Skip to Content

USDA Loans for Barndominiums

By Neighbors Bank Team September 6, 2023

Barndominiums, often called "barndos," merge features of a traditional home with those of a barn. Many people are drawn to them for the blend of rural living with modern conveniences and versatility. Additionally, USDA home loans can be used for these types of properties, making them a more accessible option for those wanting to enjoy the best of both worlds.

Using a USDA Loan for a Barndominium

To qualify for USDA-backed financing, the barndominium you are looking to purchase must satisfy certain criteria. As for all USDA loan properties, the barndominium must be located in a designated rural area and meet the USDA minimum property requirements (MPRs). Some of these MPRs include the property:

  • Being structurally sound
  • Having functional heating, cooling and electrical systems
  • Having adequate roofing, windows and doors

Aside from the barndominium property itself, the prospective borrower must also meet the eligibility requirements to qualify for a USDA loan. USDA-eligible borrowers must satisfy the following criteria:

Using a USDA Construction Loan for a Barndominium

Opting for a USDA construction loan allows borrowers to fund the construction of a new barndominium in a USDA-eligible location. Keep in mind, the borrower and property must still satisfy the same eligibility criteria as those purchasing an existing barndominium with a USDA loan.

A significant advantage of USDA construction loans is that they are single-close mortgages. Many other construction loans require two separate lending processes: one in which the borrower receives the construction loan, followed by another where the construction loan is refinanced into a traditional mortgage.

USDA construction loans, on the other hand, transition seamlessly into a 30-year USDA mortgage. This means USDA borrowers only undergo the lending process once, allowing them to streamline their home financing process.

Pros and Cons of Barndominiums

When considering whether to finance a barndominium with a USDA loan, it's helpful to weigh the pros and cons of this unique property type:

Pros Cons
Easily meets USDA property eligibility Difficulty obtaining USDA loan
Shorter timeline Higher up-front costs
High functionality Harder to resell

The Advantages

Easily meets USDA property eligibility: Considering the typical uses and nature of barndominums, these properties are often located in rural areas by design. This makes it relatively straightforward for potential buyers to find a barndominum that satisfies the USDA’s rural property requirement.

Shorter timeline: The open-concept layout of barndominiums typically translates to quicker construction compared to traditional homes.

High functionality: Barndominiums serve a dual purpose as both a primary residence and a versatile workspace, offering flexibility in how residents utilize their property.

The Disadvantages

Difficulty obtaining USDA loan: Though far from impossible, obtaining a USDA loan for a barndominium may be challenging. Many USDA lenders are unfamiliar with these structures and may be reluctant to finance their purchase. Borrowers may also experience added difficulty when seeking a USDA construction loan to build a new barndominium, as some USDA lenders, including Neighbors Bank, do not offer this loan type.

Higher up-front cost: While barndominiums offer long-term savings through reduced maintenance costs, the initial investment required for these properties tends to be higher compared to conventional homes.

Harder to resell: The distinctive nature of barndominiums might pose challenges when reselling, as potential buyers may be limited by their specific preferences.

The Bottom Line

By understanding the intricacies of using a USDA loan for a barndominium, you can navigate the process with confidence and turn your vision of a unique and functional living space into a reality. Whether you're purchasing an existing barndominium or building a new one, the potential to leverage a USDA loan provides a pathway to achieving your rural living goals.

Talk to a Neighbors Bank Specialist today to begin your journey toward purchasing a barndominium!

Written by:
Neighbors Bank Team
Neighbors Bank Team headshot

Neighbors Bank Learning Center

Essential reads to get you home with confidence

Visit Learning Center