June 8, 2022
When looking for land in the country, all buyers inevitably have the same question: how am I going to pay for this property? For some buyers it is their first time buying land, and they soon find that the process is very different than buying a house in a subdivision. Rural homes with acreage have their own unique challenges when it comes to financing. Farm Credit is here to help guide you along the way. Here are some key considerations from a lender’s perspective to help you in understanding the financing process and why choosing a lender who specializes in rural property is so important.
Establishing Value
Before a lender will lend on a property, they require an appraisal to establish the value of the property. Typically a lender will want to see three homes that have sold within 6 months of the appraisal and which are within one mile of the property. Depending on the location, appraising rural property can be challenging in finding comparable sales.
Access
In considering the purchase of rural property, ensure that it has an established right of way recorded with the deed.
Use
Traditional mortgage companies typically lend on residential property with little acreage. Homes with acreage are often more challenging to finance.
Utilities
Many rural properties do not have access to the standard utilities that urban and suburban homes do. Rural properties often have a well for water and a septic system for waste. The lender may require an inspection or test of your well and septic systems. If you are preparing for a new build, your lender may suggest contacting the local electric company early to gain information on how to access electricity on the property. You will also need to ensure that the land perks for a property septic system. If a well is not already in place, you will also need to ensure there is access to water.
While some of these challenges can seem daunting, the good news is you have options. By working with a lender who specializes in rural property, they are well versed in understanding these challenges and are willing to work with you to achieve your dreams.
At Farm Credit, we can often finance existing rural homes and acreages, to buying land and constructing a home, to expanding, and adding outbuildings. It’s important to us to find the right solution for your rural living needs.
When you choose Farm Credit, we will work with you every step of the way to make financing your property a simple process.