Frequently Asked Questions
How do I go about financing a country home?
Your ability to find financing for a country home may depend on the value of the home compared to the value of the land, and the amount of acreage on which the home is situated. Some commercial lenders can finance home sites up to just 10 acres in size. Also, some lenders are restricted from making loans on which the land is worth more than the home. Farm Credit institutions are among the most flexible rural home lenders. They can lend up to 95 percent of appraised value on a fixed-rate home loan, with no acreage minimums.
How do land and home mortgages differ?
Land loans and home mortgages are normally similar, but land buyers often require longer terms and more flexible repayment schedules. This is especially true if the income earned from the land, such as the sale of agricultural crops, is the primary source of loan repayment. A lender that specializes in making loans for real estate is most likely to offer flexible financing.
How does owner financing differ from a traditional mortgage?
It may be possible to negotiate more flexible repayment options with a private lender. However, buyers typically can choose from more products and options when they borrow from traditional lending institutions.
What are the main sources of rural financing?
Commercial banks, mortgage companies, insurance companies, private lenders (owner financing) and Farm Credit lending co-ops are all sources of financing for rural real estate. Some are more active in financing certain types of real estate, such as working farms, than other types. Farm Credit institutions finance the entire spectrum of rural real estate, from recreational property and part-time agricultural operations to country homes.
What mortgage products are available to rural real estate buyers?
Both variable-rate and fixed-rate loans are available for rural real estate loans. Each type of mortgage offers advantages, depending on the customer’s situation and market conditions.
Buyers wanting to take advantage of low interest-rate markets often choose variable-rate mortgage loans, which are held by the lender and not sold to other financing institutions. Variable-rate loans are generally more desirable for shorter terms. Farm Credit financing institutions offer Prime- or LIBOR-based floating rates for up to 15 years.
Fixed-rate loans up to 30 years are often preferred in a rising interest-rate market, but many rural lenders do not offer fixed rate terms, especially for land loans.
What should I look for in a rural lender?
Choose a lender who is knowledgeable and experienced in financing rural real estate. An experienced rural lender can offer advice on agricultural-use tax exemptions, environmental factors and insurance sources that an out-of-state lender might not. A local lender will be familiar with land values and comparable real estate sales prices in the area.
What is Farm Credit?
Are Farm Credit interest rates competitive?
Farm Credit is extremely competitive with other lenders. That is because, as a government-sponsored enterprise, they have a competitive source of capital: their AAA-rated Farm Credit securities, which are sold in the nationï¿½s money markets. In fact, they have the second-lowest cost of funds next to the U.S. Treasury.
Do Farm Credit loan officers have any special qualifications?
Farm Credit loan officers typically have extensive education and experience in agricultural financing, banking, business and/or mortgage lending. In most cases, they live in the community, often grew up in an agricultural or rural area, and have a good understanding of local land values. Some loan officers are also certified rural real estate appraisers.
Is Farm Credit a government entity?
No, it is a network of privately owned cooperatives.
Is Farm Credit regulated?
Yes, Farm Credit is regulated by the Farm Credit Administration, an independent federal agency, whose board members are appointed by the President of the United States. For more information, visit www.fca.gov.
What is Farm Credit?
The Farm Credit System is a nationwide network of cooperatively owned banks and lending cooperatives established by Congress in 1916 to provide agricultural producers and rural America with a reliable source of credit at reasonable cost.
What makes Farm Credit different from other lenders?
When Farm Credit cooperatives do well, they typically share their earnings with their borrower-stockholders in the form of patronage payments or dividends. These payments can have the effect of significantly reducing a customer's overall cost of borrowing.
Who owns Farm Credit lending cooperatives?
Farm Credit co-ops are owned by their borrowers, who also are co-op stockholders. The stockholders elect the board of directors who set policy and oversee management of the association. This ownership structure assures that a Farm Credit institution is accountable to its customer-stockholders, and decisions are made in the best interest of the customers.