Mortgage advice

Tessynae · #1 03/15/07, 11:11 AM

My DH and I are looking to buy raw land in Oregon. We are wanting to homestead on it, a few cows, some goats, chickens, rabbits, large garden, etc. We are at a loss as to where to find a good loan. Our mortgage guy says he does residential mortgages but not "farm" mortgages. Does anyone have any advice on a good lending institution for a homesteader? Or Ideas on how to go about finding one? Are there goverment grants or anything we should know about before we get started?

ANY info would be We just want to make sure we do this the right way.

Deb862 · #2 03/15/07, 11:17 AM

You could try Farm Bureau's Bank. They even finance bare land. 1-800-492-3276.

Jim S. · #3 03/15/07, 11:20 AM

I'd forget about government assistance or grants. You might find some, but they will come with lots of strings and hoops to jump through.

The best way to finance land is to get with local and regional banks where you are buying it. You need a rural banker, not a city guy. The rural guy understands land and farm loans; the city guy understands houses.

You will find it to be the same with insurance. You need a rural insurer, not a city guy. Find out who all the farmers use in your area. They will be cheapest, I guarantee!

After that, it is the same as any other loan. Shop for best rates and service. One cool thing about country bankers is, there are some of them who will take risks on more marginal loans if they have a good "character feeling" about the folks being earnest in wanting to get a homestead.

I have a good friend who got his land that way; no other bank would look at them, their income was not high enough, and the puters said no. But the president of the lil local bank said yes after meeting them. Yes, they had to pay more interest. But they never would have gotten the land otherwise.

My friend has since sought out the advice of the bank pres on a couple of land issues with his place, and his family keeps some of their other bank biz there, too, in gratitude.

That's what "living in the small world" is all about. Good luck!

Judy in IN · #4 03/15/07, 11:22 AM

Also check out Federal Land Bank.

**Terri** · #5 03/15/07, 11:30 AM

I had the same problem, so I asked the realtor.

She DID know of a local bank that financed bare land as some OTHER people that she had sold bare land had used them.

Apparently small, local banks are more likely to lend on local, bare land.

Andy · #6 03/15/07, 11:31 AM

You can also try Washington Federal Savings - I know they lend on houses with more than 20 acres, but I'm not sure about bare land. Maybe an option for you would be a construction loan....

Good luck!

Silvercreek Farmer · #7 03/15/07, 11:49 AM

Definatly check out a construction loan from a small country bank if you plan on building pretty soon, but if you want to wait they may not like that route. The interest rate will be high while the house is under construction but once you are finished you can convert to a regular mortgage. Your regular mortgage guy should be able to finance "farms" up to a certain acreage maybe 10 or so. With out a house or plans to build a house they will probably want a good deal of money up front maybe 25-35%. You might also want to check out the USDA and see if they have any programs available. Good luck, sorry if this is kinda random...I'm in a hurry!

GoatsRus · #8 03/15/07, 11:53 AM

<edited> Sorry for original post. I meant to say check out Farm CREDIT, that's who we use(d). We use Farm bureau for other things.

Wolf mom · #9 03/15/07, 12:20 PM

I'd first see if the seller will carry the mtg. Raw land around here with the seller carrying the mtg. goes for about 8 to 10% interest rate.
It's to the sellers benefit as a really secure 10% rate of return is not that easy to get today. Set up through a title company, they'll collect the payment & do all the paperwork for you for a nominal fee. Protects both the buyer & seller as there's no way the "payment got lost".
If you default, the seller not only gets to keep what you've paid him, but the land back also...
It's also easier to get a construction loan later or refinance to a regular mtg. if you've already been paying on the land.

Freeholder · #10 03/15/07, 01:20 PM

I would STRONGLY suggest that you downsize your plans to the amount of land that you can afford to pay cash for, then camp on the land in a travel trailer (or even a tipi) while you build a small house a little bit at a time as you can afford to pay cash for the materials. This is NOT a good time to be going into debt. This is a time to be getting OUT of debt (there is no good time to be in debt, in my book, but the real estate market is peaking, prices are starting to slide, the whole economy is shaking and there is probably at the very least a solid recession coming, possible a Depression, capital D. It would not be wise at all to be going into debt at this time.).

Kathleen

veggrower · #11 03/15/07, 01:40 PM

Buy a copy of the Capital Press and look under financing. They also have a website where you can view the classifieds, although I haven't been able to view the larger display ads.

Raw land is always hard to finance. You didn't say how many acres and whether you were looking to build right away.

I bought my 20 acres w/house and outbuildings zoned Exclusive Farm Use as a straight conventional residential property.Got the best rate I have ever had on a mortgage. I told the broker exactly what my plans were for the property. He said 'Whoa' we can't do ag property. I told him I wasn't going to lie to him. He was going to make a nice fee by finding me a mortgage, and to earn that fee he needed to do what was necessary to present me to the lender in a way that met the lender's qualifications. He did, we closed, he got his fee, I got my farm.

The bank didn't blink about the acreage because the appraiser said 20 acres is a common lot size for this area. I didn't get much value on the appraisel for the acreage but the appraiser used the right phrase that the bank needed to hear.

Keep in mind that raw land and ag land are going to have a higher down payment requirement and a higher interest rate. They will probably take longer to close. When I bought my place I put 20%down and paid cash for the closing costs. We closed in 30 days on a 30 yr fixed 5.85%. At the same time had I gone an ag loan, it would have taken 45 days just to get the appraisel, 90 days minimum to close, the rate would have been at least 1% higher and I would have had to put down 35%. The 90 days to close would have put me in after the spring planting season so I would have lost some income. The 15% I saved on the down payment bought me some equipment I needed.

heather · #12 03/15/07, 01:54 PM

If you belong to a Credit Union, try them -

After approval, ours simply gave us money when we asked - never came to inspect - never asked any questions - it was absolutely ridiculous, but wonderful!!

Tessynae · #13 03/15/07, 11:39 PM

Quote:

Originally Posted by veggrower

Buy a copy of the Capital Press and look under financing. They also have a website where you can view the classifieds, although I haven't been able to view the larger display ads.

I ordered a subscription today.

Quote:

Originally Posted by veggrower

Raw land is always hard to finance. You didn't say how many acres and whether you were looking to build right away.

We are looking for 60+ acres and are looking to start building on it within the first year.

suburbanite · #14 03/15/07, 11:46 PM

Quote:

Originally Posted by BlueJuniperFarm

I would STRONGLY suggest that you downsize your plans to the amount of land that you can afford to pay cash for, then camp on the land in a travel trailer (or even a tipi) while you build a small house a little bit at a time as you can afford to pay cash for the materials. This is NOT a good time to be going into debt. This is a time to be getting OUT of debt (there is no good time to be in debt, in my book, but the real estate market is peaking, prices are starting to slide, the whole economy is shaking and there is probably at the very least a solid recession coming, possible a Depression, capital D. It would not be wise at all to be going into debt at this time.).

Kathleen

I think you're right.

nehimama · #15 03/16/07, 05:57 AM

Would there be a Farm Credit Services office in the area you're trying to relocate to? They're in the business of mortgaging farms & farm land.

Good Luck!

NeHi

CindyOR · #16 03/16/07, 03:19 PM

We're also in Oregon, in Lane Cty, and had a tough time when we went to buy our property.
We sold a house in town and were able to buy our land outright with the profit off that sale. But we had to put a house on it, and that's when it got tricky. We found lots of lenders, but no one would lend on 20 acres. They had no problem lending if we had 5 acres, but no more. Couldn't ever get a straight answer why the 20 acres was a problem vs 5 acres. Finally, after a lot of searching by our mortgage broker we found CIT (this was 10 yrs ago - don't know if they exist anymore) at a rate of 12%. We took it, and the high payments, then refinanced at 5.25% 6 months later. That's where we are today and our payment is around $400 a month. We love it because we know no matter what, we just about could cash in cans to pay our mortgage.

The advice about going to banks in small towns or country towns is good, but in my county, there isn't too many real rural areas left if you are west of the Cascades. If you are up & down the Willamette Valley, you might be luckier in the Roseburg/south areas in finding lenders. If you are looking at eastern Oregon or Central Oregon, most of the real estate people there should be able to give you lots of names. Most mortgage brokers have a pretty wide range of funders to pick from. Ask them up front before you choose a broker what their experience is with bare rural property.

And there is always a land sales contract. Not too many people in OR seem to be doing those anymore. Too many defaults in the '80's. But you can always ask the property owner if they are interested in doing that - never hurts to ask.

Good luck in your search.
Cindy in OR