Barndominiums are quickly becoming one of the most popular new build options. After all, they offer fast, and cost-effective alternatives to traditional housing – while improving durability, reducing maintenance, and giving you the freedom of an open-floor plan with no interior load-bearing walls.

However, whatever your reasons for choosing a barndominium, you’ll still have to finance them. And, that can mean more difficulties than financing a traditional home. 

But, the good news is that more and more banks will offer barndominium financing under the same terms as a traditional home construction loan. However, you might find that your home is classified as a modular home and given similar terms. This will change your interest, mortgage, and insurance rates – so you’ll have to make sure you do your research. 

Financing A Barndominium In Alabama

Alabama makes it relatively easy to finance a barndominium. After all, you can relatively easily find banks and credit organizations that explicitly state that they finance barndominiums.

In addition, the state of Alabama is very open to things like owner-builder construction, which means you can generally get a loan even if you want to do much of the work yourself. 

Alabama is also a popular place to build barndominiums. This means that local banks are more likely to be willing to finance them.

In most cases, you can also get a construction loan with a credit score of 580 or higher – although you can expect that your downpayment will shrink as your credit score rises. 

Your Alabama Barndominium Loan Choices

You’ll have roughly the same choices in barndominium loan and financing options in Alabama as you would in any other state.

However, Alabama has a large amount of rural area, meaning that you’re more likely to qualify for USDA and agricultural loans than in many other states. 

Construction Loan 

The construction loan is the standard loan taken out to fund the construction of a new home.

Here, you typically get a construction loan for a period of 12-24 months where you’ll receive a short-term loan to fund the building of your home and the purchase of any materials. This may take the form of a lump sum loan or a line of credit, where your suppliers and builders are paid directly by the bank.

Then, at the end of the loan, you either pay it off in a balloon payment or convert it into a mortgage on the new home. 

Construction loans are ideal for barndominiums because you almost always complete the build within the allotted 12 months. This means you can best benefit from terms and can keep interest and payments to a minimum.

In addition, most banks offer them on barndominiums or on “modular homes with foundations”. 

However, if you take out a construction loan via a private bank, you can expect to require a 3-20% down payment depending on your credit score.

You might also have to check to ensure that your property purchase is included, as not all banks cover this. 

FHA Loan

A Federal Housing Association (FHA) loan is an ideal solution if you want a construction loan but can’t afford loan insurance or don’t qualify for a traditional private loan.

Here, most FHA loans are intended to purchase existing property. Therefore, you’ll have additional trouble being approved for a construction loan. However, you can buy or build a single or multi-family home with your FHA loan.

Rates are capped at $472,030 for a single-family home including property. You’ll also have to pay a 3.5% down payment with a credit score of 580. However, you can get an FHA loan with a credit score as low as 500, providing you have a 10% down payment. 

VA Loan 

If you are a veteran, a VA loan is the best option you can take. However, you’ll have to source VA-approved builders. On the other hand, you’ll get optimum rates, no down payment, won’t need to worry about credit score, and will get better interest rates than pretty much anywhere else.

But, if you do have to buy land with your VA loan, you’ll have to start construction immediately to qualify. 

USDA Loan 

A USDA loan is ideal if your home owns between 50-80% of the median-income and live outside of a big city, typically in an area with 20,000 residents or fewer.

Income is capped at around $108,000 for a 4-person household – but actual maximums will vary depending on income in your region. However, you can also check the specific address against the USDA’s eligibility map.

But, with 100% of costs covered, support for mixed-use buildings, an average interest rate of 3%, and loan terms from 2-30 years, it’s a great way to go if you qualify. In addition, USDA loans are designed to make rural housing accessible. 

Conventional Loans 

Conventional loans include direct loans, loans taken out on your assets, etc.

Here, you can expect that the most common is a loan provided through a lender and your metal building manufacturer. These are typically “just” for the products and services provided by your metal building company, for example, “just” the building kit or the building kit, erection, and foundation services.

These loans are typically for a few years, do require credit scores of 580+, and generally have higher interest rates. However, they are ideal if you want to do most of the work of interior finishing on your own.

Alternatively, you could take out a mortgage or a loan on your existing assets, saving yourself the hassle of going through an appraisal for your new barndo for a mortgage. 

Alabama Barndo Loan Criteria

Applying for a barndominium loan in Alabama typically means meeting state-specific criteria. However, they are very similar criteria to those set in most of the state. 

• Down Payment – In most cases, you’re looking at a downpayment of around 10-20%. This means that if you have a $400,000 loan, you need $20,000 in cash to pay out of pocket. 
• Credit Score – You’ll generally need a credit score of 580 or higher. However, especially national banks, will typically require a score of 620 or higher. That can change from financial institution to financial institution. 
• Builder – You’ll either have to apply for an owner-builder construction permit or choose a builder up front. Some banks won’t finance owner-builders. 
• Collateral – You’ll have to show proof of employment and income, show that you have 6 months of interest and taxes, and will typically have to insure the loan. 

That can sound like a lot, but it’s generally about the same in every state.

You have to prove to the bank that your finances are in order, show that you have a good builder, and have cash to cover your part of the costs. 

Barndominium Lenders In The Cotton State

Most banks will cover barndominiums under their construction loans. This means you can typically go to any lender providing mortgage financing. 

• Alabama Ag Credit – This borrower-owner cooperative explicitly funds the building of barndominiums and similar homes. There are some specifications. The home must be outside of city limits or in a town with a population of 2,500 or less. In addition, it must be a single-family, owner-occupied home. And, the new home has to contribute at least 50% of the value of the property. But with no requirements for insurance and no escrow, this can be a great choice. 
• Alabama Farm Credit – Alabama Farm Credit actually explicitly funds barndominiums. However, your home will have to be rural. Otherwise, Alabama Farm Credit offers loans to people of every income and for homes that are intended as lake homes, hunting cabins, and more. 
• First Bank of Alabama – First Bank of Alabama offers a single mortgage loan on the appraised value of the barndo you’re building. It does have basic requirements for credit score and actual mortgage terms will vary, however, this local bank makes it relatively easy to finance your barndo. 
• Wintrust Mortgage – Wintrust is an Alabama-based banking firm offering mortgages, conventional loans, and construction loans. Here, you can get financing up to $5 million with down payments as low as 5%. Terms are 12-18 months, after which you can convert the loan to a traditional mortgage. Wintrust also offers semi-fixed mortgage interest and payment rates. 
• Hometown Bank – This local Alabama bank offers a range of home construction, land purchase, and line of credit loans ideal for building barndominiums. The bank also offers agricultural loans if your barndo is for mixed use. However actual rates and requirements will vary depending on your location. This bank also has banks across the state, making it easy to go to a branch to discuss your terms and options. 

What Next?

If you’re ready to get started building a barndominium, you need financing. Hopefully this guide gives you a good idea of what you’re looking for and what your options are.

If you’re ready to get started, use the form at the top of the page to compare the top barndominium financing options in Alabama, with rates, interest, terms, and requirements laid out for you.

However, financing a barndo, just like with any other home, will require a significant amount of prep work. You’ll have to have your paperwork, contractors, and building designs in order. This financing guide will walk you through everything you need to know to finance your barndo.

Can You Finance A Barndo In Texas?

Yes! Texas is home to multiple banks and financial institutions that offer financing for barndominiums. This includes a range of financing options, including traditional one and two stage construction loans, barndo kit financing, and a range of U.S. government loan options.

However, not everyone will qualify for a barndominium construction loan. In fact, most people need a credit score of 620 or higher, with some requiring up to 720 for optimum chances of approval. Of course, a USDA or VA loan will negate those requirements. However, preparation will still be key to ensuring that you get your barndo financing.

4 Texas Barndominium Loan Options

Texas offers multiple loan constructions, which typically give you a range of different options when building your barndo. However, most people opt for the construction loan.

1. Construction Loan

A construction loan allows you to borrow money with a line of credit to cover construction costs. Here, you typically have a construction where you talk to a bank, get an appraisal on your prospective build, and then have it approved or not. Once approved, payments are made directly to your materials and work providers. This means that you only pay interest on the amount you’ve actually spent- reducing your total costs over the loan. Then, at the end of the loan when you get your certificate of occupancy, you can either pay the entire loan off at once or convert it into a mortgage on the home.

2. Personal Loan

Personal loans are typically available directly through your barndominium manufacturers. Here, the loans are made via banks and financial institutions like Acorn Finance. However, they’re typically personal loans and typically only cover the cost of barndominium kit and potentially the foundation. This means that the loan covers the cost of whatever the metal building manufacturer is providing and that’s it. If you want to buy property or cover the interior, this option won’t be good enough. However, this can be a great option if you primarily want to DIY the interior – which means that most Texas banks won’t offer you a construction loan anyway.

3. VA Loan

Veterans Affairs loans are construction loans with minimal requirements, minimal credit requirements, and very good repayment terms. You will have to work with a VA builder, you’ll need VA-approved building materials, and you’ll have to begin construction immediately if you want to purchase land with your VA loan. However, with 0% down and limited closing costs, if you can get a VA loan, it is the way to go.

4. USDA Loan

If you’re planning to build in an area with fewer than 20,000 residents and make less than 15% above the average income in the area, have stable income and employment, and want to build a home, you likely qualify for a Texas USDA loan. This is a construction loan that transfers to a 30-year fixed-rate plan. In addition, they have no upfront costs (land, building permit costs, etc., are included) and there’s no down payment. So, this can be a very good way to go.

Texas Barndominium Loan Requirements

Applying for a barndominium loan in Texas means meeting requirements. However, those will vary depending on the type of loan and the specific financial institution you intend to go to. For example, most banks will require:

• Credit Score – Most banks require a credit score between 580 and 720. The higher your credit score, the better your terms, downpayment, and interest will be.
• Proof of Employment – You’ll need proof of employment/stable income
• Builder – Most Texas banks will not offer a construction loan without a registered builder. This is no longer required by law in Texas, however, most banks have not updated. This means that owner-builder construction loans are often not an option.
• Land – Many construction loans allow the purchase of land, however, they may require that you have land selected and have a binder paid on it. This will vary from bank to bank.
• Downpayment – Most banks require a 10-20% down payment
• Collateral – You typically need 6 months of interest, taxes due, and should have your income insured

Some banks will also require that you already have building permission before granting the loan. However, most will not require this as a set thing.

Barndominium Lenders In The Lone Star State

There are plenty of lenders willing to finance barndominiums in Texas. This means you’ll have your pick of options – although different banks will offer a range of pros and cons.

1. Legacy AG Credit

Legacy AG Credit is a lender based in East Texas. The lender offers short-to-long-term credit solutions for home development, new build homes, and agricultural development. This means you can attempt to get a loan from them even if you’re adding an agricultural area to your barndo. However, Legacy Ag is focused on rural and farmland development meaning you’ll have to qualify.

2. Nationwide Home Loans

This lender offers traditional construction loans at a minimum value of $250,000. It does require that you have a credit score of 620 or higher. However, with loan down payment from 0%, it can be a great option if you don’t have a lot of upfront capital. The lender also offers you a year of construction loan, after which it converts into a mortgage loan.

3. Go Mortgage

Go Mortgage is a non-traditional (digital) loan company offering five different construction loans. Like Nationwide, it has a build period of 12 months. You’ll also need a credit score of 640+. However, Go Mortgage also explicitly offers mortgages including land purchases. Down Payments start at 3.5%.

4. Wells Fargo

Wells Fargo is one of the largest banks in the world. It also has a barndominium loan program including a barndominium management team. The construction loan requires a minimum credit score of 640. In addition, you’ll have to pay a minimum of an 11% downpayment for the loan. However, you can get a construction loan for up to 24 months, which is one of the longest options available in the state.

5. Chase Bank

Chase is another very large bank which offers barndominium loans if your credit score is good. You’ll need a score of 700+. In addition, you’ll have to pay a 20% downpayment. In exchange, you’ll get highly competitive interest rates. This construction loan is a line of credit only, meaning it does not usually cover property purchase.

6. Loan Depot

Loan Depot specializes in home mortgages including barndominiums. Here, it offers prefabricated construction, which means you can cover the cost of the building, the erection, and interior finishing. However, you’ll have to pay for your land out of pocket. On the other hand, Loan Depot only requires your credit score to be 500 or higher, however you’ll pay a 20% downpayment.

7. FMC Lending

FMC Lending is one of the best barndominium lenders for individuals with a lower credit score. However, if you have a higher credit score, you’ll typically want to go somewhere with better interest rates. However, with no credit score required and a loan period of 1 year, it can be a great way to enable your barndo while you save to pay off the costs. Loan down payments start at 20%, loans don’t cover the cost of property, and you can expect to pay interest rates over 7%.

8. U.S. Bank

The U.S. Bank is another large banking organization offering personal loans and credit for your new home. However, it does require foundations, which means you can’t use the U.S. Bank to finance your pole barn home. On the other hand, you can get a loan with a credit score of 620 with down payment rates from 3%.

9. First National Bank

First National Bank covers a range of barndo financing scenarios including a construction loan to mortgage offering. The bank requires a credit score of 620+. In addition, you’ll have to pay at least a 20% downpayment. Otherwise, First National Bank has a lot to offer, including building managers to help you ensure your barndo construction goes smoothly.

Next Steps

Financing your new barndominium in Texas may be slightly more complex than a traditional home. However, chances are, you can get the same construction loans for your barndo as you would for your new home. This means you can always approach your current bank to ask for an appraisal on your barndominium project – although they aren’t guaranteed to cover it. Good luck financing your barndominium.