Mortgage For Rural Property on 38 Acres

by Denise W from Rural America

Ask Kate about a mortgage for a rural property on 38 acres: Private money lenders and local community banks can often be your best source of money for financing rural properties. In fact, just yesterday I was asked by Denise how to get a mortgage for a home greatly in need of major repairs that's situated on acreage.


Mortgage For Rural Property on 38 Acres

By Denise who lives in rural America

Kate, I need a mortgage for rural property on 38 acres. In fact, I have a property purchase agreement for a house in my Father's estate with a $40,000 equity mortgage that is not assumable.
Mortgage For Rural Property on 38 Acres and Private Money Lenders

I need a mortgage before I can submit the purchase and sale agreement. I need the LOWEST monthly payments.

Banks are questioning if it is seasonal, rental, commercial? What is the best way to go?

It is currently vacant, on 38 acres of woods, with a separate garage and a shed. Two buildings were used for rental. I could not rent it out yet, but ASAP. Both buildings need a lot of work. They need separate water and electric as the two buildings are on the same wire/pipe lines.

Last I knew, the water was not working. The electric lines run through trees. The water supply would run out. The last tenants trashed the places so clean and pickup, painting and repair work is needed.

I figure I would want to ask for an extra $10,000 to help with expenses and I will probably have to pay for all the closing costs, deed and survey and such.

I guess a 30-40 year mortgage, fixed or variable? I guess that would change the amount of points/down payment? I am living on alimony but have no loans/mortgages, only bills to run my current home.
***zz-portrait-left.shtml*** Ask Kate answers: Mortgage For Rural Property on 38 Acres and Private Money Lenders

Hi Denise,

Now right off I can tell you this rural property doesn't sound like a candidate for a conventional mortgage. I also doubt it's going to pass FHA appraisal guidelines.

So, I'd begin looking for local mortgage lenders. Here's why.

Local Community Banks or Online Mortgage Lenders

Local community banks understand the terrain and can give you more concrete answers for tricky situations. Imagine asking online mortgage lenders specializing in big cities whether or not they required running water to loan on a property!

In addition to local community banks are private money lenders. Specializing in hard to finance properties, they have more leeway with housing in need of repairs.

Mortgage Affordability and Mortgage Pre-Approval

But before you address the property issues, take these three steps first.
  1. Know your upper limits. Start off on the right foot by determining mortgage affordability.

  2. Get your ducks in a row. Use my free Mortgage Information Planner to organize your paperwork.

  3. Contact a couple of small banks to begin the process of mortgage pre-approval.

Local Credit Unions

What is your next step if the local community banks sigh when they see you and clap as you leave? Time for more leg work... also known as extending your feelers.

While you are still at the bank, ask the representative for another course of action. The best mortgage lenders network with each other so small community banks can be a convenient source of referrals.

Inquire specifically into private lenders, local credit unions and real estate appraisers specializing in rural properties.

Call each of them to see where it leads. There's no getting around it, this will take some old fashioned legwork. But if you are able to finance the rural property, any work entailed will be worth the effort. (More on low down payments below.)

Best wishes,

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Comments for Mortgage For Rural Property on 38 Acres.

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How to Purchase l0 Acres of Land
by: Betsy from Chattanooga, TN

Kate, We are trying to find a lender to purchase l0 acres of land.

Hi Betsy, Kate here...

You didn't mention if there is an existing home on the land. Assuming there is, contact a lender approved to offer FHA financing. Although guidelines change from time-to-time, FHA may approve up to 10 acres without a huge down payment requirement.

If you need to get a conventional mortgage, plan on at least 10 to 20% down.

Otherwise, for land loans, see the part of my answer (above) to Denise W that discusses community banks and local credit unions.

Additionally, as a rule of thumb, if a home buyer is looking for rural financing of acreage, do a similar online search substituting your state's name: tennessee rural mortgage acreage.

But be aware that you must qualify private money lenders very carefully. I recommend having paperwork reviewed by an attorney before signing it.

Best wishes, Kate

Getting a Mortgage on 10 Acres with 4 Year Old Mobile Home
by: Debbie H from Pickens, GA

Where can we get a $200,000 mortgage to buy 10 acres of land? We want the land to build a future home on it in a few years. But we don't want the mobile home that is sitting on the land.

Our credit is great. Debbie

Hi Debbie, Kate here...

If you have any friends who recently purchased acreage, I'd ask them for the name of their loan originator. You could also ask your real estate agent.

Otherwise, I would set up appointments with several local community lenders to find out what type of programs they offer to finance land. (See the above letter to Denise for more ideas.)

Some mortgage companies may be reluctant to approve a land loan if there are structures, such as the mobile home. That would leave you with a couple of options -

1) Negotiate with the seller to remove the mobile home before closing.

2) Have a buyer lined up to purchase the mobile home simultaneously with the closing of your land loan.

Run these ideas past your lender so there are no unpleasant surprises for you at closing.

Best wishes, Kate

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