Whereas farm loans typically require 25% down payment or more, an acreage under $1 mil. So residential mortgage lending rules restrict the financable size/value of an acreage zoned Agriculture (AG-Zoning), which serves to make it tough for the homeowner to earn a living wage off the land or at least forces the buyer to bring more down payment to the purchase as security for repayment. If the zoning is "Agriculture", then lending gets tougher as farming would be a 'permitted use' for the land by the municipality. If the property is zoned 'Country Residential' by the local municipality, that means residential not agri-business or commercial use, so this zoning designation makes it easy for the lender to say approved (farming not allowed). Municipal zoning refers to what you are allowed to do with your land. So if you want to farm, you need to get a farm loan with a much bigger down payment, not a residential house loan as we are discussing on this page. Here's why: if the homeowner does derive their income from "farm land" it takes 12 months BEFORE the lender can start foreclosing on a delinquent borrower - that's a long time! Foreclosure law requires much less for residential lending, typically 3 months. Generally for residential lending, the acreage needs to be 10 acres or less, and the intended use of the property is residential (not a farming operation nor source of the applicant's income). Sometimes the distinction between a farm and an acreage property is blurry. Mortgage lenders don't like waiting years to get their money back on a non-performing loan, so they have special rules as it relates to rural properties to reduce their risk. a quick sale for a home in an urban area where there is much more demand. With rural properties, depending on remoteness of location and condition of the property, time on the market to sell could take years vs. As it relates to mortgage lending, lenders don't really want to foreclose a property because it takes time and effort to get the homeowner off the property, list it for sale, then actually get it sold where they can finally get (some of) their money back. Lending money is always about managing risk for the lender, risk that you'll pay them back as agreed and they don't have to seize the asset instead. In this article, we will talk about and reference: Provided you are not planning to grow crops or raise animals for sale, financing a home in the country is quite similar to financing an urban home, with a few differences regarding the property itself. If you are considering acreage living, there's lots to read to make sure this lifestyle is a fit for you. Peace and quiet, your own space, no nosy neighbors, beautiful setting, big home, a place to relax, raise the kids. Financing a Rural Acreage Property The General Thought.įor some, living in the country has extreme appeal.
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