Some people love the big city life but others long for a big beautiful home in the country. Financing country homes on numerous acres can be a little tricky so there are a few things you need to be aware of if this is your dream.
The first thing to look at is the zoning of the property. If you are looking to do a regular residential mortgage, the zoning must comply. If the property you are looking at is zoned agricultural, that is a whole other story. You’d then be looking to do an agricultural loan which I am not going to get into the requirements here.
The next thing to consider is the number of acres. If your dream home is sitting on land with less than 5 – 10 acres, it is a little bit easier. We will typically be able to qualify you in the same manner as a regular City home except with an acreage, an appraisal is almost always required. The minimum down payment is normally 5% of the purchase price with this scenario. The difference comes when your home is located on more than 10 acres and has a barn or a shop as well. The banks will only give value to a home, garage and up to the 10 acres.
Here is an example:
If you have an accepted offer of $200,000 on a home with 20 acres that has a large shop on it (5% down payment would be $10,000), the bank will do their appraisal on the house, garage and 10 acres only. If the value comes back at $190,000 (because they have not counted the additional 10 acres and the shop but of course the seller wants paid for those too), the bank will finance 95% of the $190,000. This means, they will give you a maximum mortgage of $180,500 which increases your down payment from $10,000 to $19,500. You are paying, out of pocket, for the additional 10 acres and the shop.
Another thing to keep in mind is if you have a well and septic tank, which is typical on an acreage, you will need to have a water potability test completed (your realtor will help with this). The bank needs to know the water is safe. In regards to the septic tank, there is usually no issue here unless it is new, in which case a septic certificate is required from the municipality in order to confirm it has been installed correctly.
Financing your dream home in the country can be done, there are just a few different requirements that you need to be aware of. Your realtor and your mortgage broker will work together to help make the process go smoothly. If you have any questions, please don’t hesitate to contact me!
Office: (204) 727-2177
Cell: (204) 724-7290