Understanding Fannie Mae’s Stance on Financing Barndominiums
Barndominiums, blending the rustic charm of a barn with the modern comforts of a home, have become increasingly popular in recent years. However, financing a barndominium can be complex, especially when it comes to securing a mortgage through conventional channels like Fannie Mae. In this article, we will explore whether Fannie Mae lends on barndominiums, detailing the specific requirements and considerations involved in obtaining a loan.
Does Fannie Mae Lend on Barndominiums?
Fannie Mae, a leading source of financing for mortgage lenders, does not directly lend money to borrowers but buys mortgages from banks and other lenders. This ensures that lenders have the funds to loan to more homeowners. The key question for many prospective barndominium owners is whether Fannie Mae will purchase mortgages secured by these unique properties. The answer is potentially yes, but with specific stipulations and requirements that need to be met.
Eligibility and Requirements
1. **Property Eligibility**
Fannie Mae requires that all properties financed through its programs be eligible under its guidelines, which primarily focus on ensuring the property is safe, sound, and structurally secure. For barndominiums, the challenge often lies in proving that the property is primarily residential and not commercial, as many barndominiums are built on land used for agricultural purposes or have significant workshop or business components.
– **Primary Residence:** The barndominium must be intended for use as a primary residence. Investment properties or second homes may have different requirements and restrictions.
– **Conventional Home Features:** The property must include all the typical features of a home, including living areas, a kitchen, and bathrooms. It must be suitable for year-round use.
2. **Appraisal Requirements**
A key component in securing a Fannie Mae-backed mortgage for a barndominium is the appraisal. The property must be appraised by a licensed appraiser who can navigate the complexities of such a unique property.
– **Comparable Properties:** The appraiser must find comparable properties that have sold recently. Finding comps for barndominiums can be challenging due to their unique nature and relatively scarce number in many areas.
– **Adjustments:** Appraisers may need to make significant adjustments based on the differences between a traditional home and a barndominium, which can affect the appraisal value.
3. **Construction and Materials**
The construction of the barndominium and the materials used can also play a significant role in the approval process.
– **Construction Quality:** The construction must meet or exceed local building codes and standards. Fannie Mae will require detailed documentation regarding the materials and construction methods used.
– **Durability and Maintenance:** The materials should ensure the longevity and low maintenance of the property, which aligns with Fannie Mae’s requirements for financing.
4. **Loan Types**
For those building a new barndominium, a one-time close construction-to-permanent loan may be an option. This type of loan allows the borrower to finance the land purchase, construction, and mortgage into one loan, which will convert to a typical mortgage after construction is completed.
Applying for a Loan
To apply for a loan for a barndominium through a lender that sells mortgages to Fannie Mae, potential borrowers should be prepared to provide:
– **Detailed Plans and Specifications:** Full documentation of the building plans, specifications, and materials used.
– **Proof of Primary Residence:** Evidence that the property will be used as a primary residence.
– **Financial Documentation:** Standard mortgage application requirements including income verification, credit check, and debt-to-income ratio.
While Fannie Mae does not explicitly exclude barndominiums from eligibility, the unique nature of these properties requires careful consideration of Fannie Mae’s guidelines. Prospective buyers should work closely with their lender to ensure that all aspects of the barndominium meet Fannie Mae’s criteria for safety, habitability, and residential use. By carefully navigating the appraisal process and meeting construction standards, securing financing for a barndominium through a Fannie Mae-backed lender is indeed possible, opening the door to more individuals wishing to own this innovative type of home.
