When looking for land in the country, all buyers inevitably have the same question: how am I going to pay for this? For most buyers it is their first time to buy land, and they soon find that the process is much different than buying a house in a subdivision. It’s important for buyers to have a team of knowledgeable professionals to guide them through the process. A good lender is one of those professionals. Most acreage and Ag properties don’t qualify for conventional mortgage loans, so most mortgage originators can’t help with financing. This is where Capital Farm Credit comes in.
Capital Farm Credit specializes in financing rural properties including: large acreage tracts, rural homesites, recreational properties, ranches, and farms. Financing these types of properties presents unique challenges that the typical lender doesn’t usually handle. The first thing buyers need to know is to forget everything they learned when buying their house. The loan terms and interest rates are going to be different on ag/acreage properties than what most buyers are used to seeing from conventional lenders. Typically, the interest rates will be higher than a comparable term mortgage, while the amortization terms (length of time to pay the loan back) are usually shorter. Another difference is that a full 20% (or more) down-payment is usually required, where conventional mortgages may be had with as little as 5% down. When shopping around for land financing, the terms offered by different lenders can vary widely and be difficult to compare. Many banks will use balloon notes, adjustable rates, and pre-payment penalties in land financing, so a buyer needs to pay close attention to the terms they are quoted.
The closing process for land is going to be a little slower. We typically see 30-45 day closing times, but that can be stretched out by complicated surveys, title issues, and appraisal problems. With the upcoming changes in regulations and procedures stemming from the Dodd-Frank Act, known as TRID, we expect to see the closing times get even longer on properties like rural homesites that are classified as “Consumer Purpose” loans. We are currently expecting 60-90 day closing times until the industry gets comfortable with the new processes.
Capital Farm Credit is here to be your expert lender in rural properties. As a Co-op, we are owned by our borrowers, so we take the customer experience very seriously since the customer will be our boss. An added benefit of the Co-op structure is that our profits are returned to you in cash to offset your interest costs. Call us anytime and we will show you just how powerful that can be. When you are gathering your team to go buy land, make sure Capital Farm Credit is in your corner.
This is a guest post courtesy of Tim Traister and Mark Rutledge with Capital Farm Credit. Capital Farm Credit is a premier rural real estate lender in Texas offering farm loans, ranch loans, country home loans and recreational property loans. Rose Real Estate is not affiliated with Capital Farm Credit in any way.