Buying a Farm Residence With An FHA Residential Real Estate Mortgage
December 4, 2024
Borrowers who want to buy a farm residence are in luck with the FHA loan program, which includes options to purchase farm residences.
Those purchases must be made under specific conditions when the primary focus is on the residence itself. This distinction is crucial: the FHA loan program is intended to support homeownership, not business ventures.
Getting an FHA Farm Residence Loan
A successful FHA farm loan is one in which the buyer wants a home that happens to be situated on a rural property rather than trying to pay for the purchase of a working farm. For farm residence loans, the appraisal process is crucial.
While the FHA appraiser will consider the land surrounding the home, the emphasis is on its value as a residence, as mentioned above. The appraisal amount will not include its business or agricultural potential.
Things To Know
- A reasonable amount of acreage typical for a homeowner in the area will be included in the appraisal. Don’t expect more consideration than for a typical front and back yard.
- Excess farmland, barns, silos, outbuildings used for commercial farming operations, and specialized equipment are considered commercial assets and do not contribute to the appraised value for FHA loan purposes.
- Outbuildings or land areas that are intended for personal use may require you to provide documentation to support this claim.
- Beyond the appraisal, several other FHA requirements must be met. The borrower must intend to occupy the farmhouse as their primary residence. The property must also meet FHA's minimum standards for health, safety, and structural integrity requirements.
- Finally, borrowers must meet FHA's debt-to-income ratio requirements and have a credit score that meets the lender's standards.
Despite these requirements, FHA loans often have more relaxed eligibility criteria, making them accessible to a wider range of borrowers. They typically offer competitive interest rates, which can translate to significant savings over the life of the loan.
However, potential challenges and considerations should be acknowledged. FHA loans have maximum loan limits that vary by county, and these limits may be lower in rural areas, potentially impacting purchasing power.
FHA loans also require both upfront and annual mortgage insurance premiums (MIP), which increase the overall cost of the loan. Discuss your needs with a lender before committing to a farm residence loan to better know your options and obligations.
FHA Loan Articles
March 30, 2022Once you’ve decided that you’ll be purchasing a home, one of the first questions you need to ask yourself is what kind of mortgage you’ll be using to finance it. When it comes to shopping for a home loan, there are a number of options to consider.
March 3, 2022Savvy homeowners make it a point to monitor interest rates so they can take advantage of a drop. Many choose to refinance their mortgages to capitalize on falling rates and lower their monthly payments and save on interest.
February 24, 2022One of the major hurdles that keeps families from purchasing a home is the need for a down payment. The FHA’s goal is to offer more homebuying opportunities to low- and moderate-income Americans and set more easily achievable down payment requirements for borrowers.
January 31, 2022One of the first steps to take when you decide to buy a home is getting pre-approved for a mortgage. It is important to know what it means to get pre-approved for a home loan, and what the pre-approval letter does and doesn’t do for your home buying chances.
January 10, 2022A home loan is one of the most important investments you can make. Buying a home means owning property, and being a homeowner means there's potential to watch your investment grow in value over time. But first, the lender has to make sure the borrower is a good credit risk.
