A buyer looking at a lovely home on 75 acres near Charlottesville may be thinking that the timing is perfect. Prices have fallen over the last few years making properties like this much more affordable. Inventories are flush so there is a lot to choose from and ready, willing and able buyers are treated like royalty. To top it off, interest rates are at an all time low. How about a 30 year fixed at 3.5%? The first three points are all straight forward, but the fourth, the best financing in history, takes a little more research and preparation to fully understand.
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.