Building a barndominium has become an increasingly popular housing option in recent years. Barndominiums allow homeowners to convert existing barns or build new barn-style structures for residential living at a fraction of the cost of a traditional home build. However, since barndominiums are considered non-traditional housing, it can be tricky to get financing for your build. Lenders will want to see that you have a strong enough credit profile to take on this unique project before they approve a construction loan. So what credit score do you need to build a barndominium?
What is a Barndominium?
A barndominium is a home built out of a barn or in the style of a barn. The term combines “barn” and “condominium” to describe the hybrid living space that resembles more of a rustic barn than a conventional house. Barndominiums can be constructed by converting existing barns, sheds, or garages on a property. Many homeowners also build new structures entirely from the ground up to serve as dedicated barndominiums.
Barndominiums offer sprawling square footage at a fraction of the price of traditional construction costs. Their simple barn-like builds lack much of the complexity and detail work of regular homes. This pared down style allows homeowners to complete more of the building work themselves and rely less on expensive contracting crews.
Inside, barndominiums feature open and flexible floorplans well-suited to customization. Homeowners can partition interior spaces however they like and change layouts over time as needs evolve. Barndominiums usually have high vaulted ceilings, exposed beams, and rustic finishes. Yet they offer all the essential amenities of modern residential life like full kitchens, multiple bedrooms and bathrooms, living areas, and more.
Benefits of Building a Barndominium
There are many reasons homeowners may choose to build a barndominium rather than a conventional home:
- Lower building costs – Simpler barn-style structures cost much less per square foot than homes.
- Shorter construction timeline – Barndominiums take less time to build than complex homes.
- Flexible layouts – Open floorplans can be easily customized and changed over time.
- Rustic charm – Barndominiums offer a cozy, rustic feel that many homeowners love.
- Energy efficiency – Well-insulated barndominiums can be very energy efficient and eco-friendly.
- Larger square footage – Owners can get more space for their budget with a barndominium.
- DIY capabilities – Homeowners can complete more of their own building work.
Challenges of Financing a Barndominium
The unique nature of barndominiums can also make it more difficult to obtain financing:
- Appraisal challenges – Since they differ from normal homes, barndominiums can be harder for appraisers to evaluate.
- Zoning restrictions – Some areas prohibit unconventional home styles in residential zones.
- Inspection requirements – Lenders may require additional inspections during and after construction.
- Home insurance – Barndominiums sometimes don’t qualify for standard home insurance policies.
- Resale value unknowns – Non-traditional houses can pose resale uncertainties.
For these reasons, lenders tend to be more cautious when evaluating barndominium loans. You’ll generally need a stronger financial profile for approval compared to stick-built home financing.
What Credit Score is Recommended?
Most lenders like to see a credit score of at least 640 to 720 for approval on a barndominium construction loan. However, the higher your score, the better. A score of 740 or above is ideal for the most favorable loan rates and terms.
Here’s a look at minimum credit scores typically required:
| Credit Score Range | Qualification Assessment |
| 720+ | Excellent – Best rates/terms |
| 680-719 | Good – Decent rates |
| 640-679 | Fair – You may qualify but will pay higher rates |
| 580-639 | Poor – Unlikely to be approved |
| 579 or lower | Very poor – Highly unlikely to be approved |
A higher credit score demonstrates to lenders that you are a responsible borrower who pays bills on time and manages debt wisely. This makes them more confident in lending to you for your unique barndominium project.
What goes into your credit score?
The factors that make up your FICO or VantageScore credit rating include:
- Payment history – Track record of on-time payments and delinquencies. This is the most influential factor, making up 35% of a FICO score.
- Credit utilization – The ratio between credit balances and total available credit limits. It’s recommended to keep this below 30%.
- Credit history length – The average age of your accounts. Older is usually better.
- New credit – How much new credit activity you have initiated recently. Too many new accounts can lower scores.
- Credit mix – Having different types of credit like mortgages, auto loans, and credit cards.
Boosting your score comes down to consistently making on-time payments, keeping credit utilization low, allowing credit history to age, limiting hard inquiries from new credit accounts, and demonstrating you can responsibly manage different types of credit.
Tips for Improving Your Credit Score
If your credit score needs a boost before applying for a barndominium loan, here are some tips that may help:
- Pay all bills on time – Set up autopay or calendar reminders to avoid missed payments.
- Pay down balances – Getting balances below 30% of credit limits can help.
- Dispute errors – Fix any mistakes on your credit reports.
- Limit hard inquiries – Only apply for credit when needed to avoid too many inquiries.
- Don’t close old accounts – Keep your longest aged accounts open to build history.
- Ask for credit line increases – Higher limits help lower utilization.
- Monitor your credit – Review reports regularly and watch for any changes.
- Build credit mix – Take out an installment loan or secured card if needed.
With diligent credit management, you may be able to increase your score 100 points or more within 6-12 months. This can make the difference in qualifying for your barndominium mortgage.
Alternate Financing Options
What if your credit score is lagging and needs more than just a minor boost to be approved? Here are some alternative financing options to consider:
Portfolio Lending
Smaller community banks and credit unions sometimes offer portfolio lending programs. This allows them to keep and service loans “in-house” rather than selling to larger banks. Portfolio lenders can be more flexible by considering factors beyond credit scores for approval.
USDA and VA Loans
Certain government-backed mortgage programs through the US Department of Agriculture or Veterans Affairs provide more lenient credit requirements. These programs can help those with poorer credit still get approved.
Owner Financing
If you purchase land from a property owner willing to finance, they may allow you to bypass bank qualifying. You repay the landowner directly rather than getting a traditional mortgage.
Hard Money Loans
Hard money loans are short-term loans issued by private investors and secured by the property itself. Credit scores and income are less important. But hard money comes at a steep price with high rates and hefty fees.
Crowdfunding
Some owners tap into crowdfunding sites to source financing from multiple online investors. This provides an alternative to institutional lenders.
Using a Co-Signer or Adding a Co-Borrower
One last option is bringing on a co-signer with stronger credit or adding a co-borrower to your loan application. Their better credit profile can offset your score challenges during underwriting. This allows you to take advantage of their credibility.
Conclusion
While barndominiums offer an enticing opportunity for affordable home ownership, financing these unique projects takes some extra planning and diligence. Most lenders want to see credit scores of 640-720+ for approval, with scores of 740+ ideal to secure the most competitive loan rates and terms. If your credit needs work, focus on improving it several months prior to applying. Or look into alternate lending solutions that may provide more flexibility. With the right financing strategy, you can make your barndominium dreams a reality even with less-than-perfect credit.