Rural Mortgage

[ericrm2005]

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?

 

[deerefan]

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?

It was a real dogfight for me. I own 50 acres and a 1650 sq ft house. The land was worth more than the house. They tried to make me subdidvide it, but I would not budge. They eventually caved as I said it seems as though you are discriminating against folk who own large amounts of property. They were also trying to tell me the land has no "value" to them, eventhough it planted in pine and hardwood. I finally got my 30 year fixed, but the interest rate was slightly higher than the going rate but not enough to make me walk away. I do farm and do have livestock on some of my acreage, but at the time that did not matter to the bank. Will they let you subdivide?

 

[ericrm2005]

It was a real dogfight for me. I own 50 acres and a 1650 sq ft house. The land was worth more than the house. They tried to make me subdidvide it, but I would not budge. They eventually caved as I said it seems as though you are discriminating against folk who own large amounts of property. They were also trying to tell me the land has no "value" to them, eventhough it planted in pine and hardwood. I finally got my 30 year fixed, but the interest rate was slightly higher than the going rate but not enough to make me walk away. I do farm and do have livestock on some of my acreage, but at the time that did not matter to the bank. Will they let you subdivide?

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.

 

[Western]

That was the first question we had thrown at us when it got to the tax es part, AG exemptions , even the Mortgage lady couldn't explain it, or likely didn't want too, but we weren't under AG so.. She did say it was fine to get AG exemption after the mortgage was finalized???? Go figure

You may check with your county tax office and see if you can get the AG suspended or deffered for a short time, may raise the taxes a bit for the period, but you'd have the mortgage.

 

[Combustix]

Since the owner is a friend have you thought about owner financing? Don't know if that would help. Also maybe rezone to timber, as that was what mine was as much like yours 20 acres mostly wooded. Zoned light timber. Though I don't live in a house I live in a shop. At least for tax purposes.

 

[ericrm2005]

Since the owner is a friend have you thought about owner financing? Don't know if that would help. Also maybe rezone to timber, as that was what mine was as much like yours 20 acres mostly wooded. Zoned light timber. Though I don't live in a house I live in a shop. At least for tax purposes.

It is actually the owners kids who have the property now. Their father died recently. They are city folk who have no interest in the country and simply want to sell the property and get their cash asap. I didnt even ask about owner financing, but knowing them I doubt it would be possible.

 

[Furu]

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?

Here in the PNW we have an organization called Northwest Farm Credit Services, a member of the "farm credit services" which is basically a bank. Farm Credit Administration They lend to ag folks for land, houses, crops, equipment etc. My point is look for an organization similar to this back in your neck of the woods. They have to exist as how do farm families borrow. They may be able to help.

 

[ericrm2005]

Here in the PNW we have an organization called Northwest Farm Credit Services, a member of the "farm credit services" which is basically a bank. Farm Credit Administration They lend to ag folks for land, houses, crops, equipment etc. My point is look for an organization similar to this back in your neck of the woods. They have to exist as how do farm families borrow. They may be able to help.

I have a call in right now to Ag Choice Farm Credit. Havent heard back as of yet, but hopefully that is the right avenue. Maybe in todays age banks are being way more strict(not sure), but I never heard of anyone having problems like this in the past.

 

[MacLawn]

I hope it works out for you. Whew, I never knew about that kind of thing. It has always been a dream of mine to buy about 50 - 100 acres of land, but don't think it will happen. I have a friend in GA who has bought 50 acres, no house, but I don't know how he financed it.

 

[ericrm2005]

Talked to the guy from Ag Choice, he said that he could probably stretch it to fit somehow into a conforming mortgage. Even this guy acted like this was a stretch and this was with an ag lender. If someone has trouble buying 20 acres and a house, how do farmers buy 100's of acres these days? It seems like nobody would ever finance a farm. Kind of kills my dreams of owning a full scale farm someday.

 

[Combustix]

Talked to the guy from Ag Choice, he said that he could probably stretch it to fit somehow into a conforming mortgage. Even this guy acted like this was a stretch and this was with an ag lender. If someone has trouble buying 20 acres and a house, how do farmers buy 100's of acres these days? It seems like nobody would ever finance a farm. Kind of kills my dreams of owning a full scale farm someday.

Don't give up the rewards far outweigh the issues your having. :thumbsup:

 

[dmccarty]

We had similar issues when we bought our land. The Credit Union did not want to loan money on land that was much over 15 acres. They really wanted fiveish acre lots. We ended up with a bank that allowed us to buy the land but it was a commercial loan not a house loan.

When we went to build, we got a construction loan, on a fiveish acre lot while the remainder acreage was in the commercial loan.

I think your problem is the house AND the land. A farmer would just be buying land and not a house. The house likely falls under a Federal rule/regulation for the mortgage. If you go bankrupt, a house and large chunk of land is harder to sell than just a house.

Try your state Extension office for information. NC has a pretty good website and the folks at the county office are very friendly and helpful. If there is a Farm Bureau in your state they might be worth a try as well.

Later,
Dan

 

[karverind]

1st farm credit services. They are great. That is all I have to say.

 

[MotorSeven]

The banks use any excuse to pork you into a higher interest rate...I call "Horse Apples". Around here Farm Credit is the only place to get a loan on acreage and recenty they have become pain in the arse. The pendulum has now swung the other way and it's like pulling a tooth without even a shot of whiskey to get a loan.

And don't get me going on their "non conforming" building clause that ups the interest rate by at least 2 points. Arched steel, 120mph wind rating, termites cant' touch it....argggg

 

[laurelrun]

Eric,

We had the exact same issue when we bought our property (26+- acres of woods with a tiny house and several out buildings) at the height of the real estate boom. Things are a bit different now, but our issue was the appraisals. Standard real estate appraisals depend on nearby comparable property sales. When your property has no comparison, the mortgage guys balk, and it's only gotten tougher.

Ag Choice is a good start. We used an independent broker who made it work for us and also a few friends with similar properties. If you'd like, send me a private message and I can give you a contact name and number.

For everyone's benefit, what we had to do was a second loan to cover the gap between the appraisal and the purchase price. We've since refinanced and gotten rid of the second loan. Second time around, the same broker found us a lender who didn't ask for an appraisal - not likely today.

Bottom line today, if it doesn't fit the box (i.e., standard development home exactly like 20 others that sold nearby), most lenders won't go there. And those that do will charge a premium rate. Just bare in mind, "premium" rate is still going to be significantly below the historical average.

We're at 4.9% now, and I'd love to refi again to get these sub 4.0 rates, but I just don't think we'd get a lender to bite.

 

[laurelrun]

Forgot to mention... in Pennsylvania the plus to having 10+ acres is the real estate tax abatement available by restricting development. I am sure other states have similar "Clean and Green" programs. Our tax savings after enrollment far outweighs the premium we pay on the mortgage. We pay far less in taxes than on our old development home.

 

[dodge man]

I am a land surveyor and I get a call about once year from someone that is trying to buy a piece of ground with a house and the bank wants them to split the house out from the larger tract of ground. It seems like they will loan money on it but want to be able to be able to foreclose on the house and take that back as a seperate parcel since it would be easier to sell that way. It doesn't make a lot of sense to me since the prices of rural land, be it tillable or not, has really risen in this area that last 10 years.

 

[ncnurseryman]

I've had the same experience in NC with Carolina Farm Credit. I want to move to the nursery land but the bank only wants to give a residential loan if I sub-divide out no more than 10 acres and keep the rest of the property under the existing commercial loan. It's a big hassal.

 

[windy acers]

FIND A LOCAL SMALL SAVINGS AND LOAN BANK THAT DOES NOT SELL THE LOAN AND KEEPS "IN HOUSE".CALL AROUND AND ASK,IT WILL COST A LITTLE MORE BUT GO WITH IT.AND in a year or two RE SEUVEY MAYBE DOWN TO 5 ACERS INCLUDING THE HOUSE. THAT WAY IF YOU FINANCE AGAIN THE HOUSE AND 5 ACERS WILL BE WORTH MORE AND YOU CAN GO WITH A MORE NORMAL "CONFORMING LOAN" that can be sold on wall street. THIS IS WHAT I DID AND NOW OWN THE LAND WITH OUT THE HOUSE FREE AND CLEAR.

 

[Western]

I was told by a friend of my dads that is a mortgage broke,r that most M companies want a 60-40 ratio in value, 60% home-40% in real estate. That was a couple years ago, as the market was starting to drop. He said land doesn't sell quick compared to a small lot with a home.