How are barndominiums financed

With the rising popularity of barndominiums, financing can be a source of worry. Traditional mortgage programs often cannot be used for a barndominium, as lenders tend to view it as a commercial property due to its unique construction style and agricultural appeal. Fortunately, there are ways to finance your barndominium-style home.

The main options for financing a barndominium include traditional home mortgages, owner-financing options, and loans from the United States Department of Agriculture (USDA).

Traditional Home Mortgages – A typical fixed-rate mortgage loan works well for financing new construction or an existing barndominium. Most traditional lenders will consider this type of property as long as it meets certain criteria regarding land size and distance from major population areas. These loans require little money down and are typically the least expensive way to finance your home.

Owner-Financing – If finding a traditional lender isn't an option, you should consider owner-financing options like seller carryback financing or lease with option to buy contracts. With seller carryback financing, the owner agrees to hold a loan on the property and you make payments directly to the owner rather than a bank or other lender. The terms of the loan can be completely customized between buyer and seller; for example, you may be able to pay no income taxes on interest paid throughout the year if you agree to pay enough cash at closing up front. The lease with an option to buy contract may also be useful if you don't want or aren't able to take out traditional financing but want some form of ownership in the property without making full payments immediately. This contract allows you to rent from an owner who is willing to accept part payments towards buying their property at any point within an agreed upon period. Both these options will cost more in terms of overall payments than taking out a traditional mortgage loan but can provide more safety than finding another lender in some cases when trying to finance this type of home.