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First... a HUGE thank you to anyone who reads this... even bigger to those who can help.
Last summer I purchased 3.788 acre farm. I hold an option to purchase additional land that expires December 1. At a minimum, I'm hoping to pick up enough acreage to get to 10 acres and keep my agriculture tax rate without having to prove income. Ideally I would like to pick up approximately 19 acres. the option is for 43.7 acres and with personal issues with hubby (as well as his financial ones), there's no way I can expect to pick up all of it. I can dream big, but am trying to stay based in reality and that's just too much of a mortgage for me to do by myself at this point. Maybe someday.
Anyway, because of the large downpayments required for land purchases, I'm hoping to refi my existing mortgage to include the additional land. I can only hope that an appraisal would come back favorable to the terms (price) I agreed to when I purchased the farm last summer (a good deal at the time, now... who knows). I guess my question is... looking at my finances, do I have a hope of qualifying for the larger mortgage?
Thoughts?? Is what I'm proposing in the realm of doable?? thank you for your advice and input. If more information is needed, just ask.
If there are lenders who are OK with the property producing farm income, and can look at the transaction in terms of more on the level of a farm loan, then you could have a shot. Farm income production on a property essentially eliminates most traditional residential loan programs. I can't tell you where you could get a loan like that, but I can tell you that most likely you'll need to know if the two pieces of land be able to be treated as one parcel, or if not, will the lender be OK lending on adjacent parcels, as well as how much will the value increase by adding the land. You first are going to have to find a bank who is OK with the entire situation, not just finding guidelines online, as this isn't anything that could be properly figure out unless you are having a full blown conversation - probably in the neighborhood of an hour+. The lender would also need to be incredibly familiar with lending on farms, and how outbuildings increase in value based on the acreage and what the land can be used for, etc. The appraisal itself could cost $1,000+ as that would be a very involved appraisal. You could remove the income producing aspects of the farm and then try a regular residential type mortgage, but the additional land likely wouldn't increase the value by anywhere near what you'd pay for it - as it sounds like the value is being able to use it to farm, not build a home on it. Is the loan you have with Wells Fargo a type of a farm loan? These people you have spoken with in the farm real estate business would be great contacts to find lenders who could finance this type of transaction.
Thanks Shane.
The current mortgage is a standard residential mortgage. I have no plans to seek the refi through Wells Fargo. The farm income I'm doing at the moment is minimal and only to show that I can -- I have to prove $2500 from the farm in some capacity in order to keep my ag taxes (currently doing some chickens/eggs, have 13 turkeys I'll be selling in a couple months, co-owning a beef cow that will be slaughtered in December, and making use of the barn by doing some storage). Without the additional land, i'll have to keep up this "piece-meal" farm income but without the extra effort to do it (or the extra land) this place really does not qualify as a working farm all by itself.
I know of 3 banks in this area that do farm loans. one is over the state line in Indiana, one is SE of my location about 45 minutes. The third is Farm Credit. This is who the seller of the property has his mortgage through. I tried to go through them for the initial sale, but my DTI numbers were a tad high at the time (technically within their posted limits at the time but they "felt" it was too risky). They do not sell their mortgages on the market but hold them privately... so sometimes things happen, they run out of money for the month or something. The seller went through the same process to acquire the land -- house first then additional land. Farm Credit said no initially but when he added more land they "courted him like a prom queen".
I guess I shoudl have known this would be something "different". Can't ever seem to do the normal thing. Appreciate the reply however. Thank you.
You are welcome - I truly think your best bet is going to be one of the three lenders who do it. I just can't see how a big-name lender from out of the area would be interested and could understand the transaction so it wouldn't seem risky for them. Good luck and let us know how it turns out, the logistics and all.