Rural Mortgage

[jinjimbob]

I am having a really suprising issue. Hopefully someone on this website has some insight. My wife and I are trying to get a mortgage on a house, barn, and 21 acres. All of the acres except maybe 1 are wooded. No bank has any problem with our qualifications, however they all tell us that they can not mortgage a property zoned "ag". The crazy part of that is, almost every property outside cities here in Pennsyvania is zoned "ag". The property were looking at is not really farmable other than possibly a couple acres of garden. This simply sounds bogus to me. If nobody could mortgage "ag" zoning, how did the housands of people who live in the country get a mortgage for their homes? Has anyone else run into this problem either in pa or where you live, and how did you go about financing your property?

This is because the loan does not qualify as a federal backed Fannie/Freddie mortgage. So the bank can't resell is immediately like they used to a few years ago.

There is an acreage limit, I think its anything over 5 acres.

 

[MossRoad]

they would probably let me subdivide, but like you, i am not interested in doing that. they then also would probably make me put 50% down on the land part of it. its the estate of a family friend were trying to purchase. the worst part is, they are selling us the land and house for basically just the price of the house. the land is just about free. the bank does not seem to care, and they are stuck on it being ag zoning.

Do you currently own a home now? Do you have equity in it?

The reason I ask is because there is a thing called a blanket mortgage. It covers multiple pieces of property under one mortgage.

When we wanted to buy our 20 acres of ag land back around 1989 the savings and loan place we went to (upon recomendation by Farm Credit Services) wanted 20% down on vacant land. The land was 30,000. We didn't want to put 6000 down. However, we owned our home with was worth 35,000. So the savings and loan suggested a blanket mortgage.

Basically, if you add 30,000 and 35,000 you get 65,000 dollars worth of property that we already owned over 50% in equity. Get it?

Since we had over 50% equity, they did not require 20% down. The only stiputation was when we finally sold our house, we had to hand the savings and loan at least 13,000 dollars (20% of the 65,000 dollar mortgage value) to maintain a minimum of 20% equity.

Of course, we handed them the full 35,000 when we sold the house and basically got the got the land for zero money down. All we had to pay was the mortgage fees like any other mortgage. :thumbsup:

You might want to inquire about that if you have enough equity in your current home to cover the percentages that the banks want.

 

[NorTracNY]

Wow, I never have heard of these problems. I never had a problem, but the two banks that I've delt with have been small and don't sell the mortgages to another company. I'd suggest talking to small local banks.

 

[weldermike]

I am having a really suprising issue. Hopefully someone on this website has some insight. My wife and I are trying to get a mortgage on a house, barn, and 21 acres. All of the acres except maybe 1 are wooded. No bank has any problem with our qualifications, however they all tell us that they can not mortgage a property zoned "ag". The crazy part of that is, almost every property outside cities here in Pennsyvania is zoned "ag". The property were looking at is not really farmable other than possibly a couple acres of garden. This simply sounds bogus to me. If nobody could mortgage "ag" zoning, how did the housands of people who live in the country get a mortgage for their homes? Has anyone else run into this problem either in pa or where you live, and how did you go about financing your property?

Wells fargo will offer a land mortgage, that is called a 5in30 land mortgage. They will give you the rates of a 30yr mortgage, but you have to produce a legal dwelling on the property within 5yrs. A legal dwelling has to be at least 600sq ft. trailer, shack, house whatever. As soon as you have that dwelling it gets converted to a home mortgage.

 

[weldermike]

Forgot to say, if you dont produce a dwelling in 5yrs, you have to re do your whole land mortgage all over, which we all know is costly, and could be at a higher interest rate. So a kick in the butt, is still a step foward

 

[dmccarty]

Wow, I never have heard of these problems. I never had a problem, but the two banks that I've delt with have been small and don't sell the mortgages to another company. I'd suggest talking to small local banks.

Some large banks do not sell the mortgage either. Our CU would not finance our land purchase or a house build I wanted to do decades ago. We ended up with BB&T which is not a small bank. We have dealt with quite a few loan officers over the years, I think four or five. We have only had a problem with one, I think she just lost it mentally, but the bank did everything they could to resolve the situation. They were excellent dealing with the problem we had.

I think one problem with rural properties is that many banks/loan officers do not know how to deal with them since they are used to cookie cutter houses in the city.

Appraisals can be a PITA. Getting our home construction loan, the dufuses the bank hired for the appraisal of the land we used as collateral were clueless. The tried to tell us our land was worth 1/3-1/2 less that what was selling in our area. In fact we had sold off some land to pay for the house so we knew exactly the land value. Eventually the bank got some one who had a brain cell.

The comparables they had for our house were odd as well. We have a brick sided house. So many homes in our area at NOT brick, or at best, have the front of the house in brick. One of the comparables was log home! Funny thing was that I knew the people who had built that house. Very odd pick but it did not matter to us since we go the loan. :laughing:

You just have to work around these issues.

Later,
Dan

 

[ericrm2005]

Do you currently own a home now? Do you have equity in it?

The reason I ask is because there is a thing called a blanket mortgage. It covers multiple pieces of property under one mortgage.

When we wanted to buy our 20 acres of ag land back around 1989 the savings and loan place we went to (upon recomendation by Farm Credit Services) wanted 20% down on vacant land. The land was 30,000. We didn't want to put 6000 down. However, we owned our home with was worth 35,000. So the savings and loan suggested a blanket mortgage.

Basically, if you add 30,000 and 35,000 you get 65,000 dollars worth of property that we already owned over 50% in equity. Get it?

Since we had over 50% equity, they did not require 20% down. The only stiputation was when we finally sold our house, we had to hand the savings and loan at least 13,000 dollars (20% of the 65,000 dollar mortgage value) to maintain a minimum of 20% equity.

Of course, we handed them the full 35,000 when we sold the house and basically got the got the land for zero money down. All we had to pay was the mortgage fees like any other mortgage. :thumbsup:

You might want to inquire about that if you have enough equity in your current home to cover the percentages that the banks want.

unfortunately this is our first purchase. we have 20% down and healthy incomes. the banks are just a serious hassle. i guess to avoid this if i ever buy a larger property someday ill have to put much more cash down.

 

[ericrm2005]

Great responses everyone. This is a real eye opener for me. I never thought this would ever be a problem for me, let alone everyone else who has shared their experiences. It definately is a serious pain. Im still waiting to see what the guy from Ag Choice says. It sounds like he think he may be able to stretch it into a fannie loan somehow. THe next step is having them find comparables which im sure will be a problem as well. ~sigh~ Life certainly isnt simply anymore.

 

[weldermike]

Some large banks do not sell the mortgage either. Our CU would not finance our land purchase or a house build I wanted to do decades ago. We ended up with BB&T which is not a small bank. We have dealt with quite a few loan officers over the years, I think four or five. We have only had a problem with one, I think she just lost it mentally, but the bank did everything they could to resolve the situation. They were excellent dealing with the problem we had.

I think one problem with rural properties is that many banks/loan officers do not know how to deal with them since they are used to cookie cutter houses in the city.

Appraisals can be a PITA. Getting our home construction loan, the dufuses the bank hired for the appraisal of the land we used as collateral were clueless. The tried to tell us our land was worth 1/3-1/2 less that what was selling in our area. In fact we had sold off some land to pay for the house so we knew exactly the land value. Eventually the bank got some one who had a brain cell.

The comparables they had for our house were odd as well. We have a brick sided house. So many homes in our area at NOT brick, or at best, have the front of the house in brick. One of the comparables was log home! Funny thing was that I knew the people who had built that house. Very odd pick but it did not matter to us since we go the loan. :laughing:

You just have to work around these issues.

Later,
Dan

Appraisal company had my house on 13 acres, instead of 87 acres, dont know how they came up with that, and house built on piers with a crawl space. When they first came the only thing they had to take pictures of was the f#!@*n basement! I can feel my blood pressure on the rise again just reading all the posts. They just plain stink!

 

[tornadowatchranch]

I ran into the same here in Kansas. Everything above 10 acres is considered ag land and all I could get was a 15 year adjustable rate. No thanks! We almost passed on our 60 acres because of it. I finally went to a local mortgage broker and he found us a 30 year fixed that was 1/4 above what I could get at a traditional bank. Comparables were a challenge but do-able. For me it was forget the banks and go to a broker.

Good luck

 

[JRobyn]

I understand your frustration! We originally had a rural land mortgage with Farm Credit of TN - that was no problem and they were great. UNTIL we started to build and wanted a construction loan. Farm Credit was not interested despite their ads for land/construction loans! Maybe because we were honest with them that we intended to do a significant part of the construction ourselves.

So we went with a local bank (recommendation of builder) for an interest-only construction loan. They insisted on also having the land (180 ac) included. So now we're having trouble converting the construction loan to a regular mortgage, because the bank wants to be 100% certain that the house is 100% complete (so they could immediately liquidate it if we defaulted, I presume).

No other lender we have found will touch anything involving a house that is not 100% completed. But Farm Credit will do a new mortgage on just the land if we survey out the house/site. So our hope was to do that and just pay off the constuction loan outright. But Farm Credit's appraiser now says that the price of "recreational" land in the area is way down, and the appraised land value is not enough to cover the construction loan! We are stuck! Just gotta get the house construction totally, 100% complete.

 

[ericrm2005]

I understand your frustration! We originally had a rural land mortgage with Farm Credit of TN - that was no problem and they were great. UNTIL we started to build and wanted a construction loan. Farm Credit was not interested despite their ads for land/construction loans! Maybe because we were honest with them that we intended to do a significant part of the construction ourselves.

So we went with a local bank (recommendation of builder) for an interest-only construction loan. They insisted on also having the land (180 ac) included. So now we're having trouble converting the construction loan to a regular mortgage, because the bank wants to be 100% certain that the house is 100% complete (so they could immediately liquidate it if we defaulted, I presume).

No other lender we have found will touch anything involving a house that is not 100% completed. But Farm Credit will do a new mortgage on just the land if we survey out the house/site. So our hope was to do that and just pay off the constuction loan outright. But Farm Credit's appraiser now says that the price of "recreational" land in the area is way down, and the appraised land value is not enough to cover the construction loan! We are stuck! Just gotta get the house construction totally, 100% complete.

Crazy! I hope all this trouble is just due to the poor market conditions right now. My goal was to slowly buy up more and more land far farming purposes, but having trouble with a small 21 acre lot and house is kind of scaring me. If I cant seem to get a loan for a home/barn, and acres financed I think once i start buyin more land and land with barns/grain bins and such I will start having real trouble. It seems like these guys have their guidelines and stick to them anymore. Gone are the days when an actual human actually talked to a person, heard them out, and made a decision to finance them or not. Now its all strict guidelines. These guys dont really think anymore, they just follow what their book tells them.

 

[windy acers]

HOLD YOUR CHIN UP.THINK POSITIVE AND KEEP YOUR EYE ON THE PRIZE.YOU WILL STUMBLE ACROSS A LOAN SOME WHERE AND DO WELL.

 

[Luremaker]

HOLD YOUR CHIN UP.THINK POSITIVE AND KEEP YOUR EYE ON THE PRIZE.YOU WILL STUMBLE ACROSS A LOAN SOME WHERE AND DO WELL.

When we purchased the 50 acres here our bank, of 20+ years, told us no problem with transferring our existing mortgage to the new property. Then a week before closing I received a phone call from that bank saying they "do not" mortgage any properties zoned agriculture. These guys never even read the "Offer to Purchase" we sent them three months earlier until the week before closing :confused2:. Talk about a panic... we called every bank in town and managed to get a mortgage at the credit union and closed the deal on time. Good by bank.... I am sure it will all work out for you.

 

[WM75Guy]

We just refinanced our construction loan we had from the local bank as it was for 5 yrs with a balloon payment. We have 14 acres, a house, stables, and a shop/hay barn. It is ag exempt. I could not find a lender for a 30 year fixed jumbo for ag property either. We used a mortgage broker that found us a jumbo loan thru US Bank for our property. It took longer than I wanted to get things approved but it finally happened. If you can't find a lender a broker can help, but it would not be my first choice. Look for yourself first.

The only problem was a last minute crisis at closing as the processor wanted the insurance value on the house to match the loan amount. I could not get the processor or title company to comprehend the mortgage was for residence, outbuildings and land. I changed it long enough to close and afterwards contacted US Bank who agreed I could drop the value on my house back to actual value.

Most mortgage processors only understand residential loans without property. They go by a checklist, common sense does not come into play. Their production numbers are what matters. A good loan officer will help avoid or fix problems along the way.

 

[ultrarunner]

When we purchased the 50 acres here our bank, of 20+ years, told us no problem with transferring our existing mortgage to the new property. Then a week before closing I received a phone call from that bank saying they "do not" mortgage any properties zoned agriculture. These guys never even read the "Offer to Purchase" we sent them three months earlier until the week before closing :confused2:. Talk about a panic... we called every bank in town and managed to get a mortgage at the credit union and closed the deal on time. Good by bank.... I am sure it will all work out for you.

Wasn't specific before... but it was Wells that left me standing at the alter without so much as even a phone call less then 3 days before the closing.

I spoke with the Seller to coordinate and she told me the deal was dead...

That is when I called my agent and asked who said the deal is dead and she said she got a call from the Title Company and they found out when they spoke with Wells Fargo

Seems 17 acres with a home and barn doesn't meet their underwriting guidelines... you would have thought they would have known this 5 weeks ago!!!

Anyway... I let everyone know I fully intended to close on time and chewed them all out except the seller for nobody even having the courtesy to let me, they buyer know...

Did a lot of scrambling... by the way, I was putting down 1/3 cash from my savings already... between my old boss, my brother and a neighbor... I delivered the cash to close on time...

Guess you really learn who your friends are when you get a curve ball.

Some of these bankers are their own worst enemy... really.

Then I refied my residence and had everyone paid back within 30 days...

And that's the rest of the story...

Side Note... Wells Fargo keeps taking over the institutions I do business with... can't seem to get away from them... It has happened 3 times now.

 

[DieselAddict]

I highly recommend farm credit services also if they are available in your area. That's who I went through to get my loan on 103 acres with a house on it. They made the whole process so smooth it was hard to believe! They wasn't even going to require a down payment but I went ahead and put some down anyways.

 

[TRR]

When we bought this place, Wells Fargo said they would not finance the land for more than one year as a "construction loan". USAA would not write insurance for it because it was more than a few acres. Found Capital Farm Credit and they financed everything the way we wanted it. Can't say enough good about them! Also found out from them that there is a homestead law (in Texas anyway) that the banks can't take your house and land under some acreage (200 I think?) so it may be that a place with only a couple acres is excluded from that.

 

[MossRoad]

unfortunately this is our first purchase. we have 20% down and healthy incomes. the banks are just a serious hassle. i guess to avoid this if i ever buy a larger property someday ill have to put much more cash down.

I understand. Our first house was 20K. We had to borrow 18K. We had to buy 3pts to get the interest rate down to 12.5%!!! 5 years later we did the blanket mortgage on that house and the land(I mistakenly told you it was the land and a new house I think, but the gist of the story is exactly the same). 5 years after that we did the blanket mortgage again on that same 1st house and a different house that we wanted to move to but needed to repair. So we had two houses under the same mortgage. One was worth 35K and the other 65K. We owned 35% of the equity so didn't require 20% down on the 65K house. We took 7 months to remodel the newer house and move in, then put the 1st house up for sale. It sold in 1 day! Then we handed the bank a check for 35K and only owed 30k on our 65K house! :thumbsup:

Anyhow, it is a good lesson on how to make your assets work for you.

Good luck on your quest.

 

[weldermike]

When we bought this place, Wells Fargo said they would not finance the land for more than one year as a "construction loan". USAA would not write insurance for it because it was more than a few acres. Found Capital Farm Credit and they financed everything the way we wanted it. Can't say enough good about them! Also found out from them that there is a homestead law (in Texas anyway) that the banks can't take your house and land under some acreage (200 I think?) so it may be that a place with only a couple acres is excluded from that.

Ive never had hatred for a company so bad in my life!!! Wells fargo screwed me and my builder around so bad, they probably took a bunch of yrs off my life just from stress. There is no way I could fit it into one post. They f****d up every thing they touched, EVERYTHING! I was supposed to close on august 4th (after laying out my WHOLE life saveings) and didnt close till december 29th. So in between my builder had all his accounts shut off due to outstanding debts. Now the good part, since they screwed up everything (the appraisal the biggest) they called me to tell me the good news that we had a closing date, and all I needed was a check for $66,000 and we where good to go! Ive never been pushed helplessley so hard in my life, I was on the verge of doing something really bad, but its all over now and ive forgotten all about it, and I love and enjoy my new house on my 87 acre farm! Life is good