Barndominium Va Loan: The Ultimate Guide

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Barndominium VA Loan: Everything You Need to Know

Barndominiums, also known as “barn homes” or “barndos,” are metal-framed or wooden-framed homes that are increasingly popular among homeowners who want a unique, rustic, and customizable living space. While most traditional lenders shy away from financing barndominiums, VA loans are a viable option for veterans who want to build or purchase a barndominium.

This blog post will guide you through the ins and outs of the barndominium VA loan, including eligibility requirements, loan terms, and benefits. Whether you’re a veteran looking to transition to a rural lifestyle or a builder interested in catering to the growing demand for barndominiums, this post has got you covered.

Can’t Wait? Check Your Eligibility for a Barndominium VA Loan Here

Before diving into the details, let’s first see if you’re eligible for a barndominium VA loan. To qualify, you must meet certain requirements:

• You must be a veteran, active-duty service member, or a surviving spouse of a veteran who died in service or from a service-connected disability.
• You must have a Certificate of Eligibility (COE) from the VA, which proves that you meet the service requirements and the lender’s underwriting standards.
• You must use the loan to finance the purchase, construction, or renovation of a property that will serve as your primary residence.
• You must have a credit score of at least 620, sufficient income to repay the loan, and meet the VA’s debt-to-income (DTI) ratio requirements.
• You must pay a VA funding fee, which varies depending on your service status, loan amount, and down payment. The fee is typically rolled into the loan amount, so you don’t have to pay it upfront.

Sub-Topic 1: How Do VA Loans Work for Barndominiums?

Now that you know the eligibility criteria, let’s unpack how VA loans work for barndominiums. First, it’s important to note that VA loans have several advantages over conventional loans:

• No down payment: Unlike traditional mortgages, VA loans don’t require a down payment. This means that you can finance up to 100% of the purchase price or appraised value of the property.
• No mortgage insurance: Since VA loans are guaranteed by the government, they don’t require private mortgage insurance (PMI) or mortgage insurance premiums (MIP). This can save you hundreds of dollars per year.
• Lower interest rates: VA loans often have lower interest rates than conventional loans, which can reduce your monthly payments and save you thousands of dollars over the life of the loan.
• Flexible qualifications: VA loans have more lenient credit score and DTI ratio requirements than conventional loans. This means that even if you have a less-than-perfect credit score or high debt relative to your income, you may still qualify for a VA loan.

What Types of Barndominiums Qualify for VA Loans?

The good news is that VA loans can be used to finance a variety of barndominiums, including:

• Newly constructed barndominiums that meet the VA’s minimum property requirements (MPRs) and energy efficiency standards.
• Existing barndominiums that are move-in ready and meet the VA’s MPRs.
• Barndominiums that you want to build on your own land, as long as the land is already paid for or is included in the loan amount.
• Renovations or improvements to an existing barndominium, as long as the loan amount doesn’t exceed the appraised value of the property after the improvements.

Sub-Topic 2: How Much Can You Borrow with a Barndominium VA Loan?

The loan amount you can get with a barndominium VA loan depends on several factors, including:

• Your eligibility status, loan category, and Certificate of Eligibility (COE).
• The VA’s loan limits for your county, which vary depending on the cost of living and property values in your area. The loan limits for 2021 range from $548,250 to $1,054,500, depending on the location of the property.
• The appraised value of the property or the purchase price, whichever is lower. The VA requires an appraisal to ensure that the property meets its MPRs and is worth the purchase price.
• The type of barndominium you want to build or purchase, as well as the construction costs, materials, and labor involved.
• The amount of your VA funding fee, which can range from 0.5% to 3.6% of the loan amount, depending on your service status, loan category, and down payment.

Is There a Maximum Loan-to-Value (LTV) Ratio for Barndominium VA Loans?

Yes. The VA has a maximum LTV ratio of 100%, which means that you can finance the entire purchase price or appraised value of the property without a down payment. However, you may need to pay a VA funding fee, which ranges from 0.5% to 3.6% of the loan amount, depending on your service status, loan category, and down payment.

Sub-Topic 3: What Are the Benefits of Barndominium VA Loans?

The main benefits of barndominium VA loans are:

• No down payment and no PMI/MIP: As mentioned earlier, VA loans don’t require a down payment, and you don’t have to pay for private mortgage insurance (PMI) or mortgage insurance premiums (MIP). This can save you thousands of dollars over the life of the loan.
• Lower interest rates: VA loans often have lower interest rates than conventional loans, which can reduce your monthly payments and save you money over the life of the loan.
• Flexible qualifications: VA loans have more lenient credit score and DTI ratio requirements than conventional loans. This means that even if you have a less-than-perfect credit score or high debt relative to your income, you may still qualify for a VA loan.
• Ability to finance renovations: If you want to renovate or improve an existing barndominium, you can use a VA loan to finance the costs, as long as the loan amount doesn’t exceed the appraised value of the property after the improvements.
• Higher resale value: Barndominiums are becoming increasingly popular among homebuyers who want a unique and versatile living space. This means that if you decide to sell your barndominium in the future, you may be able to get a higher resale value than a traditional home.

Sub-Topic 4: What Are the Drawbacks of Barndominium VA Loans?

While barndominium VA loans have many benefits, there are also some drawbacks to consider:

• VA funding fee: Although VA loans don’t require a down payment or PMI/MIP, they do require a VA funding fee, which can range from 0.5% to 3.6% of the loan amount, depending on your service status and other factors. This fee is typically rolled into the loan amount, so you don’t have to pay it upfront, but it can add to your monthly payments.
• Property restrictions: The VA has strict minimum property requirements (MPRs) that the barndominium must meet to qualify for a VA loan. For example, the property must have adequate ventilation, heating, and cooling, as well as a safe and potable water source. Additionally, the property must be zoned for residential use and not have any hazards or environmental contamination.
• Location restrictions: VA loans are only available for properties located in approved areas, which may not include all rural or remote areas. Additionally, the VA sets loan limits for each county, which may limit your ability to finance a more expensive barndominium in a high-cost area.
• Construction risks: If you plan to build a barndominium from scratch, you may face several construction risks, such as construction delays, cost overruns, and contractor disputes. Additionally, since barndominiums are non-traditional homes, you may find it challenging to find a lender or an appraiser who understands the unique features and value of your property.

Sub-Topic 5: Tips for Getting a Barndominium VA Loan

If you’re interested in getting a barndominium VA loan, here are some tips to help you navigate the process:

• Work with a lender who has experience with barndominium loans and understands the VA’s regulations and guidelines. Ask for referrals from other barndominium owners or builders, and compare rates and fees from several lenders to find the best deal for your needs.
• Get pre-approved for a VA loan before you start shopping for a barndominium. By getting pre-approved, you can determine how much you can afford to borrow, and you can show sellers and builders that you’re a serious buyer.
• Choose a location and a type of barndominium that meets the VA’s MPRs and energy efficiency standards. Work with a local real estate agent or builder who has experience with barndominiums and can help you find the right property or build the right home for your needs.
• Consider hiring an architect or a design-build firm to help you create a custom barndominium that meets your lifestyle and aesthetic preferences. This can add to the overall cost of the project, but it can also increase the quality and value of your home.
• Save up for closing costs and other expenses, such as inspections, surveys, and the VA funding fee