Our daughter rides, and so we understand the unique challenges of finding the right “home” (barn).
When you’re financing a farm, the first thing we need to know is if this is going to be income producing property. If it is – meaning you are going to lease stalls, have trainers, organize lessons, or stud, then it’s a whole different conversation from where I’m going with this post. (Call us, 919-649-5058 and we’ll get specific details. If we can’t help you – we’ll set you in the right direction.)
If you’re purchasing a farm, chances are it’s in a rural setting that might qualify for a USDA home loan. These are 100% loans, BUT (there’s always a but) there are income restrictions. If you are a family of 4 (with 2 children under 18) in Johnston County, NC the maximum income allowance is $91,850.
USDA does consider child care allowances, and part time income, bonuses, overtime – so if you are considering a USDA home loan, and your household income is more than $65,000 contact us before you make an offer so we can double check and make sure you qualify for this loan program. It also appears that USDA could change what parts of our state qualify as "rural" in October of 2012 - so that's something else we'll need to check.
VA also offers 100% loans to veterans. There are no property “location” restrictions, and there are no maximum income restrictions – you just have to be a qualifying veteran or surviving spouse. The maximum Veteran Home Loan that is a 100% loan is $417,000 and the qualifying debt ratio is 41%… meaning they don’t want more than 41% of your total GROSS income going towards expenses, including child care, utilities, house payment and consumer debt (like cars, boats, trailers, credit cards).
The maximum FHA Mortgage Loan in Johnston County is $295,000. If you can find a farm for that price, you should buy it! Seriously though – if you are going to apply for a FHA loan, and your property has “out buildings” and most farms do… then they have to be SAFE and SECURE. That means no lead paint.
Most financing is done with a Conventional loan. So if you are purchasing a farm in Johnston County (for instance) you can expect the following:
* You will need to scrape together 10% * You need to gather all of your income documents(tax returns for 2 years, pay stubs, if your relocating here and have a contract bring that too), and your bank statements. We need ALL of the pages of ALL of these documents, so you might as well bring them with you to the loan application. (The 10% is not ALL used for downpayment, there are other costs too)
* The Appraisal Fee for a larger property with outbuildings that have to be measured is higher. Hopefully you won’t need a survey – because those can be expensive too when you’re purchasing large acreage. We’ll probably need to get a well and septic inspection report.
* Pay close attention to the relationship between the value of the land and the residence. If the property is valued (for instance) at $100,000, and the land is worth $65,000 of that price – you’re going to have trouble getting a traditional mortgage loan. This is especially critical if the “home” is a mobile home! (Mobile Homes are difficult, if not impossible for us to finance – you are probably better off calling Wells Fargo)
If you have questions about purchasing a home, or a farm, in Johnston County (or Wake, or Union County for that matter) or buying a property in Clayton please call Steve and Eleanor Thorne, 919-649-5058 - we love horses!
Originally posted at NC FHA Expert