Financing Rural Properties and Farmettes

You’ve fallen in love with the PERFECT farmette: 25 acres with a wonderful farm house, a five-stall horse barn and a well maintained pole barn for additional storage.  There is a fenced-in riding area for the horses, too!  You’ve negotiated back and forth with the sellers and finally come to an agreement.  You’ve been “preapproved” by a loan officer that verbally asked about your income and assets.  They pull a credit report and tell you that everything looks great and this should be a breeze.

Now, you move right on to the mortgage application processing.  You gather all of the essential documents and sign all of the required mortgage disclosures.  Two weeks later, the loan officer calls and tells you that the underwriter declined the loan based on the property and appraisal. What!?  I thought this was going to be a breeze!

The loan officer explains that the property is not considered primarily residential due to the “farm” characteristics.  Also, the appraisal indicates that the property is zoned agricultural. This property does not meet conventional mortgage guidelines for Fannie Mae. “I’m sorry; there is nothing we can offer for this type of property,” says the loan officer.  Now you start to panic.

Unfortunately, I get this kind of “emergency” call on a regular basis. But, thankfully, in the majority of cases, Farm Credit can offer the mortgage solution that fits this more unique residential property.  Unlike the majority of traditional banks and mortgage brokers, Farm Credit can offer conventional and jumbo mortgage products that are specifically designed to fit most rural homes on excess acreage, farmettes and gentleman’s farms.  Because Farm Credit specializes in working with rural, farm and agricultural properties, we will take the time upfront to not only qualify the borrower financially, but also get a detailed understanding of the property.  The property description and use will often direct us to the correct mortgage product for the specific scenario. There is never an assumption that one size fits all.

Some points that help us to move forward when other lenders might not include:

• Conventional mortgage for loan amounts up to $417,000 (potentially as little as 5% down payment) and jumbo mortgage for loan amounts up to $2,000,000 (potentially as little as 20% down payment for rural home with excess acreage, farmette, hobby farm, or gentleman’s farm)

• Properties with excess acreage

• Properties with multiple parcels

• Properties that are zoned agricultural

• Properties with multiple dwellings

• Unique Amish property issues (no electricity or Amish insurance)

• Properties with barns, outbuildings, animals and fencing

• Borrowers with farm income (Schedule F) reported on tax return

When it comes to financing rural homes on excess acreage, farmettes, gentleman’s farms, part-time farms or fully operational farm properties, the lenders experience and specialization definitely can matter.  If you’d like more information, I’m here to help! You can contact me at 443-987-8608 or via email at dloux@mafc.com.