Texas Barndominium Financing: The Ultimate Guide (2024)

Texas is one of the best states to build a barndominium. However, if you’re trying to finance one, you’ll quickly find out it’s not the same as financing a traditional home. However, there are a lot of similarities, and you may find that it’s actually relatively easy to finance a barndominium in Texas. In fact, depending on your situation, you’ll typically have multiple options.

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.

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