Can you build a barndominium with a VA loan?

Along with other nontraditional housing options, barndominiums have recently soared in popularity. If you find yourself dreaming of a rustic barndominium to call home, a VA loan could help.

For eligible borrowers, obtaining a VA loan could cover the purchase or building costs for the barndominium of your dreams, if it meets the VA loan’s minimum property requirements. This guide explores how to use VA loans for a barndominium. 

What is a barndominium?

A barndominium combines the best features of a barn and a condo to create a unique living space. Typically, a barnodominium includes a steel or metal frame structure with an open floor plan that prioritizes customization and affordability.

Barndominiums are one of many types of dwellings that can be purchased using VA loans, if you are eligible. They tend to attract homeowners seeking an affordable place to call home because these are often less expensive to build than a traditional home. When combined with the ability to customize a ‘barndo’ to suit your specific needs, energy efficiency, and a reputation for durability, it’s easy to see why more new construction barndominiums are popular.

A review of how VA loans work

Department of Veterans Affairs (VA) loans are government-backed loans that offer more affordable homeownership opportunities to homebuyers with a qualifying military connection.

A few key benefits of VA loans include the option to put 0% down on a home purchase, no mortgage insurance requirement, and competitive interest rates. Beyond a sufficient financial situation, you’ll need to meet one of the following service requirements to qualify for a VA loan:

• Active-duty service members
• Veterans
• Reservists
• National Guard personnel
• Surviving spouses 

When pursuing a VA loan, you can seek out a home purchase loan or a construction loan. If you plan to build a barndominium, you’ll need to get approved for a VA construction loan.

Using a VA loan to buy a barndominium

If you want to use a VA home loan to buy an existing barndominium, the property must meet VA loan inspection requirements. VA loan-eligible properties must meet the following requirements:

• Permanent, Department of Housing and Urban Development (HUD)-compliant foundation: The structure must be adequately affixed to a permanent foundation.
• Zoned as residential: Generally, VA home loans must be used to purchase a residential property. But, in some cases, the property could be used for both residential and commercial purposes if the non-residential use doesn’t impair the residential character of the property.
• Provides safe and habitable conditions: The barndominium must be safe, structurally sound, and sanitary before moving forward.
• Adequate roofing: The structure’s roof must prevent moisture entry and provide reasonable future utility and durability.

VA home loans are known for imposing relatively strict minimum property requirements. In order to move forward with a barndominium purchase through a VA loan, the property must meet the VA’s requirements. 

Building a barndominium with a VA construction loan

If you had your heart set on building a barndominium from scratch and you meet the eligibility requirements, a VA construction loan could help.

With a VA construction loan, you may not be required to make a down payment or pay private mortgage insurance. During the build process, you’ll need to work with a VA-approved builder and expect to regularly pass building inspections along the way.

VA construction loans tend to come with stricter qualifications and more documentation requirements than a VA purchase loan. And, unfortunately, it’s often a challenge to find a lender and builder willing to work with you due to the relatively complex processes and long paperwork timelines.

But, if you meet the requirements and find a lender and a builder, a VA construction loan could help you finance your barndominium’s building costs.

How to get a VA loan for a barndominium

If you are interested in using a VA home loan to purchase a barndominium, the good news is that it’s possible. But expect to face significant paperwork and extensive inspections of your potential property before your VA home loan is finalized.

Use the steps below as a guide to obtaining a VA home loan for a barndominium.

Step 1: Get preapproved for a VA loan

Start by getting a certificate of eligibility (COE), which confirms your military service and eligibility for a VA loan. With your COE in hand, you can take steps toward VA loan preapproval.

Obtaining a preapproval can give you a baseline estimate of how much you may be able to spend on your home purchase. This can help you shop for homes within your budget.

Step 2: Confirm builder and property eligibility

With a preapproval in hand, you can begin shopping for homes or looking for a builder qualified to build your ideal barndominium.

If buying an existing barndominium, you’ll need to confirm the structure meets the VA’s minimum property requirements. For starters, the home must be permanently affixed to a foundation, structurally sound, and sanitary. But you can find a comprehensive list of property requirements through the Department of Veterans Affairs.

If planning to build a barndominium with a VA construction loan, you’ll find a list of registered builders through the Department of Veterans Affairs. Notably, a builder that isn’t on the list can register with the VA to work on your home build. Keep in mind that the extensive paperwork requirements tend to discourage some builders from working with VA construction loans.

Step 3: Complete the appraisal and inspections

Once you have an accepted offer on an existing barndominium, you’ll move into the VA home loan underwriting stage. During underwriting, the lender will evaluate your finances. Additionally, the lender will conduct appraisals and inspections before loan approval. The home must meet the VA’s minimum property requirements to pass the inspections.

As you navigate this process, work closely with the involved lenders, appraisers, and inspectors to understand your closing timeline. Throughout the process, do your best to respond quickly and provide any relevant information as soon as possible to speed things along.

Step 4: Close on your home

Once the home has passed inspections and appraisals, you’ll know that your new home is safe and structurally sound. From there, it’s time to sign the closing documents and finalize your VA home loan. It’s important to keep in mind that closing costs on a VA loan include a VA funding fee as well as other common closing costs.

Common challenges and how to navigate them

Throughout the home purchase process, you may run into issues or delays. As you use a VA home loan to finance a barndominium purchase or construction, be aware of the common challenges that may come your way.

Difficulty finding a VA-approved builder

If you plan to work with a builder to build the barndominium you have in mind, it can be difficult to find a VA-approved builder. As you search for a builder, carefully look at the builder’s track record and compare costs across companies to find the best fit for your situation.

It’s a good idea to start your builder search through local recommendations. But as you consider your options, ask potential builders whether they have experience working with VA construction loans. Opting to work with a reputable builder that has some experience with VA construction loans can help to streamline the process. Some homeowners prefer to buy land and build a house, and this might work for those who aim to build a barndominium too.

Before moving forward, confirm the builder you want to work with is licensed and insured.

Potential appraisal delays

The appraisal is a key step in the VA home loan process. It’s common for appraisals to slow your march to the closing table. A VA appraisal will take one or two weeks to complete. If there’s a high demand for VA home appraisals in your area, expect a longer wait.

Since you cannot close without this key inspection, an appraisal delay could throw a wrench in your plans. Throughout the loan approval process, work closely with your appraiser and lender to avoid an unnecessary delay.

Strict zoning and building code compliance

As a relatively new type of structure, barndominiums may not always suit the zoning laws and building codes of a particular area. For example, if you have a particular neighborhood in mind, it’s critical to check that a barndominium is allowed before you get too far into the process.

When building from scratch, you’ll need to consider the local building codes. Your barndominium must meet the minimum requirements set by the local building code; otherwise, you might not be able to move in.

Alternative financing if VA loans don’t work

When exploring your purchase or building options for a barndominium, a VA loan isn’t the only financing solution. Some other options to explore include:

• U.S. Department of Agriculture (USDA) construction loans: A USDA construction loan could help you build a barndominium that meets minimum property requirements in a qualifying rural area.
• Federal Housing Administration (FHA) construction loans: For homeowners who qualify for an FHA loan, barndominiums that meet baseline property requirements could be on the table. With relatively low down payment options and competitive interest rates, an FHA loan could suit your needs.
• Conventional loans: A conventional loan isn’t a government-backed option, but these loans are a great option for homebuyers in a strong financial position.

The bottom line: A VA loan can finance your dream barndominium

For homebuyers considering a VA home loan, barndominiums are on the table. Whether you want to build or buy an existing barndominium, a VA loan could help you finance the purchase if the structure meets the strict minimum property requirements. Additional VA loan tips include considering the types of loans you can use and the types of properties you can finance with these loans if you meet the requirements.

Getting ready to buy a barndominium? Begin the approval process today with Rocket Mortgage^®, an experienced VA lender, and lock into your rate today.