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Financing Rec land vs Rec Land + Building Home

msauer933

Active Member
I may have the opportunity to buy a 60 acre piece of ground that I currently hunt on now. If it works in our "life plan" it would coincide with when we are looking to sell our current home and move to the country.

This ground is probably 40 timber and 20 ish crp now. How do banks look at buying a piece of land for just recreation vs buying the same land and immediately building a primary residence on it? Does the interest rate and down payment requirements change with the addition of the home?

Any insight would be helpful.

Thanks
 
With 20-25% down they will more than likely finance it as Rec/ag ground. They key is the price...will it appraise, down payment and your credit. Good luck, hope you can buy it!
 
May be all different now but 30 years ago our key was finding a banker who looked at similar piece of ground as a great deal on a 50 acre “building site” while other bankers thought it was a high price for “marginal farm ground”. Good luck!
 
Most likely looking at 25% down unless you leverage your current house assuming you have equity. Refinancing it all together later (house and land) likley won't get you a better rate as it will be non-conforming. Fannie Mae put acreage cap after the housing crisis so if you financial it all together a lender like Farm Credit, or your local bank will keeping it in house and not seeing the note on the secondary market. They will charge a higher rate because of this.

You could finance the house and as many acres as they will allow via a conventional conforming mortgage at an attractive rate and a second "farm loan" at farm rates.

OR, If you qualify for any of the USDA programs your can get super attractive loan deals.

OR, see if you can buy the land on contract with a 1 or 2 year balloon so you are only dealing with lenders once to cut down on closing costs and fees.

Lots of options. Just have to pencil it all out and see what the best deal is.
 
It helps that you have income from the 20 acres of CRP.

We used Farm Credit Services of America. Bought land first then refinanced and built home on the land a year or so later. I would give them a call and talk to a loan specialist who can give you all of your options.
 
Go to your local FSA office and see if you and/or the ground would qualify for any FSA loan programs. We bought a 120 that had pasture/timber and tillable and we've sectioned off 7 acres to build a home. We got some great financing options with the FSA. Your local lender should be able to assist you with this as well.
 
Keep in mind small acreage's can boost the value of the home. Homes with 5-10 acres are not that easy to find. 10 acre homesite's can easily go for $10k an acre or more. If you are buying 60 acres at say $5k an acre ($300K) its easy to get a portion of it appraised at a higher value especially once the home is built. The remaining 50 acres is now at $4k an acre if the 10 is valued at $10K. Not really any information for the loan but it makes justifying the recreational property a bit easier to swallow.
 
I may have the opportunity to buy a 60 acre piece of ground that I currently hunt on now. If it works in our "life plan" it would coincide with when we are looking to sell our current home and move to the country.

This ground is probably 40 timber and 20 ish crp now. How do banks look at buying a piece of land for just recreation vs buying the same land and immediately building a primary residence on it? Does the interest rate and down payment requirements change with the addition of the home?

Any insight would be helpful.

Thanks

Typically Farm Credit Services of America finance at 65% of appraised value rather than purchase price. That can be a good thing if you get a stellar deal. Outside of that local banks generally like to see 20-25% down based on purchased price. Find a banker you like and can trust and go from there. Exciting man, wish you the best!
 
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