# Frustrated with the world of financing...



## Bellyman (Jul 6, 2013)

Have found a couple of really neat places for sale, both right around 20 acres. 

The prices seem pretty reasonable to me. And they're right in the same range as the typical "mansion on a postage stamp".

I can qualify for financing on the mansion on a postage stamp all day long. But I don't want a mansion on a postage stamp. I'd much rather have the little 20 acre homestead. 

But, no. No bank or finance company I've found will touch something like that with a 10 foot pole... unless, of course, you have $30k - $50k (or more) of down payment, and then, 'maybe', they'll at least think about it.

Are there ways to finance properties like those 20 acre homesteads through conventional means? They're already like finding a needle in a haystack let alone trying to find one of them that would consider owner financing. And finding bare land that's a good fit for a homestead is pretty hard to come by, too, and even harder to finance. Again, large down payment required if you can get financing at all.

Are there some tricks or strategies involved in buying a homestead for those without a lot of cash? Particular banks or finance companies that are better to deal with for such things?

I'm curious if I've missed something.


----------



## FarmerKat (Jul 3, 2014)

Bellyman, I am sorry you are having trouble with the land financing. When we got a raw land loan from Farm Credit, they wanted 20% down. I thought I saw something that they do 15% on some loans. I am not sure if those percentages would bring you into a more affordable range. 

If you are buying a house and land, would it be possible to split the house & land into two properties and finance them separately? I.e. lower down payment on the house and then then land would be less and the the 15-20% would not be as much?

I know you have been looking for a house with land, but what about buying raw land and getting a construction loan to build? I think Farm Credit mentioned to us that they can do something like that and that you can use your equity in the land as your "% down" on the construction. Just throwing some ideas out there.


----------



## po boy (Jul 12, 2010)

If it's raw land, you will need a good size down payment. A house on land is much easier to obtain a loan on.

Talk to the folks at Farm Credit, they have a branch in Crossville. if it is raw land, ask them about doing a Construction/Purchase loan.

Good luck.


----------



## Belfrybat (Feb 21, 2003)

I don't know anything about TN, but in TX there are several rural land loaning companies. Farm Bureau being one of them.


----------



## Bellyman (Jul 6, 2013)

FarmerKat said:


> Bellyman, I am sorry you are having trouble with the land financing. When we got a raw land loan from Farm Credit, they wanted 20% down. I thought I saw something that they do 15% on some loans. I am not sure if those percentages would bring you into a more affordable range.
> 
> If you are buying a house and land, would it be possible to split the house & land into two properties and finance them separately? I.e. lower down payment on the house and then then land would be less and the the 15-20% would not be as much?
> 
> I know you have been looking for a house with land, but what about buying raw land and getting a construction loan to build? I think Farm Credit mentioned to us that they can do something like that and that you can use your equity in the land as your "% down" on the construction. Just throwing some ideas out there.


Thanks, FarmerKat!

I had thought I had found a place. Even wrote up a contract on it. But upon close inspection, it didn't turn out to be what we had hoped it would be. We had thought it was a "fixer-upper". It turned out to be a "bulldozer candidate". It's location within city limits presented additional problems with building codes that we really didn't want to deal with, either. Actually fixing the place up would have put us in an upside down position and no bank wanted that... neither did we. So ultimately, we had to let it go.

I hadn't thought much about splitting a property. I'll have to give that one some thought. Would you be thinking of splitting off a house and a couple of acres to buy through traditional means and then making another deal with the owner to purchase the rest of the land privately? I do occasionally see places that have a house and just a few acres, or the same house and a few more acres, or the same house and a bunch more acres. 

Thanks for throwing out some ideas! I appreciate it.


----------



## FarmerKat (Jul 3, 2014)

I am sorry that the deal did not work out. But it is good you found out about the house condition before buying it. We looked at a property last year that was sold as "land" but the realtor said that the old house did not have much value but could be fixed up. It was literally a wooden shack that was falling apart, I don't even know it could be called a house. We got a good laugh when we saw it in person. 

I was thinking two different mortgages but you may be able to find an owner financed land as well. For example, say the whole property is $150K. Maybe you can pay $120K for the house with 5% ($6,000) down and $30K for additonal land with 20% ($6,000) down. Then your total down payment would be $12,000 as opposed to 20% of the whole price ($30,000). 

Have you looked into any owner financed properties? I know there are not that many out there but they can make a decent deal sometimes.


----------



## Terri (May 10, 2002)

At the advice of the realtor, I went with a small local bank instead of the big boys. Banks that are local instead of national have an interest in keeping people buying properties. Because, a healthy community means a healthier bank.

I did have to take what was offered: 20% down and a flexible 20 year mortgage was offered, take it or leave it. So we took it. 

And, yes, cities have a LOT of additional regulations!


----------



## Bellyman (Jul 6, 2013)

po boy said:


> If it's raw land, you will need a good size down payment. A house on land is much easier to obtain a loan on.
> 
> Talk to the folks at Farm Credit, they have a branch in Crossville. if it is raw land, ask them about doing a Construction/Purchase loan.
> 
> Good luck.


Have talked to enough lenders that I get them a little confused sometimes. I think we did talk with Farm Credit on one of the properties we looked at. Our income and credit rating were excellent but they just could not get past needing a larger down payment than we could muster up.


----------



## Bellyman (Jul 6, 2013)

FarmerKat said:


> I am sorry that the deal did not work out. But it is good you found out about the house condition before buying it. We looked at a property last year that was sold as "land" but the realtor said that the old house did not have much value but could be fixed up. It was literally a wooden shack that was falling apart, I don't even know it could be called a house. We got a good laugh when we saw it in person.
> 
> I was thinking two different mortgages but you may be able to find an owner financed land as well. For example, say the whole property is $150K. Maybe you can pay $120K for the house with 5% ($6,000) down and $30K for additonal land with 20% ($6,000) down. Then your total down payment would be $12,000 as opposed to 20% of the whole price ($30,000).
> 
> Have you looked into any owner financed properties? I know there are not that many out there but they can make a decent deal sometimes.


I get where you're coming from. And thanks for the input.

Owner financed properties that I'd have any interest in owning are scarce as hens' teeth. Plus, of the ones I do find, almost all of them are requiring a pretty sizable down payment. I haven't written off the idea.


----------



## Bellyman (Jul 6, 2013)

Terri said:


> At the advice of the realtor, I went with a small local bank instead of the big boys. Banks that are local instead of national have an interest in keeping people buying properties. Because, a healthy community means a healthier bank.
> 
> I did have to take what was offered: 20% down and a flexible 20 year mortgage was offered, take it or leave it. So we took it.
> 
> And, yes, cities have a LOT of additional regulations!


Until I saw the extent of what I'd have to do with that city property, I hadn't realized the hoops I'd have to jump through to bring an old house with bad bones up to code. Originally, I thought to myself, "how bad can it be, after all, it's a small town"... And then I explored a little and found out it would be a royal pain in the posterior. There was so much that was not even close to code that it would have been a HUGE can of worms to open. In this case, I know the owners and they are of the opinion that for now, they'll "let sleeping dogs lie" and at some point, may bulldoze the place and put in another house, maybe a modular home. And for them, that would work. They own the land. For me, I'd have been way upside down.

In your case of the local bank, you still needed the 20% down. That's the problem for me. If I had 20% to put down, I wouldn't have even started the thread, I'd have been busy with the chores of the homestead... (sigh)

Anyway, I'm gleaning a few thoughts and ideas from the thread and am thankful for all of the input. I have a few other ideas floating around my head, including: 1) renting a very cheap place for a while and saving as much as I can towards a down payment or 2) buying a not too expensive place with maybe 3 or 4 acres that will finance pretty easily, that I don't really want long term but might be able to live with for a while, where I can build some equity. Those kinds of places, I can pretty much get into with zero or close to zero down. And they might give me a better place to step from than where I am right now. (Just thinkin' out loud a little.)


----------



## FarmerKat (Jul 3, 2014)

Bellyman said:


> Owner financed properties that I'd have any interest in owning are scarce as hens' teeth. Plus, of the ones I do find, almost all of them are requiring a pretty sizable down payment. I haven't written off the idea.


I totally get it (having spent many years looking like you).  Most of the owner financed ones were 20-50% down and high interest rate on the rest. That does not help you. But every now and then there is one that is doable. 

I would try local credit union too. They may be more open to financing rural properties. 

One approach we considered was to buy raw land, build a barn with apartment and live there. Or live in an RV on the land while we build.


----------



## Bellyman (Jul 6, 2013)

FarmerKat said:


> I totally get it (having spent many years looking like you).  Most of the owner financed ones were 20-50% down and high interest rate on the rest. That does not help you. But every now and then there is one that is doable.
> 
> I would try local credit union too. They may be more open to financing rural properties.
> 
> *One approach we considered was to buy raw land, build a barn with apartment and live there. Or live in an RV on the land while we build.*


If I could find a piece of land that worked that I could somehow get my hands on, I'd do that in a heartbeat!! I already own the RV and it's perfectly livable... have lived in this one for something close to 6 years now, plus, it's paid for. Haven't written off that idea either.

(Actually, the RV is one potential source of cash at some point. I've been very reluctant to give it up because it's our only home. But it does have some value. If we did decide to go the rental route (I know someone with a doublewide on an acre or so lot that's thinking of renting) or the buying something where we didn't quite want to be but could finance route, if it had a place for me to do some fixing up of the RV, I think I could potentially get $15k selling it. Book is about $21k but I don't think I'd actually get that. Right now, it needs work and I do not have a place to work on it. It's not like having a home to sell but it's maybe something to start with.)

Lots of thoughts swirling around... 

Thanks!


----------



## 92utownxj (Sep 13, 2013)

Like others have said, try to find a small, local bank. See what they say. I had to talk with a few banks before I found one that would give me a great interest rate and finance 30 acres with a house. There are banks that will do it. Where I am I think the banks know the value of land around here.


----------



## Elevenpoint (Nov 17, 2009)

I've bought three owner financed properties. $0, $400, & $2000 down.
Two were 0%, one 6% interest.
Renovated and sold two, split one and sold off part which left the remaining paid off.
Just have to look.


----------



## ozarkchaz (Feb 4, 2005)

Bellyman,

While doing some research for property, I ran across the USDA loan program.

Check out the link:

http://www.fsa.usda.gov/programs-and-services/farm-loan-programs/index

Hope this helps. All the best on your search!

Chaz


----------



## moonspinner (Jul 2, 2002)

Po Boy or anyone, why is raw land more difficult than a house w/land to obtain a loan?


----------



## cfuhrer (Jun 11, 2013)

moonspinner said:


> Po Boy or anyone, why is raw land more difficult than a house w/land to obtain a loan?


I was told land with a house is better collateral because it is easier for the bank to re-sell in the event they foreclose on it.

More foreclosure buyers want houses than raw land.


----------



## po boy (Jul 12, 2010)

moonspinner said:


> Po Boy or anyone, why is raw land more difficult than a house w/land to obtain a loan?


In most cases a house will appreciate faster than land and an owner is more likely to pay his HOME payment if times get bad.


----------



## sisterpine (May 9, 2004)

I also agree that bare land generally increases in value quite slowly. Unless you are around here and watching the vineyards coming in and all the huge wells being drilled. That land is worth a small fortune!


----------



## i8paintchips (Feb 27, 2016)

Financing is a pain. We just went through the wringer with a few banks in Kentucky before working out a deal. We had several options but they were too far from where we wanted to be or couldn't pass a perk test for a septic system. When we found the perfect spot the bank that had pre-approved us said it was in a county that was outside of their lending area. That was a small, local bank in central KY that was comfortable with land loans and only asked 10% down. 

We ended up doint business with another bank that required 15% down and had a slightly worse interest rate. They really wanted more money down but we stood our ground and they eventually caved. Just find a local bank...someone small and familiar with the area. Usually they lend in their county and any adjacent counties. Good luck.


----------



## AmericanStand (Jul 29, 2014)

Find a $250,000 place talk them down to $200,000 show the bank the listing and tell them you need $200,000 to buy the house. 
How you put your $50,000 into the house seldom matters.


----------



## Jlynnp (Sep 9, 2014)

We financed through the VA, it was very easy If you are a former service member it might be the way to go.


----------



## Bellyman (Jul 6, 2013)

Jlynnp said:


> We financed through the VA, it was very easy If you are a former service member it might be the way to go.


Hi Judy,

Neither my wife nor myself are veterans. So far, I've assumed that we would be 100% ineligible for VA financing. But if I am wrong about that, I'd certainly be interesting in hearing about it.

We're actually out of the market again at the moment. Aging parents in poor health have necessitated a temporary move off of the plateau and back to southeastern Pennsylvania, for a time. We're not sure how it's all going to work out our how quickly (or slowly). So we're pretty much a day at a time with not a whole lot of planning. Hunting for the homestead has gone away for the time being with the exception of an occasional look through the listings on realtor.com.

Thanks for thinking of me, Judy. Take care!


----------



## Murby (May 24, 2016)

I'm wondering if one of the reasons the financing is more difficult with the large acreage properties is due to the restrictions of foreclosure laws.

I think this is a federal law.. (have to check that).. but if you have over 3 acres of properties, it takes MUCH longer to run foreclosure proceedings. 

I probably have the numbers a bit off.. but under 3 acres is basically 90 days to foreclose and evict (or something like that).. For properties over 3 acres, it takes a full year(?) and even then there are special appeals... 

I think it was set up that way to protect farmers or something. I'm not real sharp on these laws but learned about them when a buddy of mine was getting foreclosed on. 

I asked how they were able to stay there when he hadn't paid his mortgage for over a year and he said that is property was 4 acres and fell under different laws.

So it kind of makes sense in a way why banks are kind of shy with larger properties after the 08 crash.


----------



## po boy (Jul 12, 2010)

AmericanStand said:


> Find a $250,000 place talk them down to $200,000 show the bank the listing and tell them you need $200,000 to buy the house.
> How you put your $50,000 into the house seldom matters.


The bank goes by the sales contract and appraised value. Buyers down payment always matters.


----------



## stanb999 (Jan 30, 2005)

Bellyman said:


> Have found a couple of really neat places for sale, both right around 20 acres.
> 
> The prices seem pretty reasonable to me. And they're right in the same range as the typical "mansion on a postage stamp".
> 
> ...



Few things we learned from financing our farm.

Conventional mortgage financing with the big guys is generally only approved for up to 10 acres... 15 if you get a really good deal on the land. Basically the land value has to be 30% or less. Hard to do generally. 

Farm credit AKA USDA works if your a farmer. Have been for years and have the tax returns to prove it. If not, your out of luck.

If you plan to make money with the property... Commercial in any way. You can't conventional finance regardless of size or cost.

All of the above simply didn't work and we had a large stake in the property. We carried a 70 thousand dollar mortgage on a 120 thousand dollar property. So we had 50 grand in equity, perfect credit and couldn't finance 25K for a farm expansion. 

What did work?
While working with USDA farm credit to get a loan they directed us to two potential sources of credit. One was a local bank. I actually got the bank presidents email and a recommendation from USDA farm credit. I also found Agchoice farm credit. They are a credit union that gives loans to rural folks like us.

We got offers from both agchoice and the local bank, the rates were slightly above market but both were less than .25% from the going rate. We ended up going with agchoice because you get a yearly dividend that equals about one months mortgage payment. Not bad at all.

here is their website.

http://www.agchoice.com/home.aspx


----------

