VA Loans for a Barndominium

Written By: Larry Haggerty

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If you are a veteran or an active-duty service member looking to build a new home then you have options to help finance building or buying your barndominium.

A VA loan is a mortgage guaranteed by the U.S. Department of Veterans Affairs. A VA loan can be used to purchase or refinance a home, including a unique type of home known as a barndominium.

If you’re eligible for a VA loan, you may be able to use it to finance the construction of a barndominium. However, there are certain eligibility requirements that you must meet, and the process of applying for a VA loan can be more complex than applying for a traditional mortgage. 

In this article, we’ll explore the ins and outs of VA loans for barndominiums, including the benefits and drawbacks, eligibility requirements and the application process.

Key Takeaways:

  • VA loans are a financing option for veterans and active-duty service members that can be used to purchase or refinance a home, including a barndominium.
  • Barndominiums are a unique type of home that are constructed from a metal or steel building and are often more affordable and customizable than traditional homes.
  • While VA loans can be a good option for financing a barndominium, there are certain eligibility requirements and the application process can be more complex than for a traditional mortgage.

What are VA Loans?

VA loans are backed by the Department of Veterans Affairs and are designed to help veterans and service members become homeowners.

The biggest advantages of a VA loan is that it does not require a down payment. This means that you can purchase a home without having to save up a large sum of money for a down payment. Additionally, VA loans typically have lower interest rates than conventional loans, which can save you money over the life of the loan.

To be eligible for a VA loan, you must meet certain requirements. You must have served at least 90 consecutive days of active duty during wartime or 181 days of active duty during peacetime. You may also be eligible if you have served at least six years in the National Guard or Reserves.

Another requirement is that the property being purchased must be used as your primary residence. This means that if you are applying for a VA loan to build or buy a barndominium, you must intend to live in the home full time.

VA loans are a great option for veterans and service members looking to become homeowners. With no down payment required and lower interest rates, a VA loan can make purchasing a home more affordable. If you meet the eligibility requirements and are interested in purchasing a barndominium, a VA loan may be a good option for you.

Eligibility for VA Loans for a Barndominium

VA loans are a great option for those who meet the eligibility requirements, as they offer many benefits, such as no down payment, no mortgage insurance, and competitive interest rates.

Minimum Property Requirements

To qualify for a VA loan for a barndominium, the property must meet certain minimum property requirements set by the VA. These requirements include:

  • The property must be primarily residential in nature, with at least 400 square feet of living space.
  • The property must have functional electric, heating, and cooling systems.
  • The property must have a safe and sanitary water supply and sewage disposal system.
  • The property must be accessible by a safe and adequate street or easement.

Credit Score Requirements

While there is technically no minimum credit score requirement for a VA loan, most lenders will require a credit score of at least 620. However, some lenders may be willing to work with borrowers with lower credit scores on a case-by-case basis.

Debt-to-Income Ratio Requirements

To qualify for a VA loan, you must also meet certain debt-to-income ratio requirements. Your debt-to-income ratio is the amount of debt you have compared to your gross monthly income. Generally, lenders prefer a debt-to-income ratio of 41% or lower, although some may be willing to work with borrowers with higher ratios.

Overall, if you meet the eligibility requirements for a VA loan and are interested in purchasing a barndominium, it can be a great option for you. Make sure to work with a lender who is experienced in VA loans and can help guide you through the process.

Benefits of VA Loans for a Barndominium

If you’re a veteran looking to build a barndominium, you might want to consider a VA loan. VA loans offer several benefits that can make it easier for you to finance your new home.

No Down Payment Required

One of the most significant benefits of a VA loan is that you don’t need to make a down payment. This can be a huge advantage for those who don’t have a lot of cash on hand. With a VA loan, you can finance up to 100% of the purchase price of the property. This means that you can get into your new barndominium without having to save up for a down payment.

Lower Interest Rates

Another benefit of a VA loan is that it typically comes with lower interest rates. This can save you thousands of dollars over the life of the loan. The Department of Veterans Affairs guarantees a portion of the loan, which means that lenders are more willing to offer lower rates to veterans.

No Private Mortgage Insurance

With a traditional loan, if you put down less than 20% of the purchase price, you’ll likely have to pay for private mortgage insurance (PMI). This can add hundreds of dollars to your monthly mortgage payment. However, with a VA loan, there’s no PMI required, even if you don’t put any money down. This can save you a significant amount of money over the life of the loan.

In summary, if you’re a veteran looking to build a barndominium, a VA loan can be an excellent option. With no down payment required, lower interest rates, and no private mortgage insurance, a VA loan can make it easier and more affordable to finance your new home.

Drawbacks of VA Loans for a Barndominium

If you’re considering using a VA loan to fund your barndominium, it’s important to know that there are some drawbacks to this financing option. Here are two key drawbacks to keep in mind:

Funding Fee

One of the biggest drawbacks of using a VA loan for a barndominium is the funding fee. This fee is a one-time cost that you’ll pay to the VA when you take out your loan. The amount of the fee varies depending on your down payment amount and whether you’ve used a VA loan before.

For example, if you’re taking out a VA loan for the first time and you’re making no down payment, your funding fee will be 2.3% of the loan amount. If you’re making a down payment of 10% or more, your funding fee will be reduced to 1.4% of the loan amount.

While this fee can be rolled into your loan amount, it’s still an additional cost that you’ll need to consider when budgeting for your barndominium.

Property Restrictions

Another potential drawback of using a VA loan for a barndominium is that there are some restrictions on the types of properties that are eligible for VA financing. For example, the property must be a residential property that you intend to live in full-time. Additionally, the property must meet certain safety, soundness, and value requirements.

While barndominiums can be eligible for VA financing, it’s important to ensure that your property meets all of the VA’s requirements before you apply for a loan. This may require additional inspections or appraisals, which can add to the overall cost of your project.

Overall, while VA loans can be a great option for financing your barndominium, it’s important to keep in mind these potential drawbacks. By understanding the funding fee and property restrictions associated with VA loans, you can make an informed decision about whether this financing option is right for you.

Applying for VA Loans for a Barndominium

If you’re a veteran looking to build or buy a barndominium, you may be wondering how to apply for a VA loan. Here are the steps you need to take to secure a VA loan for a barndominium.

Finding a VA-Approved Lender

The first step in applying for a VA loan for a barndominium is finding a VA-approved lender. Not all lenders are approved by the VA to provide VA loans, so you’ll need to do some research to find a lender that is approved. You can find a list of VA-approved lenders on the VA website, or you can ask your real estate agent for recommendations.

Obtaining a Certificate of Eligibility

Before you can apply for a VA loan, you’ll need to obtain a Certificate of Eligibility (COE) from the VA. The COE is a document that proves you’re eligible for a VA loan. You can apply for a COE online through the VA’s eBenefits portal, or you can apply by mail using VA Form 26-1880.

Completing the Loan Application Process

Once you’ve found a VA-approved lender and obtained a COE, you can begin the loan application process. The lender will ask you to provide documentation of your income, assets, and debts, as well as information about the property you want to buy or build. You’ll also need to undergo a credit check and provide proof of insurance.

Once you’ve completed the loan application process, the lender will review your application and determine whether you qualify for a VA loan. If you’re approved, the lender will work with you to finalize the loan and close on the property.

Remember, VA loans have specific requirements and guidelines that must be met, so it’s important to work with a lender who is experienced in VA loans and can guide you through the process. With the right lender and a little bit of preparation, you can secure a VA loan for your dream barndominium.

Frequently Asked Questions

Can you use a VA construction loan to build a barndominium?

Yes, you can use a VA construction loan to build a barndominium. However, the barndominium must meet the minimum property and occupancy requirements set by the VA, along with other guidelines. A VA loan requires that the property being purchased is being used as a primary residence.

How do I find VA construction loan lenders for a barndominium?

To find VA construction loan lenders for a barndominium, you can start by contacting your local VA office or contacting a VA-approved lender. These lenders are familiar with the VA loan program and can help you understand the requirements and application process.

What are the VA loan requirements for a barndominium?

The VA loan requirements for a barndominium are similar to those for a traditional home. The barndominium must meet the minimum property and occupancy requirements set by the VA, along with other guidelines. A VA loan requires that the property being purchased is being used as a primary residence.

What is the cost of building a barndominium in VA?

The cost of building a barndominium in VA can vary depending on several factors, such as the size of the barndominium, the materials used, and the location. It is important to work with a reputable builder and obtain multiple quotes to ensure you are getting a fair price.

Can a barndominium be financed with a mortgage?

Yes, a barndominium can be financed with a mortgage. However, it is important to work with a lender who is familiar with the unique aspects of a barndominium and can provide financing options that meet your needs.

Are there any barndominium kits that qualify for VA loans?

There may be barndominium kits that qualify for VA loans, but it is important to work with a lender who is familiar with the VA loan program and can help you understand the requirements and application process. It is also important to ensure that the kit meets the minimum property and occupancy requirements set by the VA, along with other guidelines.

Remember to do your research and work with a reputable builder and lender to ensure that you are making the best choices for your barndominium project.

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