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