USDA nightmare

@ crookedoak:

This is my take: The USDA is not loaning the money...they are merely guaranteeing the bank that if you default, they will cover it, and the bank/lender has NOTHING to lose.

If you make your payments on time, USDA has nothing to lose, nor does your bank. This is a home loan, not a farm (business) loan, therefore the restrictions. The USDA probably does not have funds, nor personnel to drive around the country investigating how many tomatoes you have planted. Unless they have to reimburse the bank for losses, they probably could care less what you are doing there. Likewise, the bank does not care, as long as they are being paid in a timely manner. They would probably rather see you sell $200 worth of eggs or tomatoes and pay the mortgage than see you sell nothing and not pay the mortgage. They are in business to make a profit (like any other business). That is their bottom line. If you do not make the payments they actually stand to lose money. They want to see that mortgage check every month, and they have no real interest how you earned the money to do so.

Go for it! (Just my humble opinion...Good Luck, John)

They did the same thing to us. Not kosher.

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Shari

I rather baffled by the purpose of that prohibition. Not disputing its existance, just can't figure out its purpose.

I can understand not issuing a mortgage based on speculative income. But to prohibit a specific type of income or activity that not in violation of zoning? Don't understand why the mortgage loan would contain such a clause.

The loan is supposed to be used to purchase a HOME in a rural area, not an income producing farm. If the OP sells a calf or some eggs I doubt they're gonna hunt her down. If she moves in and puts up a sign for her new nursery business and starts loading the acreage with greenhouses- then they'd have a problem.

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" It's better to ride even if you get thrown, than to wind up just wishin' ya had."

Chris Ledoux

Not exactly sure what the USDA guarantee rate is, but the SBA rate ranges from 50-90% (of the loss after liquidation of the collateral, not the face value of the loan) so banks have almost always have some risk in the deal. How much just depends on the guarantee rate.

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http://www.lindsayfarmonsilvercreek.blogspot.com/

well a good thread

Sounds like you have benefited from a low-income rural housing development program. The program is to support housing, not to subsidize business opportunities. It's your banker you should have issues with, he's laid off the risk of your loan onto the USDA. You need to ask now about loan compliance reviews.

With ten acres, another type of loan just may not be possible. The only loan we could get was with a company with which DH has done business for many years. It's also a 10 year balloon. There was no other way we could get a loan on these 27 acres.

Does the USDA do loans for farm land? We looked at them. The way I understood, they do loans for rural areas, not farmland. That's probably the reason for the restriction.

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Moms don't look at things like normal people.
-----DD

You would have thought they would have told us up front????

Again, it's your mortgage broker that should have told you up front. Ten acress is pushing the envelope for this program. It's intended to finance a typical-sized lot. i think most people would agree that a ten-acre lot is not typical. Lenders are trying harder and harder to see what they can push through with this program. If USDA-RD agreed to back it, with the stipulation that you won't farm it for x number of years, I think they were being lenient.

[QUOTE}You can farm for profit?
huh who knew?[/QUOTE]

Isn't THAT the truth?

<--Willow, who plans to keep farming 'til the money runs out!

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"I love all of this mud," said no one, ever.

I fully agree with Nette on this. It is the job of the BROKER to know the rules and tell the person applying for the loan. That he told you USDA just had to give it their "rubber stamp", as you put it, tells me that he didn't know what was actually involved in this type of guarantee.

BUT....since you're a stay at home mom anyway...not getting an income making job is a GOOD thing! (It sounds like you've got the income level covered comfortably, so

The "can't farm for profit" really isn't something you need to worry about as long as you treat the place as a house with a REALLY big yard Seriously, the only way you would run afoul of this requirement is to incorporate AS a farm. i.e., start running an income making business.

Since you're not get the loan itself from the USDA..they're just guaranteeing the lender that the USDA will pay the loan if you default....you won't even be dealing with the USDA once the papers are signed.

Just make sure you are able to make your payments on time, if you can, pay a little extra. If you decide to incorporate or actually do a business, just renegotiate the loan Once you've gone through this, it becomes easier the next time. (you just have to watch the paperwork carefully and never be afraid to say "hey! Mr. Mortgage Guy! What does THIS mean?"

As always...this is all just my opinion. I've got some history with mortgages, and history with law, but I'm NOT a lawyer..dont' even play one on TV


Ann

p.s., dont' let this worry you so you can't enjoy your lovely new home I think you've gotten one of the few rare deals that are available these days. Best wishes to you and your family.

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"A good photograph is knowing where to stand.” - Ansel Adams
(and a lot of luck - Wisconsin Ann)
Rabbits anyone? RabbitTalk.com

It is a beautiful place, sits way off the road. The road is dirt and it is surrounded by 5000 acres of paper company land. Then there is another dirt road that runs for miles. The one of two neighbors told me that you can go for 17 miles on trails and not touch pavement. I will post pictures soon.
Erin

Sounds heavenly, Erin. Can't wait to see pics

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" It's better to ride even if you get thrown, than to wind up just wishin' ya had."

Chris Ledoux

LOL humm I think I detect a trend!

Yes the USDA does farm loans and also guarantees loans. The FSA is a part of USDA and they still have a bit of money for such things. Interest is cheap if you can get a direct loan from them.

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Deja Moo; The feeling I've heard this bull before.

I haven't read the entire thread yet, but I know in MN if you farm a property, the foreclosure redemption time is twice as long then if you didn't farm. This may be the reason for the "no farming" clause.

Just keep a ledger of your livestock, gardening, etc. expenses and any $$ you get for selling those extra eggs or whatever. I do it simply as a record for myself, but it would show anyone that you are not making a profit.

I am a little (ok, more than a little) envious - sounds like my dream place too!

I agree, call Farm Credit Services and then call Farmer's Insurance! Best way to go for the loan and the needed insurance..... We got a fixed 15 yr loan and they've dropped the rate substantially twice in less than a year.

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Be a fountain, not a drain!

^()^
http://tubbsfarmstead.com/

I'd work with a local BANK and not a mortgage broker.