Qualifying to refi -- variables and questions

[tleventer]

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?

1. Credit.  Just pulled my Equifax credit report and score.  Score is 738.  I have 4 negatives on the account -- credit card late payments, but ALL of them are 4+ years old and most are 5-7 years old.  Nothing negative since February 2007.
2. Income.  This year's income is on track to hit $80K between full-time employment salary, farm income, rental and roommate income and side job (self employment) work.Gross income is what is important when qualifying, not net income. 
3. Monthly debt payments.  Approximate total debt payments:  $2000/month.  Includes farm mortgage (PITI), a small amount on a HELOC (used as a 2nd mortgage for the farm purchase when PMI wasn't an option), the rental house mortgage, a HEL on the rental, a loan taken on my 401K and the balance on 1 credit card.  the 401K loan does not appear on my credit report.  According to my calculations my back end DTI is 30.5%.  If the front end calculation only takes into consideration the mortgage/HELOC on the farm, that number is 16.1%.  If it takes BOTH mortgages, then I'm at 26.2%.  Total credit card utilization currently stands at 31% but by November will be down to around 10% (I just consolidated the 2 cards with balances onto a single card so that utilization just jumped but it will be easier to pay down quickly).
4. Employment(for those who are employed).  Been employed by a large department store chain since December 1999.  Done side job (self employment -- working at horse shows) for 15 years as well.
5. Assets/Reserves.  Overall in various accounts currently (savings amount should go up another $1000 in the next couple months following my spending plan - which I've had in place for several years):  Savings - $4,000; Checking - $1200; IRA - $15,000 (I think); 401(K) - $65,000 (with approximately $11,000 currently tied up in the "loan" noted in debts above).
6. Location.  Montgomery County, Ohio.  Farming community outside Dayton.
7. Property.  Single family home, rural location, 3.788 acres currently.  attached garaged, detached garage, 1 other outbuilding plus a 7,000 sq ft barn and 2.5 acres fenced for livestock.   House is fully updated save windows and in (much) better than average condition for its age (1916).
8. Value.  Property appraised for $160,000 last summer.  Purchased for $154,500.  Adding more land will (I've been told by many in the farming/farm real estate business) make the exceptionally large barn more valuable in an appraisal.  Last year's appraisal only valued it at $10K which is ridiculous but since it's essentially "too big" for the currently small acreage it's almost more of a detriment.  Option purchase price on the land is for $4k/acre (land 2 miles away sold at auction last summer for $5100/acre, all tillable I believe).  the 19 acres I hope to pick up include approximately 3.5 acres in woods, the rest is tillable (currently being sharecropped). Current loan balances on the farm are $122K for the main Wells Fargo held mortgage and $4450 extended on the First Financial $15,000 HELOC.
9. Occupancy.  Primary residence.
10. Transaction Type.  Trying to refinance the existing mortgage on the farm to include the new acreage (using the value and equity I have in the property to hopefully cover any equity needed to maintain in the new loan -- so I don't have to come to the table with a lot of cash).  I know of at least 1 lender that in their refi's have a 15% equity needed - the best I could find as most are 20% or more.

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.

[ShanetheMortgageMan]

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.

[tleventer]

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.

[ShanetheMortgageMan]

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.