the Financing Process
Choose a Reputable Builder
Working with an experienced barndominium builder increases your credibility with lenders. Many banks require detailed plans from builders they recognize, so partnering with a reputable contractor can make a big difference​
Provide a Clear Purpose
Be prepared to explain the intended use of the barndominium. Lenders are more likely to approve financing if the structure will serve primarily as a residence rather than a mixed-use property.
Check Zoning and Permits
Ensure your land is properly zoned for residential use and that all necessary permits are in place. Lenders may deny financing if the property doesn’t meet local zoning codes​
Get Pre-Qualified
Before you dive into building or purchasing, seek pre-qualification from lenders familiar with non-traditional properties. This will give you a clearer picture of what you can afford and what type of loan products are available to you
Interest Rates and Loan Terms
Interest rates for barndominium loans may be higher than standard mortgage rates. This is because non-traditional properties pose a higher perceived risk for lenders. Additionally, loan terms may be shorter—ranging from 10 to 20 years—compared to the 30-year term typical of traditional home loans. However, refinancing into a conventional mortgage after construction is a strategy many buyers use to lock in lower rates over the long term
Yes, You Can Finance a Barndominium
While financing a barndominium can be more complex than financing a conventional home, it is far from impossible. Options such as construction loans, HELOCs, and even USDA loans offer pathways to owning your dream barndo. The key lies in working with the right lenders, builders, and financial strategies to navigate the unique challenges involved.
For homeowners who value customization, affordability, and rustic charm, the effort to secure financing is well worth it. With a bit of preparation and the right approach, you can turn your barndominium dream into reality—without getting lost in the maze of financing hurdles​
