How much house can you really afford?

From house hunting to financing, first-time homebuyers often have many questions about navigating the road to homeownership. It’s an undertaking that can seem even more overwhelming when moving to a farm, acreage or rural community.

Frontier Farm Credit shares five tips on how to successfully finance a country home that fits both your lifestyle and budget.

  1. Start the conversation early
    Before falling in love with a property, Frontier Farm Credit advises homebuyers to evaluate their financial situation and explore their mortgage options.

    The first mistake homebuyers often make is not meeting with a lender prior to going out and shopping for their home. Involving a lender early in the homebuying process allows them to determine what property price range their income qualifies them for.

  2. Gather up-to-date financial records
    To submit a loan application, Frontier Farm Credit requires the past two years’ tax returns, a most recent paystub and an updated balance sheet.

    A proper balance sheet accounts for all assets and liabilities. While listing liabilities is generally the easier part, many applicants tend to overlook their assets such as a car or checking account.

    Understanding the basics of how to fill out a loan application can reveal how debt-to-income ratios impact a homebuyer’s ability to borrow.

  3. Avoid overextending finances
    Frontier Farm Credit cautions homebuyers against borrowing the maximum amount possible, and works with borrowers to help them build their dream home and still be successful. For example, ensuring clients can make their loan payments while having the flexibility to take on an unexpected car payment or being able to go out for pizza on Friday night.

    As a general rule of thumb, Frontier Farm Credit recommends the 28/36 standard which states a household should spend a maximum of 28 percent of its gross monthly income on total housing expenses and no more than 36 percent on total debt.

    Following this industry guideline is a great way for homebuyers to calculate what they can comfortably afford without crossing their borrowing limit.

  4. Consider the size of the property
    Some lenders are hesitant to offer financing for farms and acreages they define as nonconforming properties. Frontier Farm Credit, however, can finance any sized lot.

    Large properties over 40 acres sometimes require a higher down payment and shorter loan term. A property under that threshold is generally treated as a traditional home loan product, but there is a lot of flexibility under the Frontier Farm Credit umbrella.

  5. Seek out the right lender
    Lenders stand out from the competition by the areas they specialize in.

    In addition to accepting rural acreages that don’t always conform to traditional financing, another Frontier Farm Credit niche includes self-employed homebuyers.

    Frontier Farm Credit understands the unique financial situations of the self-employed market, including farmers, and has the expertise to use trends and averages to get approvals. Over 100 years of experience serving rural America is a Frontier Farm Credit advantage, too.

Are you ready to start your rural property search? Consult with the lenders who know the country. Click here for more information about rural home and acreage mortgages.