In an ecosystem known for tradition, the world of real estate continuously evolves, welcoming unique ventures that challenge the standard narrative. Among these developments, a term has recently caught the attention of savvy home buyers and investors alike – Barndominiums.
But what ignites even more interest, is the emerging opportunity to finance these unconventional dwellings using Veterans Affairs or VA loans. Is it truly achievable? Can veterans and eligible beneficiaries incorporate this new domain into their homeownership dreams?
If these questions keep you up at night, I invite you into the intriguing world of harnessing VA loans for barndominiums. Drawing on my deep understanding of financing, let’s debunk the myths, unravel intricate procedures, and discover the realities of this fascinating financial frontier.
VA Loan: An Overview
Originating from a strong commitment to providing support for military personnel, the Department of Veterans Affairs loan is a unique financing option available exclusively to American military members, veterans, and some eligible spouses.
Facilitated by private lenders, the VA guarantees a portion of these loans, effectively lowering the risks involved for lenders, which results in more favorable terms for qualified borrowers. The VA loan is recognized as a powerful tool that opens the door to homeownership for those who have dedicated their lives to serving the country.
Now, the power of the loan extends beyond traditional residential properties. Specific Types of VA Loans include Native American Direct loans, Interest Rate Reduction Refinance loans (IRRRL), and VA cash-out refinance loans.
VA Loan Benefits
One significant feature of VA loans is that private mortgage insurance (PMI) is not required, leading to lower monthly payments than traditional mortgage financing.
Here are some important benefits:
- Possibility of 100% financing
- Lower interest rates
- Capped closing costs
- No down payment
VA loans also extend their benefits to construction. The VA one-time close construction loan is desirable, enabling the borrower to combine their construction and mortgage loan into one, offering a seamless and straightforward process.
Moreover, to qualify for a VA loan, you must meet VA’s service requirements and the lender’s credit and income criteria to be approved.
Barndominiums: A New Investment Opportunity
Barndominiums also known as ‘barndos’, are an emerging trend in residential real estate. These unique hybrid homes combine the simplicity of a barn with the comfort of a condominium. These structures provide flexibility, durability, and modern design possibilities in a single package.
Barndominiums offer an economical and sustainable alternative to traditional homes due to their relatively inexpensive building costs and low maintenance needs. They’ve gained popularity due to their versatility— functioning as a combined living and workspace.
How to Finance a Barndominium
When it comes to financing a barndominium, there are multiple pathways one can explore.
Here are the most common ways to finance a barndominium:
- Traditional home loans: These are standard bank loans often used for residential property purchases. Your financial history and credit score determine your eligibility and rates.
- Construction loans: A construction loan could be viable if you build your barndominium from the ground up. These loans finance the building phase and then transfer into a regular mortgage upon construction completion.
- Mortgage refinancing: If you own property, you could draw equity from it to finance your new barndominium through cash-out refinancing.
- FHA construction loan: This facility is insured by the Federal Housing Administration and accessed through most banks and credit unions. It requires a down payment of 3.5% or more.
- VA loans: Veterans and active-duty service members may have the option to finance a barndominium through VA loans. These loans offer benefits such as no down payment, lower interest rates, and no private mortgage insurance (PMI), making them an attractive option for eligible borrowers.
Always ensure that your potential property meets the VA loan minimum property requirements. Also, it’s important to understand your basic and bonus entitlements and how these can be used effectively for your loan process.
Getting a Barndominium VA Loan
Here’s an overview of what’s needed to qualify for a VA barndominium loan:
Understand Your Eligibility
First, establish your eligibility for the loan. This generally includes military personnel, veterans, and certain eligible spouses. It would be best to validate your eligibility by requesting a VA Certificate of Eligibility (COE).
Primary Residence
The VA loan property must be your primary residence, whether an existing barndos or new construction. The eligibility criteria emphasize your commitment to living in the home full-time, not as a second home or investment property.
Lender Selection and Pre-Approval
Selecting a lender with experience with VA loans and barndos is crucial. Once you choose a lender, the next step is to get pre-approved. Although the VA is generally more lenient about credit scores, maintaining a good and solid financial employment history is beneficial in pre-approval.
Property Selection and Appraisal
Find your dream barndominium or plan its construction. Once you have this figured out, your lender will arrange for a VA appraisal to ensure the home meets the VA’s property requirements and provides a fair market value for the home.
Loan Closing
Loan closing involves signing all necessary documentation. Then, you’re ready to build or move into your new, unique home.
This streamlined process reduces the complexities often associated with traditional financing methods and provides an easy pathway to homeownership for eligible candidates.
Building a Barndominium Using a VA Loan
This process requires thorough planning. The VA has particular construction and quality standards for homes, with specifications around the living space area, room count, water, sanitation facilities, and floor plan. Limits may exist around the land size specified by the VA home loan acreage limit.
Despite these constraints, using a VA loan for construction presents attractive advantages. For one, the all-in-one nature of the VA construction loan simplifies the payment process. These one-time-close loans mean you only have a single loan closing, saving time and money. Also, lenders have different ways of converting the construction loan into a permanent VA loan.
With a deep-rooted passion for VA loans, I can confidently say that the loan’s viability in shaping the barndominium property scene remains to be seen. However, the amalgamation of veterans’ financial lending privileges and the robust, flexible living concept of barndominiums opens up creative possibilities for building your dream home.
Frequently Asked Questions About VA Loans for Barndominiums
How much do most barndominiums cost to build?
Barndominiums typically cost between $62 and $190 per square foot, including the metallic structure and interior build-out cost. However, the price can vary significantly depending on location, property size, and design complexity.
What type of building is best for a barndominium?
Metal or steel buildings are typically best for barndominium because of their durability, cost-effectiveness, and easy maintenance. The sturdy nature of these materials can withstand diverse weather conditions, making them perfect for the dual functionality of barndominiums that blend living space with more traditional barn uses.
What is the most expensive part of building a barndominium?
Typically, the interior finish out is the most expensive part of building a barndominium. This includes plumbing, electrical work, flooring, cabinetry, appliances, and labor costs. While the barndominium shell structure can be cost-effective, interior finishes significantly add to the overall expense based on the luxury and customization desired.
