Tips on loans for land

[Thinkin Rut]

Anybody have any pointers on buying raw land? Some of my questions would be, how much down, what sort of interest rates compared to home loans, what kind of lending institutions offers these loans? Anything else you might think would be of help would be great.

 

[Jdubs]

Thinkin,

Attitudes and rates vary from lending institution to institution. In my opinion it is hard to go wrong with Farm Credit. They understand the value of farm land as well as rec land. Give them a try I don't think you'll be disappointed.

 

[JNRBRONC]

As far as down payment, residential is usually 20% and ag is 30% (not a hard and fast rule).

I'm not a fan of Farm Credit! We tried to get our farm financed through them back in the early 90's and the agent said "we would be a blemish on their portfolio". I didn't think our per acre price was out of line and the farm had CRP income (and we had off farm income). Who's laughing now?

Nah, I ain't bitter!

Give Farm Credit a try, though, as their interest rates can be very good.

 

[Jdubs]

Bronc,

I also tried in the 90's, but in the 2000's they have realized the value of farm and rec land, and the recent popularity of purchasing this type of land, and have changed dramatically. Back then I agree with you, but today I believe they have a rec land division. I have a friend who bought a small Iowa farm last year, Iowa Savings and Trust would not touch it claiming it was not worth the price per acre(1200). Farm Credit jumped on it and were very easy to work with. Again, it's worth a call.

 

[Fulldrw]

The percentage down all depends on what kind of programs you are using. Your best bet is to see if your bank uses secondary market because that will have a better rate than your in house. I usually use a program here in IL that is roughly 2 basis points lower than our in house loan rate. It only requires you to put 10% down. Another thing that you might want to try since many people have a large amount of working capital is to see if you can finance the land at a reasonable rate through the owner of the land. I don't like to bash any particular lender but farm credit isn't really into working with the customer. They want to charge one rate and they only want to have the "good" customers. They don't work with you to make sure that you are on track by updating your cash flow. If you have anymore questions feel free to contact me.

 

[Critter]

Your percentage down on a piece of property will be based on the actual value of the land compared to the purchase price. They're going to require somewhere around 25% based on the appraised value. So, say you found 100 acres and it appraised at 2000 an acre, and the purchase price is 2200 an acre.........The bank is more than likeley is going to require that you put down 25% of the 200,000(100acres @ 2000), and then you'll have to come up with the difference in purchase price to appraised value difference.(200,000 - 220,000) Basically you'd have to come up with enough collateral or cash to cover the 25%, which is 50,000, plus the difference between the appraised value and the actual selling cost of 20,000. $70,000. If you buy the property right, and can actually get it for less than the appraised value, you'll pay only 25% of the appraised value, and then won't have to worry about any over difference between the two. Hope all this makes sense. Don't be afraid to go to your local bank either, especially if it's located in a farming community, or has branches located in the area you're wanting to buy. If I had to guess, I'd say your interest rate is going to fall somewhere around 7 to 8 percent.
critter