Land Loans

[LongViewFarm]

Hi Folks,
I thought you might be the right crew to ask, as somebody has to have the experience I am looking for.

I’m in the process of trying to purchase 94 acres of land here in NH, with 25 acres great for cultivation (needs clearing beyond the 8 acres of open field) and 70 acre woodlot. It’s a great place with southern exposure, cellar hole circa ~1760, driveway, drilled well, septic, electricity, and a two car garage. It is obvious the 25 acres was once cultivated, for the soil is perfectly smooth. It regrew and was extensively logged in 1999. It seems to me a great place to put in my homestead and try my hand at all the things I struggle to learn now on steep, rocky sidehills.

My question is this, do any of you have experience getting land only loans? My local bank, who holds my current mortgage, wants 25% down, maybe 35% down, depending on a few criteria. It also wants the length of the loan to be no more than 20 years. I know land loans are considered higher risk, but there must be groups and lenders out there who are more interested in working with folks like me and offer alternative means of financing.

Any recommendations? Experiences?

It was off-putting too that the bank is so eager to fund ‘development.’ If I were dividing off the acreage into lots, constructing a road, and selling them off, I’d be fine. The loan officer actually told me that’s what I should do if I want the loan and I thought “That’s exactly the opposite of what I want to have happen to the land.” It was anotehr reminder to me how far off kilter society’s gotten.

Rant’s over now. By spring I should be able to swing 35% if need be, and you all can come for a barn raising.

Thanks,
Jay

[Does’ Leap]

Jay:

When I bought my land it was owner-financed for the reasons you outlined – banks don’t like to loan $ for land. Have you discussed this possibility with the owner? A couple of years ago we bought some additional acreage and got a loan through the Farm Service Agency. The catch there is that they want you to be farming commercially for at least 3 (maybe 5?) years with some solid numbers behind your farm/business. Other than that, you can try agriculturally-focused banks like Yankee Farm Credit. They are used to dealing with farmers, but their interest rates tend to be high.

Good luck.

George

[drafthorsey]

Jay …. If Financing was easy we’d all be doing it right? I agree with George, no house = no loan. Banks won’t give you a loan for land. I like the idea of owner financing if you can get it. Just make certain you don’t wind up what we call “land poor”. Your down payment sounds about right, loan term is right on for today … and if I read right they didn’t say “no”. Right?

While it’s nice the loan guy gave you a way out I’d say he doesn’t know beans about what he asked you to consider. There’s a huge housing mess going on right now. Second if you know nothing about the process of zoning, what a developer is, what a builder is, and who’s the engineer group you’re going to hire to plat the property, well that’s a steep learning curve. You’d sooner have saved the money to buy the place outright before you got a handle on all that. On top of that as the houses go up you’ve got young families with kids chasing your livestock, dogs, cars and traffic. And within a few years these same people are in front of the city council trying to zone you out. No thanks. Just the same, my land’s platted for development, doesn’t mean I’m using it that way.

I do know that there are those who have built a combination barn / house and wrapped that into a land deal. Point being, the bank see’s you’re building a house on land and the house is in a sense the collateral their after. A bank understands that approach. People buy land every day with nothing on it in a development and build. Of course you have to tell the bank you’re building a house. You might want to spend a little money on a professional lawyer or CPA (boo – hiss) and have them get your story together for you, might even have them pitch it to the bank. For a couple grand you may pull it off. And look at the bright side, you’ll lock into the lowest interest rate (4.73%) in history.

The point here is you want to know your options ….

[Kevin Cunningham]

I do not know if you have AG Credit type institutions out there but that is how we purchased our farm. It was a little different from a regular mortgage because I had to write a business plan to prove I could make money farming the land. This was the only way for us to get into “raw” land. Our place even had a house but because it was not permitted it didn’t count. I have been really happy with AG Credit here is California. Our interest is low and the people I worked with understood that I wanted to farm and not develop. I certainly did a serious crash course in financing when it came time to buy this place because nobody ever teaches you how to jump through all those hoops. Good Luck!

[PhilG]

we did the same, owner finance on 40 raw acres we have to build within 10 ( 6 now) years and then get a bank loan, i’ll have to look into that ag credit…

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