# Trying to get financing on home and 80 acres



## Trailsend

We have decided that since we have not sold our property yet and do not have a mortgage, we would find an interim place closer to our family. We found a home on 80 acres, agreed on a price and now are trying to get financing. We have substantial down payment, very good credit scores and great income. We were told today by Farm Credit that our debt to income ratio did not fall into the requirements. We basically have no debts, just a vehicle and horse trailer. What are our options? We only need to have the loan until our big place sells and we are only looking to borrow approx $120,000. Why would this be so difficult?


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## KCFLY

The DTI or debt to income ratio is based on your gross monthly income and the total payments listed on your credit report. What many people don't think about is the minimum payments on credit cards. Even if you don't carry a balance, there is a min payment due that reports to the credit bureaus, this can screw things up.

I would ask them for a copy of the credit report. They have to give you one if they declined you for a mortgage.

Go thru line by line and look at everything that says you have monthly payment. Figure out if there are errors or accounts you pay off each month, etc.

Go back to your lender and see if they will have a constructive discusssion about it.

What state are you looking to buy in, that may help too.

Also ask what their DTI limit is.


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## Molly Mckee

They may have changed their lending practices, but Farm Credit used to cash flow a property based on the production of that property. In other words, if the place you want to buy will not be able to produce the income to pay the mortgage, they would not lend the money, no matter how much other income, or property you have.
You might want to check with a local bank, one that does not package and sell the loans.


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## sidepasser

Can you get owner financing for the place?


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## Trailsend

The property does a nice apple orchard that we are hoping to reclaim. We are thinking of approaching the owner for an owner finance situation. Farm credit did not even run our credit before telling us we would probably not qualify. My husband is retired with a nice pension and SS but I work part time. They would not consider my income since I do not have proof of a job in the state we are looking at the property in. Complicated! We can't relocate and get a job until we get the property!


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## simi-steading

hhhmm.. Interesting... I bought land in WV, and we live in Virginia... Farm Credit knew we were planning to buy the place and move there... Thus giving up our jobs eventually.. They didn't bat an eye and gave us the loan... They also did not consider what the land would make financially... All they looked at was our credit and our income and our physical assets..


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## GunMonkeyIntl

Molly Mckee said:


> They may have changed their lending practices, but Farm Credit used to cash flow a property based on the production of that property. In other words, if the place you want to buy will not be able to produce the income to pay the mortgage, they would not lend the money, no matter how much other income, or property you have.
> You might want to check with a local bank, one that does not package and sell the loans.


Farm Credit does FHA-backed loans for homes. Their programs are identical to those of conventional lenders, except that they allow further/older comps, and have a little more breathing room on the allowable land/improvement ratios.

While a proper loan-app process would certainly go into more detail than the loan officer's sniff-check, if they threw a flag on the DTI ratio, before even going through the application process, then there likely is an issue. FHA rules tie their hands pretty tightly on DTI - 0.001% over the limit, and they're not allowed to provide the loan with FHA backing. An FHA-backed loan greatly reduces their assumed risk, and makes it eaiser for them to sell the loan (I think they only sell to AgFirst), but I have read that a lot of the "predatory" lending laws have made it so that non-FHA backed loans are still subject to a lot of the same restrictions, and non-FHA home loans have all but gone away.

Bottom line, the DTI is what it is, and will likely be a problem no matter what lender you use. I agree with the advice above to get a credit report, tally up your obligations (all of them), and add in the payment you expect on this new mortgage. If it is anywhere near 45% of the income that you can report, then the lender is going to be very cautious about selling you the loan.


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## po boy

GunMonkeyIntl said:


> Farm Credit does FHA-backed loans for homes. Their programs are identical to those of conventional lenders, except that they allow further/older comps, and have a little more breathing room on the allowable land/improvement ratios.
> 
> While a proper loan-app process would certainly go into more detail than the loan officer's sniff-check, if they threw a flag on the DTI ratio, before even going through the application process, then there likely is an issue. FHA rules tie their hands pretty tightly on DTI - 0.001% over the limit, and they're not allowed to provide the loan with FHA backing. An FHA-backed loan greatly reduces their assumed risk, and makes it eaiser for them to sell the loan (I think they only sell to AgFirst), but I have read that a lot of the "predatory" lending laws have made it so that non-FHA backed loans are still subject to a lot of the same restrictions, and non-FHA home loans have all but gone away.
> 
> 
> Bottom line, the DTI is what it is, and will likely be a problem no matter what lender you use. I agree with the advice above to get a credit report, tally up your obligations (all of them), and add in the payment you expect on this new mortgage. If it is anywhere near 45% of the income that you can report, then the lender is going to be very cautious about selling you the loan.


 That's just not correct. 
Farm Credit just did a loan for me and it is considered a second home. FHA does not do second homes. My loan does not have mortgage insurance and it is required on FHA backed loans. FHA requires a ton of FHA specific disclosures and Farm credit does not.

There are similarities with all mortgage loans as they require credit, income and collateral. How those are looked at depends on the lender and the secondary market if it is a secondary market type loan.


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## MO_cows

When they look at DTI, I believe any lines of credit or credit cards you have open, they will tally them as if they had been maxed out. 

For example, if you have a credit card and even if you pay it off every month, if that card has a $7500 credit limit, they will consider it as $7500 under their DTI calculations.


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## Onegreenguy

We tried to use Farm Credit as well but was told(on two different occasions from two different branches here in Tennessee) that since I'm married they'll only apply half my assets/income since I could wind up suddenly divorced and my wife would get half...which was one of two reasons I was given for why they had my debt to income ratio as higher than other places I shopped. The other reason given was that I have a rental house that cash flows positive several hundred dollars after taxes and insurance etc. but the way they (and they told me most lenders also) calculate rentals they had me down as a $300/month loss on my rental...some fuzzy accounting going on with Farm Credit if you ask me...probably all either politically loaned money or the "Good Ol' Boy" network from all I've seen and heard from others.

I'd move on to another bank, local ones have the most flexibility usually, and also since the Dodd/Frank Financial Reform Act of 2010 most lenders who do farm, land, hobby farm etc. loans either got out of the business or are just now beginning to get back in due to the regulatory uncertainty of the legislation. Underwriters nowadays DO NOT want to do loans on property over 10 and definately 20 acres. I had a lender tell me that, all things being equal he, could get me a loan for 10 acres but could NOT get me a loan for 130 acres even though the sales price on both was the same!!!!

Keep your head up and don't stop searching and you'll find your loan. I called about 18 different lenders before I found one that would finance us. The other 17 didn't even care that I had great credit, 40% down, and low Debt to Income Ratio...they just weren't financing land over 10 acres...period.


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## Teej

Have you tried getting a mortgage on the home you live in now? That's what we did when we bought our 88 acres because even back then (90's) banks didn't want to lend on land only. Had enough equity in our house at the time so we just refinanced to get the cash to pay for the farm.


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## sidepasser

USAA is good about financing for military retirees. Do you qualify for that? Also, again, approach the owner about doing a short term owner finance until your property sells in the state you are moving from.

You might be surprised if the owner has been trying to sell for a while or doesn't owe on the mortgage.

I found out that there are LOTS of ways to get creative with financing if both parties approach it with "get the deal done".


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## NamasteMama

Try a credit union you will have best luck with them.


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## mowrey1999

Well after seeing your issue here is what I did, so I didn't have to go thru farm credit . Just go to a local lender since you have a substantial down payment, My lender and most will loan on 10 or 25 acres with a home, I had them split the property and bought 50 acres for the appraised value outright and took title ,then still put a 20% down on the remainder of 25 acres and the home, which the bank and underwriters were ok with, If your in Missouri and want a bank that will do that , I used west plains bank, It was not a problem and I did everything over the phone and by fax and did a deal in about 4 weeks including signing the papers, hope this helps


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## Trailsend

Was the property you bought out of state thru the bank in West Plains? Would you mind forwarding the bank name and your loan officer to me? We are not that far from West Plains.


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## po boy

The bank name is West Plains


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## mowrey1999

Trailsend,I sent you a PM ,it has all the information you had asked about and hopefully it helps to get your loan processed, good luck and hope it helps, Don


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## Trailsend

On a whim, I contacted Quicken Loans. Very accommodating and we now have our PreApproval letter! The property we are interested in is currently in the survey process and the owner will be ready for a contract in early Spring. Things are happening!


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