Financing country property can certainly be a maze to navigate. A buyer looking at a lovely home on 75 acres near Charlottesville may be thinking that the timing is perfect. Prices have finally leveled off and inventory is coming back. Rates have bumped up lately but are still at record lows historically.
Just ask you parents if they are still around. Financing country property is not the same as financing a residential property. Are you a non-conformist? Quite possibly you are and if you are hoping to pick up a sizable chunk of land, your loan probably will be as well.
Country property, farms, estates and raw land do not fit the standard criteria on the application for a home loan. Whenever the ratio of land value to improvements value exceeds 30% it becomes a non-conforming loan and will not fit neatly into the packaging of loans for resale to the secondary market.
Unfortunately, few lenders will explain the non-conformity issue at the pre-qualification stage so buyers who believe they are ready, willing and able don’t realize that the property they seek may not be.
The nation’s largest lender for rural properties is Farm Credit. Farm Credit has been around for about 90 years and was originated to assist farmers with reliable financing in good times and bad. Today, they still are in business to assist farmers but also make loans to rural land owners, country home owners and agribusinesses.
Traditional lenders also participate in country property financing but usually need to be creative. They may originate two loans, one for the residence and another for the surrounding land which may carry a higher interest rate.
Personal bankers who can keep a loan in house may choose to finance country properties for clients whose assets are known and respected and seller financing is more prevalent in country property brokerage than in the traditional residential market.
The best strategy for financing country property is to be prepared. Make sure you explain to your lender that you are interested in purchasing a property with some acreage and make sure they understand the nuances. We will be happy to refer you to some excellent lenders who know how to work with country property. It is indeed a perfect time to consider a purchase of country property and we’d love to help.
