In this blog, we will cover and discuss qualifying and getting a mortgage approval for home purchase on acreage in rural areas. Gustan Cho Associates is licensed in 48 states including Washington, DC, Puerto Rico, and the U.S. Virgin Islands. We have dozens of options for mortgage approval for home purchase on acreage in rural areas. As many Americans move out of large cities, Gustan Cho Associates have received numerous questions about lending criteria for larger parcels of property, mainly surrounding acreage limits. With the chaos caused during the Covid-19 pandemic, many American workers are now able to complete their jobs remotely, allowing them to move further from large urban cities.
Applying For Mortgage Approval For Home Purchase on Acreage
Many potential mortgage borrowers call our team with specific questions about getting mortgage approval for home purchase on acreage. Many have questions about the maximum allowable acreage limits as well as land loans. In this blog, we will detail the mortgage agency guidelines surrounding getting mortgage approval for home purchase on acreage in rural areas. We will cover the various loan options on mortgage approval for home purchase on acreage and the acreage limits allowed. We will show you how to apply for mortgage approval for home purchase on acreage as well as how to apply for a mortgage loan with our team.
Fannie Mae Guidelines on Mortgage Approval For Home Purchase on Acreage on Conventional Loans
Conventional mortgage lending – The most common mortgage program utilized to purchase or refinance a property in 2024 is a conventional mortgage loan. And it is estimated that 64% of all mortgage loans are conventional mortgage loans (backed by Fannie Mae and Freddie Mac). With that being said, there are many misconceptions about conventional mortgage lending. Many potential borrowers and loan officers believe there is a maximum acreage limit when utilizing a conventional loan.
Freddie Mac Guidelines on the Maximum Allowable Acreage on Home Purchase on Large Acreage Parcel
According to Freddie Mac, there is no limitation on maximum acreage. When a property has large acreage parcel(s) and is in a location where commercial farming is performed, additional analysis of the property must be completed to verify the home is a residential home. You may not utilize a conventional loan to purchase a farm or land that is zoned agricultural.
Fannie Mae Guidelines on Buying Home on Large Acreage Parcel
Fannie Mae has similar but slightly different rules when addressing acreage. According to Fannie Mae, there is no restriction for properties greater than 10 acres. The acreage does not solely make a property ineligible. The lender must verify the intended use of the property/ land and confirm it is common in the area. You may not use a conventional loan to purchase properties that create agricultural income, including hobby farms.
HUD Guidelines on Mortgage Approval For Home Purchase on Acreage on FHA Loans
FHA acreage limitations. As stated above, each agency has a different way of looking at maximum acreage limitations for their respective guidelines. The Federal Housing Administration is unique in the way it views acreage limits. Technically, there is no limitation on the maximum acreage for utilizing an FHA loan. However, FHA will only include the value of the first 10 acres of the property. Those 10 acres must include the physical home. The additional land above and beyond the home plus the 10 acres, cannot be included within the value of the property (for appraisal purposes). This can be an issue. Get Mortgage Approval For Home Purchase on Acreage On FHA Loans
HUD Allowable Acreage For Mortgage Approval For Home Purchase on Acreage Larger than 10 Acres
For example, rural home with 25 acres is being sold for $500,000. The home and first 10 acres are worth $400,000 and the additional acreage on the property are worth another $100,000. This makes the purchase price $500,000 but the lender may only use an appraised value of $400,000. In this example, to purchase this property, a borrower would need to pay the $100,000 outside of the transaction (which would count as the down payment).
HUD Down Payment Requirements For Mortgage Approval For Home Purchase on Acreage Larger than 10 Acres
A mortgage lender may only use the lower value of purchase price and OR appraised value when determining loan qualifications. The caveat is the phrase “lower of the two”. Since the purchase price is $500,000 and the appraised value per FHA guidelines will be $400,000, a substantial down payment is needed in this example. Depending on the area of the country, land can be incredibly valuable. That being said, make sure you consult your real estate agent to discuss the value of the home and the first 10 acres when looking at properties with acreage over 10 acres.
USDA Guidelines For Mortgage Approval For Home Purchase on Acreage
USDA acreage limits. The United States Department of Agriculture offers mortgage lending in rural areas across the country. A USDA loan program is confusing for most loan officers as well as most mortgage borrowers. There are many areas of the country where these loans can save you a substantial amount of money. These loan programs are guaranteed and backed by the USDA and offer a zero down payment residential mortgage loan.
USDA Promotes Homeownership in Rural Areas With No Acreage Caps
The purpose of these mortgage loans is to increase homeownership in rural areas. These mortgage loans have many great features above and beyond the no down payment requirement. They also offer competitive interest rates compared to conventional financing and have lower mortgage insurance compared to FHA financing. You are also not required to be a first-time homebuyer but these mortgage programs are only available for primary residences. There are income limits for each county so you must make sure you don’t over qualify for this program. But let’s get back to the main point of focus of this blog, acreage.
USDA Guidelines Limitations For Mortgage Approval For Home Purchase on Acreage
With a USDA mortgage loan, there is no maximum acreage limit. However, the property must be common in the area and the value of land cannot exceed 30% of the property value. So, if there is a tiny shack on a huge parcel of land, chances are USDA financing will not be an option. The home must make at least 70% of the overall value of the property. This will be determined on the appraisal. USDA lending can be tricky. In fact, your lender can approve your file and then USDA can deny your file at the last moment. After your lender completes their portion of the underwriting process, the entire file is sent directly to USDA for endorsement. For more information on USDA lending, please reach out to our team today. Click here to contact with our team for mortgage approval for home purchase.
Non-QM Mortgage Approval For Home Purchase on Acreage
NON-QM acreage limits. Most NON-QM mortgage loans will have an acreage limit of 10 acres or less. However, NON-QM mortgages can have exceptions. Each individual NON-QM lender can change their lending criteria as these mortgage programs are not tied to agency guidelines. Gustan Cho Associates are experts in the NON-QM mortgage realm and have many different NON-QM investors at our disposal. If you are utilizing a NON-QM loan and are looking at properties above 10 acres, depending on your other qualifications we may be able to get this to the finish line. Feel free to reach out to us to go over your specific NON-QM scenario.
Get Qualified and Pre-Approved on Your Home Purchase on Large Acreage Parcel
Whether you are going to apply for an FHA, conventional, VA, NON-QM, or USDA mortgage with our team, the steps to apply are very simple. First, contact Alex Carlucci on (800) 900-8569. You will have a one-on-one mortgage consultation with Alex and go over your specific qualifying requirements. Each mortgage program will have slightly different qualifications but the basic documentation we need for pre-approval is the same.
Mortgage Options and Eligibility Guidelines on Buying Home on Large Parcel in Rural Area
When applying for a mortgage, you should be prepared to upload 60 days’ worth of bank statements, 30 days’ worth of paystubs, a driver’s license or state ID, and your two most recent W-2s or federal tax returns (depending on your sources of income). Some of our borrowers may be on a fixed income, in that case, you will need to send your awards letters. Once you and Alex Carlucci will go over your mortgage qualifications, you will be sent an application link for a loan officer licensed in your state.
Starting the Process of Mortgage Approval For Home Purchase on Acreage
Once your loan officer has your full application and supporting documentation, they can then pull your tri-merged credit report and go over your exact qualifications. The documentation for refinancing is slightly different but the process is the same. After your loan officer reviews all of the information above, a preapproval letter will be issued or a conversation to qualify for a mortgage loan in the near future will occur. According to numerous articles including one published in the Atlantic, many Americans are fleeing major cities. According to this article, New York City, Los Angeles, Chicago, San Francisco, San Diego, Washington D.C., Boston, and Minneapolis all lost population in 2021. Combined they lost almost over 1 million people according to local census data.
Gustan Cho Associates Is Licensed in 48 States Get Mortgage Approval For Home Purchase on Acreage
The Surge of Families Migrating to Rural Areas Increase Demand in Rural Areas
Since the pandemic, the birth rate has declined and unfortunately, the death rate has increased. This is also a factor for cities losing part of their population. In years past, cities typically shrank because of economic and cultural problems. A great example is the city of Detroit, Michigan, which was once one of the richest cities in our country.
The Exodus of People From Cities to Rural Areas Increasing Mortgage Approval For Home Purchase on Acreage
The recent fleeing from major cities has a lot to do with pandemic regulations and the ability of many Americans to work from home. I understand why many Americans would rather live on a large piece of land compared to a major metropolitan area. Just because a property may have a lot of acreages, don’t let that deter you from attempting to utilize a qualified mortgage program to purchase that property. The acreage guidelines can be confusing, so feel free to reach out to our team for any questions you may have.
Why Choose Gustan Cho Associates For Mortgage Approval For Home Purchase on Acreage?
Why work with Gustan Cho Associates? Gustan Cho Associates are growing during a time when many mortgage companies are laying off employees. Our platform is designed to help borrowers understand the mortgage process from the application all the way to the closing table. Our team is made up of highly skilled individuals who are here to help with your mortgage needs. We have a no overlay lending platform that allows us to help borrowers who may have less than perfect credit.
Get Qualified and Mortgage Approval For Home Purchase on Acreage
Mortgage Approval For Home Purchase on Acreage with Bad Credit
We are even able to help individuals who are currently in an active chapter 13 bankruptcy. Most lenders have overlays requiring a two-year waiting period after the discharge of a chapter 13 bankruptcy. If you read our reviews, we have helped many mortgage borrowers with unique qualifying criteria. We have access to over 160 different lenders and are a one-stop mortgage shop. We have specialty mortgage programs including fix and flip loans, commercial loans, renovation loans, construction loans, bank statement loans, and many products geared toward real estate investors. We are experts in all areas of mortgage lending and are here to answer your question seven days a week.
Mortgage Approval For Home Purchase on Acreage Available 7 Days a Week
If you follow our Mortgage blogs, we strive to keep our readers up to date on new guidelines, unique mortgage programs, and tips to qualify for a mortgage. If you do not qualify today, our team will help you stay on track to qualify for a mortgage in the near future. We work with many families for well over a year before they qualify for the home that will fit their needs. Buying a home is a long-term investment and we are here to make sure you make the right decision for you and your family. Gustan Cho Associates are expanding into more states and always expanding our operations staff. We strive to make the process as easy as possible for you. For more information, please call at (800) 900-8569 or send an email to alex@gustancho.com.
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