Talk to Farm Credit or see if there is an agricultural financing co-op in your area. They are far more likely to be favorable than a “traditional” lender. Have most of the lenders been commercial banks? Have you tried any credit unions in your area?
The long and short of it is that if a lender (bank, mortgage company, credit union, etc.) is only offering “conforming” mortgages then they are constrained by a set of national rules (set by the Federal Reserve, Fannie, and/or Freddie; or maybe the VA, if a veteran is involved). Since these mortgages are traded on national exchanges they must have a very strict set of underwriting rules. Since 2008 these rules have gotten progressively more restrictive.*
If the lender does not trade the paper then, within limits, it can write any kind of mortgage it wants to. The major limits are two-fold: the creditworthiness of the buyer and the market value of the property. The first is generally governed by the credit score; the second by the appraiser’s opinion on value. That second part is what will “bite” you because your arrangement is odd (in today’s market) and that means the bank faces a much longer holding problem if the loan goes sour. The Law of Supply and Demand is fully functional in these matters.
The ag. lenders will be more open to “unusual” properties but they still have to live with the same basic rules as a commercial bank or other lender. Since they will take more risk you’ll pay more in interest. Right now general mortgage interest is running 4% (more or less) for 30 year fixed loans; the ag. lender will likely be looking for 5.5% to 6% for 15 years.
There is one more possibility and that’s owner finance (if the owner has clear title). They can either write you a mortgage or they can sell on a land contract. If this is a possibility take the mortgage even if they offer a lower rate on a land contract. Mortgages are governed by a lot of regulations that protect the borrower. The land contract is governed by Contract Law and it has very few borrower protections. I’ve got personal and professional experience with land contracts; I do not recommend them for buyers. In either type of owner finance hire a local attorney to represent you.
Shop around to ag. lenders. Contact your County Agent or Farm Service Office and get contact information.
Good luck in your project.
G.
*Proving that humans are capable of forgetting even massive tragedy when they want to I’ve read multiple reports of banks becoming much more “creative” in financing. At least a couple in our area are lending 115% of purchase price on houses and bare land. This is the sort of thing that brought down the economy in 2008. There is another push going on to get “marginally” qualified buyers into mortgages so they can purchase homes. This may be very good social policy; but barely six years ago it was a major factor in the national economic meltdown.
