The Press Room
How to Get a Loan
Editor’s Note: The land rush has arrived, and wise investors in Mossy Oak Properties will venture further out from their urban surroundings to search for second-home opportunities on less-expensive land. Since no one can create more land, as the demand for land increases, so will the price of that land. Do you dream of purchasing a large tract of forestland to subdivide into 1- to 40-acre lots? What happens if an owner’s ready to sell at a right price, and you know customers waiting to buy, but you don’t have the cash to purchase and develop the land? Don’t worry, a strong forestland real-estate market means that companies like Developer Finance Corporation and Farm Credit Bank will help you buy and build that subdevelopment.
Joy Upchurch of AgFirst Farm Credit Bank explains how land developers can get loans.
Mossy Oak Properties: How do developers go about getting a loan for 40 to 150 acres? What does the lender need to know? What’s the interest rate (or range of rates)? What are the collateral requirements, etc.?
Upchurch: A developer needs to first contact the local Farm Credit office. To find the office nearest you, go to www.fcredit.com or call 1-800-343-6940. Applying for a farm or a rural property loan is very much like applying for a home loan. You’ll need to complete a loan application, which may include a balance sheet and an income statement. You may be asked to provide a copy of your most recent W-2 or income tax return as verification of your income. Farm Credit offers variable rates with your choice of two indices: the Wall Street Journal Prime Rate or LIBOR (London InterBank Offered Rate). We also offer 1-, 3- and 5-year ARMS and short- and long-term fixed-rate loans. We’re one of the few lenders who offer fixed rates up to 20 years, and sometimes for 30 years, on bare land. For real-estate financing, interest rates will be based on risk factors such as the repayment capacity of the borrower, the percentage of the purchase price financed, etc. Depending upon the size of the loan and other factors, the rate may be slightly higher or lower than prevailing home-mortgage rates. For long-term financing of real estate-loans greater than 10 years – AgFirst finances up to 85% of the appraised value of the land. The land must be considered "agricultural land" or land devoted to or available for the production of agricultural products, including croplands, timberlands, pasturelands and other land uses. We finance land purchased for hunting, fishing and other recreational uses, too. Through the years, we’ve financed land for a variety of uses: an alligator farm as well as farms for raising llamas, emus, ostriches and other unusual animals. I believe we even financed an earthworm farm. However, that loan didn’t work out very well because the collateral crawled away.
Mossy Oak Properties: If someone wants to refinance a rural or an urban home or rural property to buy additional land, does Farm Credit do that?
Upchurch: Yes, we can do that. If you own a home or a property in a rural area, we can help you by refinancing your home or property (a cash-out refinance) or making you a home-equity loan to aid you in buying the property. If your home’s in an urban area, we can help you by originating similar-type loans to enable you to purchase the rural property. We also offer loans on home sites or lots in rural regions.
Mossy Oak Properties: What if someone already has property in the country and needs a construction loan to build a house? What steps must he go through to get a construction loan?
Upchurch: You’ll do much the same things that you will to apply for a home-construction loan with any other lender. But something that makes Farm Credit unique is that we finance homes in rural areas, not just rural subdivisions.