Land buying question

[wmonroe]

As anyone bought farmland that does not have a residence on it? There is some farmland that adjoins my property that I am thinking about buying but I am finding out it is very difficult to obtain a mortgage for land. I have very good credit, very little debt, and a decent income but banks don't even ask for any of that, as soon as I tell them what I am looking at they tell me they can't help me. The only option I have found is a farm credit union that is offering 6.5% for 20 years. Anyone else been through this and found a better option?

 

[milkman636]

I picked up a vacant parcel last summer and found the same thing. My bank would not offer any long-term fixed rate financing for vacant land. The loan originator that originally wrote my home mortgage referred me to a farm credit service that operates here in MI and part of WI. They were real easy to work with and it was one of the simplest loans I ever received. The application took all of about 10 minutes and they didn't collect a single dime from me until closing. With 20% down I was able to get a 4% rate for 12 years. They also offered me 10 yr at 3.8, 15 yr at 4.35, and 20 yr at 4.75.

So even though they were the only option I was very happy with the outcome. You might want to ask them about rates for different terms. If you can shorten the loan up you might be able to get a better rate.

Land adjoining your residence here in Michigan can be filed as homestead for lower property taxes, and the mortgage interest should be deductible.

 

[kenmac]

Don't know how much land you're talking about. I bought 13 acres and paid cash. Most places that will finance land will require 20% down. Try Googling farm credit and see what comes up

 

[sodamo]

We used the Hawaii branch of Farm Credit Services. Pleasure to deal with and as voting members go to a great dinner every year.

http://www.farmcreditnetwork.com/about/locations#map

David Sent from my iPad Air using TractorByNet

 

[wmonroe]

I picked up a vacant parcel last summer and found the same thing. My bank would not offer any long-term fixed rate financing for vacant land. The loan originator that originally wrote my home mortgage referred me to a farm credit service that operates here in MI and part of WI. They were real easy to work with and it was one of the simplest loans I ever received. The application took all of about 10 minutes and they didn't collect a single dime from me until closing. With 20% down I was able to get a 4% rate for 12 years. They also offered me 10 yr at 3.8, 15 yr at 4.35, and 20 yr at 4.75. So even though they were the only option I was very happy with the outcome. You might want to ask them about rates for different terms. If you can shorten the loan up you might be able to get a better rate. Land adjoining your residence here in Michigan can be filed as homestead for lower property taxes, and the mortgage interest should be deductible.

The farm credit union we talked to was who we used to buy the 17 acres that we built on and they were easy to deal with then. When we talked to them this time they offered 6.5% which I was a little disappointed with. I'm not done dealing with them as I think they will do better but I like other options as well.

 

[wmonroe]

Don't know how much land you're talking about. I bought 13 acres and paid cash. Most places that will finance land will require 20% down. Try Googling farm credit and see what comes up

It is 78 acres total but I am looking at buying about 55 acres and my neighbor (farmer) will buy the rest. I am prepared to put 20% down but to pay cash I would have to cash in some investments that are doing better than the finance rates, so it wouldn't pay off to go cash.

 

[wmonroe]

We used the Hawaii branch of Farm Credit Services. Pleasure to deal with and as voting members go to a great dinner every year. http://www.farmcreditnetwork.com/about/locations#map David Sent from my iPad Air using TractorByNet

Thanks, I'll check it out.

 

[ultrarunner]

Any chance of seller financing?

Another way is to refi your home and use the cash to pick up the acreage?

 

[MossRoad]

When we bought our 20 acres back in 1989 we owned our home. It was worth about 20k. The land was 30k. Zoned AG. They wanted 20% down, so that would have been 6K. We talked to Farm Credit Services, but they referred us to a local savings and loan for a blanket mortgage. What the blanket mortgage did was put the house and the farm land under one mortgage. So, we had 20k in the house + 30k in the land for 50k in total value that we already owned 20k of in equity. Since we already owned 40% of the total, NO DOWN PAYMENT was required.

We did the same thing when we bought our 2nd house.... the old house was now worth 35k. The new house was 65K. They wanted 20% down or we would have had to pay mortgage insurance. So they wanted a 13K down payment. We again went to the S&L and got a blanket mortgage that covered both houses. 35k + 65k = 100k of which we already owned 35% in equity, so, again, we purchased the house with NO down payment. We had to sign papers that said if we sold the old house, we had to immediately at closing hand over enough cash to pay the mortgage on the new house up to over 20% in equity. We took about 3-4 months to remodel the new house. We moved in and sold the old house in a couple days and instead of just handing them the 13K we handed them the total 35K we got for the old house so we only owed 30k on the new one 4 months after buying it.

I kept asking my wife and the bankers if this was legal? It seemed strange that you could buy something with no money down. But I was assured that it was all legal and proper and documented, and a common practice. The S&L was happy. I was happy. The sellers were happy. Happy happy happy!

 

[AGRIMAN]

I think it depends some on the banker. I bought a 38 acre track next to me two years ago and went though my bank without any problems or down payment, but I do a lot of business with them.

Our local Farm Credit service is also good to work with.