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.

 

[JMER817]

Little debt? Can I assume that your home is paid off or small mortgage. What about a home equity loan?

 

[wmonroe]

Any chance of seller financing? Another way is to refi your home and use the cash to pick up the acreage?

The sellers are 3 siblings that inherited the property and have just been holding onto it for the last 10 years or so, unfortunately they are not interested in financing it. I'm not sure if they are having a disagreement now or why they are selling all of a sudden. We are looking into refinancing our home also, we talked to two banks and they both told us they would not finance more than 20 acres even with a residence on it. Very frustrating.

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!

If I could refinance my house to buy the land then I would have the equity to not need a down payment, might do one anyway but I need to find a bank willing to finance about 75 acres and a house. The search continues.

 

[wmonroe]

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.

The banks do make a difference, we have a couple local "small town" banks that are not part of a large corporation, I'll be talking to them today.

Little debt? Can I assume that your home is paid off or small mortgage. What about a home equity loan?

Unfortunately the house is not paid off. My only debt is the house and my Kubota loan, I have the cash to pay the tractor off but haven't since it is a 0% loan. I could continue with all my current bills/payments and buy this property on either my or my wife's income so my debt to income ratio is favorable and my wife and I both have excellent credit with no bad marks against us. That's what frustrates me about the process, our credit history proves we pay our bills, pay on time, we've had our jobs over five years and can afford the land but banks don't even ask for any of that, instead it is an automatic no on land. I hadn't thought about an equity loan, I'll check that out as well.

 

[Timm250]

Farm Credit Services is easy to work with and usually has real good rates. I have used them to buy both equipment & land. The process is easy & quick as well. I bought 20 acres a year ago & from the time I filled out my loan application until we closed was less than 3 weeks.

You could also go to the local FSA office & apply for a USDA loan but there's a lot of paperwork & it can take up to several months to close. They only have so many $$ for loans each year & if they have used up their $$ they have to wait until more is appropriated to complete the open loans. You also have to complete a business plan every couple of years to send to them. The up side is that most of the time they do not require a down payment if you qualify for the loan.

Both of these options usually have really good interest rates.

Farm Credit is really easy to deal with.

 

[sseelhoff]

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?

We Bought some farmland with no home outside of Dallas. We used an ag lender, and everything was fine. Banks won't finance, but an ag lender specializes in that type of financing. Ours is a coop. You have to "buy" a membership, but we also get an annual dividend check based on the profits. Dividend checks aren't huge, but it's still a nice touch.

If you google Ag Lender Pennsylvania, you will get a bunch of hits.

 

[joemd11]

I went thru the same frustrating process 3 years ago. We wanted to purchase 12 acres (mostly wooded) that adjoined our house/3 acres. None of the banks we talked to would give us a mortgage just for the land nor would they refinance the whole package under one loan. They said there were no "comparables" in the neighborhood for valuation. We ended up using a combination of savings and a home equity loan to buy the land.
On a different note, you might want to check out who holds the mineral rights to the property or if they are included in the sale. Drilling for Marcelus Shale gas is really big in this part of the state.

 

[Woody65]

I found the same issues when I was attempting to purchase an 106 acre plot with no home. I have good credit, good income, stable job, but no banks wanted to lend me money for a vacant parcel. I could have purchased it cash but did not want to deplete my savings. I ended up refinancing my home, taking out the necessary funds to make the purchase, saved 2% on the mortage interest in the process and paid cash for the parcel. It wound up being the best way for me to purchase the property. Good luck with the purchase.

 

[ultrarunner]

The week I was to close the Wells Fargo underwriter told the Title Company they had missed the fact the home was on 5.19 acres and they limit loans to 5 acres or less.

I only found out about the SNAFU when the Sellers e-mailed me... through some quick work I was able to salvage the deal... without Wells Fargo.

The adjoining 10 acres were also owned by the sellers and they agreed to a 30 year note due in 7... or I should say the husband did since it was a divorce sale.

Maybe one of the sellers would take a note?

I did that once... Offered full price with the sellers taking a note... sellers came back at cash and I lowered my offer and we were able to make it work with short term seller financing.

Hoping it all works out for you... it's one of those things you have to at least explore or kick yourself later.

 

[JRobyn]

We had the same issues in purchasing two parcels in TN and have used Farm Credit for both. As several others have noted, they are great to deal with. Interest rates are good, but not quite as low as the prevailing home mortgage rates, I assume because a mortgage for land-only is a bit more risky for the lender.

Farm Real Estate Loans | Farm Credit Mid-America

- Jay

 

[sfloggie]

I have used Farm Credit several times and they are great. Their Underwriter was demanding on our last purchase, but how good they have been outweighed the Underwriter issue. Each year I receive a check as relates to their profits. It averages $3700 back per year and a great dinner, if you attend, or they mail the check.