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Rural Property Appraisals

Appraisals are an important step in the homebuying process. But when it comes to appraising farmland, acreages or residences in rural communities, there is often more to the valuation checklist than what meets the eye.

As a portfolio lender that specializes in financing homes in the country and rural communities, Frontier Farm Credit has the experience and expertise to help you make informed decisions about your rural property purchase. Here are five rural property features to consider when buying or building in the country.

Lot size and land use: Because no two rural properties are the same, rural property appraisers utilize area sales, market data and interviews with other real estate experts to determine whether each feature adds value or has undesirable qualities.

Lenders have different standards concerning lot size and land use. Although it is an industry standard to base lending eligibility on whether the property is residential, agricultural or recreational, Frontier Farm Credit provides country home loan financing for any rural property regardless of how the land is classified.

Location and proximity to other properties: Moving to the country can sometimes mean living within proximity to various types and sizes of livestock facilities. Land valuation experts recognize that in some rural areas, this may be a deterrent for homebuyers.

Other external factors rural property appraisers take into account include distance to major roadways, as well as proximity to metro areas that can provide employment and education opportunities, medical services, shopping and recreational amenities.

Water sources and septic systems: A third area assessed by rural property appraisers includes the presence of adequate water sources and a working septic system. While these costly components should always be examined by a professional during a home inspection prior to the appraisal, it’s critical to inquire about their functionality and availability.

In addition to determining whether the primary residence is supported by a rural water system or private well, appraisers also verify whether water is being supplied to other external structures on the property, such as livestock facilities. Appraisers also ask questions concerning the septic system to ensure it is up to code. Appraised value assumes these services are working as they should.

Outbuildings: Outbuildings are another factor that can contribute significant value to rural properties. Determing whether an outbuilding is an improvement or detriment to the property requires analysis of its condition and potential uses.

A few important factors to take into consideration include the age, quality and the highest and best use of the outbuildings. For example, rural property owners may rent out oversized machine sheds for camper or boat storage or even as additional machinery storage for farmers in the surrounding area.

Cost of maintenance and repairs: Many homebuyers tend to overlook the maintenance and repair costs associated with living in the country. Along with a thorough assessment of water sources and the septic system, it’s important to have home inspections completed by a professional in all major components of a dwelling such as the foundation, plumbing, heating and cooling, electrical and roofing. Similarly, property inspections can also identify costs associated with necessary repairs, upkeep or potential removal of outbuildings.

Having an accurate indication of what factors determine what your rural property is worth protects your interests as a homebuyer. Click here for more information on buying or building in the country.

Wooden fence

What Rural Home Buyers Need to Know about Zoning, Access and More

Although moving to the country can create a newfound sense of freedom, rural homebuyers may be caught off-guard by the legal limitations of their property rights. That’s why it’s important to understand the extent of any zoning laws, easements or access agreements before closing on your country dream home.

As a lender that specializes in financing homes in the country and rural communities, we developed the following tips to help inform you about the potential legalities of your rural property purchase.

Zoning Laws

Zoning laws directly impact rural property owners by classifying land into districts with regulated uses. Each individual county has their own criteria as to how each property is classified. Common classifications include residential, commercial, industrial and agricultural areas.

In addition to confirming the zoning designation, identify the permitted uses and restrictions that apply to your property. It’s also a good idea to contact the local government office and obtain a copy of the applicable zoning map to consider compatibility with neighboring areas.

Easements

Easements grant limited rights to use another person’s property for a specific purpose, such as allowing a neighbor access to a private road or permitting a utility company to install a fiber optic line.

In general, easements are contractual agreements that fall under two categories: appurtenant easements or personal easements.

An appurtenant easement benefits an individual in their capacity as a landowner. Unless the agreement says otherwise, this type of easement runs with the land and is transferred automatically when the property is sold to a new owner.

For example, if a landowner owns a parcel of land that has access to a river and has granted an easement appurtenant to their neighbor for use of that access, when the parcel is sold the easement still stands for the new owner of the property. Similarly, if the neighbor sells their property, that new owner would also have the same right to use the easement.

Also known as an easement in gross, personal easements are exclusive to an individual or entity. Once the property changes hands the easement may be terminated or transferred with the landowner’s consent.

Because lending institutions are responsible for reestablishing a personal easement if the borrower fails to make their mortgage payments, most lenders require an appurtenant easement to limit this liability.

One of the best ways for rural homebuyers to avoid any unsuspecting easement issues is to work with their lender to conduct a title search prior to purchasing the property. This is an important step in protecting homebuyers against any potential title discrepancies that may arise in the future.

Access

Contrary to popular belief, unrestricted road access is not guaranteed with every rural property purchase. In some cases, it may require crossing private property lines.

If a property cannot be accessed from a public road, confirm a deeded access agreement exists with the adjoining landowners. Road use and maintenance terms should also be negotiated to keep up good neighbor relations.

Property rights are within every homebuyer’s control as long as you are aware of the legal implications of your rural property purchase. Frontier Farm Credit can help you navigate these important details.

Click here for more tips on buying or building in the country.

Secure a home loan and avoid these five pitfalls

Mortgage qualifications vary by lender and loan type. But all homebuyers can improve their odds of securing loan approval by avoiding actions and decisions that may call their financial management into question. We have developed the following list to help you maintain or improve your credit worthiness.

Top 5 Mortgage MistakesOverextended borrowing capacity: Calculating affordability requires homebuyers to be realistic about their borrowing capacity. Stretching borrowing limits can quickly create financial stress. As a general rule of thumb, plan to purchase a property that’s worth no more than three times your total gross annual income, and if estimating a monthly mortgage payment, remember to factor taxes and insurance.

Because debt-to-income ratios demonstrate a homebuyer’s ability to handle monthly payments and repay debt, avoid taking on new debt while your application is under review and put off major purchases until after loan closing.

Poor financial profile: When applying for a home loan, homebuyers should expect to share their full financial profile, including their debt and credit history.

Failing to report debt challenges the accuracy of the financial documentation homebuyers submit in their loan application and may cast doubt on the applicant’s character. Always disclose debt up front and respond quickly if asked to provide additional financial information.

Similarly, lenders use credit scores to assess risk and make objective predictions about future financial behavior, but homebuyers don’t necessarily need a traditional credit profile to prove their loan eligibility. Depending on the lender and loan program, you may be able to boost your credibility as a borrower by reporting other on-time payments such as rent or utility bills.

Change in employment: Employment history establishes whether a homebuyer has a predictable source of income to support their mortgage payments. If a new career opportunity is on the horizon, be prepared to verify any change in employment income to avoid loan processing delays.

For those who farm or are self-employed, verifying income may require additional steps. In order for a second job to count towards overall income, the job must have been held for at least two years.

In general, lenders will want to review your past two years’ personal and business tax returns, your most recent paystub and an updated balance sheet.

Lack of funds for down payment: Homebuyers who dismiss their down payment run the risk of not having cash available when they’re ready to buy. Setting aside down payment funds early in the home loan application process will bring peace of mind to both you and your lender.

Underestimating the costs of buying and furnishing a home can also leave homebuyers feeling strapped for cash. In the months prior to house hunting, it’s good practice to cut unnecessary spending and save three to six months of living expenses as an emergency cash reserve.

Missing debt payments: Finally, missing a payment during the loan application process may interfere with mortgage approval. By keeping careful records and paying debts early you can rest assured your accounts are properly credited and your mortgage application is current.

Homebuyers who have a history of missing debt payments are also likely to raise credit concerns. While recovering from negative credit takes time, it’s important to monitor your spending and immediately begin resolving any patterns of financial mismanagement.

Click for more information about rural home and acreage mortgages.

house with ckecklist

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.

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

Start the conversation early. Before falling in love with a property, our officers advise 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, they said. Involving a lender early in the homebuying process allows them to determine what property price range their income qualifies them for.

Gather up-to-date financial records. To complete a loan application, Frontier Farm Credit requires the past two years’ tax returns, a most recent pay stub and an updated balance sheet. Our officers said it’s important for homebuyers to account for all assets and liabilities when preparing their balance sheet.

Listing liabilities is the easy part, but 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.

Avoid overextending finances. Our officers caution homebuyers against borrowing the maximum amount possible.

We don’t want to set up our borrowers to fail. We want to set them up to buy their dream home and still be successful — making their loan payments and having the flexibility to take on an unexpected car payment, for example, or being able to go out for pizza on Friday night.

As a general rule, we recommend the 28/36 standard, meaning 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.

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. We treat a property under that threshold as a traditional home loan product. There is a lot of flexibility under the Frontier Farm Credit umbrella.

Seek out the right lender. Lenders stand out from the competition by the areas they specialize in. For example, do you need a lender that is attuned to the needs of self-employed borrowers?

We understand the unique financial situations of the self-employed market, including farmers, and have the expertise to use trends and averages to get approvals.

Click here for more information about rural home and acreage mortgages.

House in field for future residential building plot

Financing options for buying now and building later.

The perfect home in the country often begins with finding the perfect property. With a home site loan, you can buy your land now, and build your dream home later.

Home site loans offer many advantages. But some of them require finding the right lender for your project.

Use Land Equity for Construction: Buying a farm, lot or acreage when the location is available can protect you from rising land values. It also is an opportunity to leverage any land equity for future home construction, possibly reducing your money down.

No Acreage Limits: While many lenders offer lot loan programs, some shy away from financing home sites that don’t fit within certain thresholds, referred to as “nonconforming” properties. Talk to lenders about their ability to finance any sized lot and their familiarity with rural features, such as outbuildings, crops or septic systems that often other lenders aren’t.

Straightforward Application: Home site loan applications generally require the same financial information as other loan packages, including the past two years’ tax returns, most recent pay stubs and an updated balance sheet. No construction plans or contracts are needed until applicants are ready to secure financing for new home construction.

Flexible Construction Periods: While many home site borrowers are ready to build within five years, it’s important to have flexibility, in case of delayed dreams. Make sure you understand your lender’s expectations and ability to accommodate your schedule. This is particularly important for agricultural producers, whose property purchase also might be tied to their agricultural production and income.

When it comes to buying land and building a new home, working with the right lender is as important as finding the right property. Click for more information about rural home construction and lot loans.