Is this rule regional, because it doesn’t seem to be the case where I live.
Also, what is a ‘farm’ definition?
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Ugh, so sorry you are going through this. When we bought this place it was on the edge of what a regular bank would do, and it only worked because it was just barely under 20 acres and the house is a significant portion of the value of the property.
(It turns out the survey was wrong and it’s actually 22+ acres, so… yay for us, but when we sell it may be a problem for conventional financing. I’m not going anywhere for a long time and I’m kind of hoping we sell out to developers eventually and it’s all professionally handled.)
I hope you get it worked out swiftly and get moved in!
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I work mortgages over the entire nation, as far as I know that’s the rule for conforming conventional primary residence mortgages to be sold to Fannie Mae. It is possible that how my lender packages and sells mortgages influences this guideline. For example, Fannie Mae requires either LTV to be no more than 80% OR for the loan to carry PMI. My lender will originate these mortgages with an LTV up to 95%, forego the PMI, retain the mortgage until LTV falls to 80% or less and then sell the loan since it now conforms to Fannie Mae’s standards.
Jumbo conventional loans, @ $600k and up range may have different guidelines for acreages. I keep meaning to review the guidelines for those regarding acreages out of curiosity sake, but so far I’m just barely keeping up with the intense volume at work. With the jumbo loans, I only work them briefly, a cursory qualification based on credit/income/loan amount. And only if a conforming loan applicant requests to increase their loan amount into the jumbo range.
I work for a very large lender, but I am not intimately familiar with product guidelines through other lenders. Certainly any lender may create any in house product that they are willing to underwrite, though at that point it loses value as a commodity. At the same time there maybe other types of mortgages that my lender doesn’t offer, for example we no longer originate FHA loans. And other products will have different guidelines. In an area with a lot of farms or estates with acreages, I would expect to see more products available from more local lenders to meet that need.
Every mortgage product that I have a cursory understanding of, would balk at the two parcels situation the OP finds herself in.
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In my work, a farm would be anything zoned agricultural without a primary residence. I’m not familiar with “farm loans”, as my lender doesn’t offer them. I do see them advertised a bit from local lenders in my area that specialize in servicing the agricultural customers. I’ve heard there are larger organizations that offer them as well, Farm Bureau perhaps? Not entirely sure.
What I do see, is individuals hoping to finance a home on acreage with a conforming residential loan where the acreage accounts for too much of the value for the loan to be viable.
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So - the property is small (under 10 ac) and area is zoned residential, but horses are allowed and the actual property is zoned mixed use. The house truly has the most value and should actually appraise, but I don’t know at this point if it will.
The problem I think is that the lender thought it wouldn’t be a problem to do as residential but the appraisers won’t budge. Well, they are blaming the appraisers but maybe that isn’t the issue, I don’t know. The appraisers saw a “large number of horses” (10) on the property and said it must be commercial.
I’m hoping this farm guy can at least get us some sort of approval. I’m just sick.
Sounds like my current place. We were able to secure a residential mortgage. We only have 3.37 acres which made the appraisal fairly easy, though there were limited comps.
Do the sellers run any kind of business? Is there anything that could be considered a “business sign” out front? That’s a hang up for appraising as a residence.
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The sellers have a small wrought iron sign with their farm name on it out front. No phone number or anything like that. I suspect though that these appraisers have zero experience with the idea that even a “non-business” type of barn might have a sign out front, since it’s in the middle of a city. I mean - the property is literally surrounded by development and is itty bitty.
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Probably no comps except for commercial / business and that’s not helping.
It should be an attractive piece of collateral for anyone that routinely works “farm” loans. I hope the provider with the Hobby Farm loan is able to get you cleared to close! Sounds like your best bet right now
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So sorry to hear you are having issues. It sounds similar to the situation I described above for our place. The it’s a farm, it’s not a farm conundrum. We had also gone pretty far in the loan process before anyone said anything about it. I was extremely annoyed with the lender who should have known the issues from the start. I will never use them again (it is a major lender). We were lucky that we got the loan from Compeer (our local outlet for Farm Credit). The were very speedy and everything sailed through without a hitch. I hope they can take care of you as well.
It really bugs me as this can’t be that uncommon and why they don’t catch this stuff right away and send you down the correct part is beyond me…
Best of luck to you!
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I agree. At the very least an early conversation should take place regarding any potential obstacles so that people aren’t blindsided at the last minute.
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That was part of my issue. Had the lender not been so confident we might have made our current home contingent on the farm closing so at least if it fell through I had a place to live. Similarly we might have started the “look for alternatives” process much earlier and not 4 days before closing.
I even freaked out on them a few weeks ago because I had a feeling it wasn’t going well (based on things they kept asking me for) and the loan officer tried to talk me off a ledge telling me he was confident and he was going to get this done…only to be here now.
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that level of employees are usually not the NO people, they work under the oversight of a higher authority (depends on the operation if it s person or a committee) …but the beginning of the loan process is rarely if ever met with a No…primarily because of Federal laws that prohibit the limiting of access to a loan.
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That’s pretty accurate IME. A loan officer can give a conditional “yes”, a loan officer can (evidently they may not always do so) provide information regarding what guidelines need to be met and/or what items are outside of guidelines but a loan officer CANNOT “make” a no decision officially. That’s underwriting’s job. There very well maybe some lenders where the UW and the LO are one in the same, but that’s not the “normal” set up.
If I have a conversation with a member regarding the parts of their loan application that may be a hurdle to approval and the member says they want to “try anyways”, that loan is getting sent to UW; who is going to decline it. Then I will have the task of relaying that decision to the member, along with the formal letter that will be sent to them.
Of course, there are some things that can be outside of a loan officer’s ability to predict. Is the title clean? Is the was the property titled different than the way the consumer presented it (ie they say it’s a town home but the title says it’s a condo)? How will the property appraise?
There’s also a possibility that the Loan Officer / Underwriter / Appraiser is so over worked by the current volume that they are not currently offering their absolute best levels of services. It’s also possible that a Loan Officer is working in some sort of “variable compensation plan” ie commission and would rather ride out every loan application as long as possible on the off chance it’s another loan they may get to closing
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I suspect that this loan officer was really just not experienced enough to realize how big of a hurdle this was going to be. Maybe a little bit of greed in there too, but it was a normal UW process until the appraisal just slammed the brakes on everything. We had TWO appraisals done - the first guy didn’t get out of the car, proclaimed it commercial and didn’t provide a value. The second guy at least got out of the car (sellers were home) before declaring that he couldn’t appraise it.
Both times there was a huge delay, given that appraisers are busy blah blah blah, and both times it took multiple days post appraisal to come back with “we can’t provide a value”. That’s if the lender is telling the truth.
I suspect it’s the sign that is the issue, plus the fact that there are 10 horses on the property at present. The other issue is likely that they advertised it as a turnkey boarding facility - it’s literally in the listing. Again, I don’t know how this didn’t come up as some sort of flag earlier.
I’m still waiting for an answer on either strategy. I’m hoping that the hobby farm guy at least gives us a conditional approval by Monday, as that will be enough to move forward. Otherwise we are truly back to square one…only this time without a place to live.
On the flip side, I’ve now learned enough about farm financing that I feel like I should get my RE license and specialize in these facilities 
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I personally know loan officers that would rather “conditionally condition” an approval rather than have a hard conversation. Lack of experience and greed may also be factors.
Regarding the appraiser giving a value, if they gave a valuation (which can only be an appraisal they don’t go half a$$ in this area) then the lender is required to give you a copy “promptly on completion or no later than 3 days before consummation”. Federally required. It maybe that the lender could “fudge” why the appraiser said he couldn’t valuate the property, but if a value was provided then you will receive a full and complete copy of that.
Some people will talk about different lenders get different appraisers, but it is a federal requirement that lenders and appraisers be “separate / impartial”. Typically appraisal orders are submitted by an employee of the lender OTHER than the loan officer / processor / closer to a “pool” of certified/approved (by a regulatory agency not the lender) appraisers that service the subject zip code. What IS different is what kind of appraisal is required for the particular product that the consumer has applied and/or been approved for.
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that is where you need to understand just what questions are asked… is this a barn or is it a garage?.. difference comes to many tens of thousands of appraise value
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It is my understanding that something like “is this valued as a barn or a garage” is subject to the appraiser’s guidelines and / or the appraiser’s discretion. Guidelines will vary depending on what type of appraisal has been ordered (usually types of appraisals will be differentiated by what appraisal form the appraiser completes. There is a regulated process by which a consumer may appeal an appraisal. Consumers do need to be able to read the appraisal form and be able answer their own questions (like was this valued as a garage or a barn) or perhaps hire a real estate attorney. Lenders translating appraisals for consumers is a delicate area that is subject to a host of compliance issues.
Retaining a real estate attorney as a settlement agent, advisor and title provider (if offered) appears to be a sound investment from what I have observed .
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What a nightmare, I’m so sorry! Jingling and sending good vibes your way.
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I was not permitted to be part of the process but did suggest that to the loan officer before appraisal #2. Not sure that he was able to provide any input.
According to the lender they have provided no valuation. Just said “can’t do it, it is commercial”. I may push on that some more.
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