There has never been a better time to buy a second home. I am even watching my spending these days, eyeing fractional ownership if it has all the right locations. We are having a guest post soon from a fractional ownership expert to explain the do’s and don’ts. The problem is not buying, as we know, it’s getting financing. We recently re-financed our lot in the Hill Country at Walnut Springs, no thanks to Wells Fargo and were told to basically forget it. No one wants to finance land without a house on it because there is nothing to sell should you default. And when it comes to raw, open land in the country, things are a lot trickier.
I would strongly suggest that even before you begin looking in the country or lakes or wherever — but really, now, go look — heed this advice from Marcus McCue, Senior Vice President at Guardian Mortgage. By the way, from my own personal experience, I also strongly recommend local mortgage companies FIRST and staying clear of the large banks to avoid headaches, or in the case of Wells Fargo, migraines.
What surprises await new country homeowners?
There are several surprises that can slow down the loan approval process for country homes. For example, most people are not aware that there are special requirements for wells, sewage systems, oil/gas wells or pipelines, power lines, storage tanks, wood-burning stoves and even how close the property is to a landfill. (A landfill!) These factors take on even greater importance if you are considering an FHA or VA loan, both of which have more stringent rules.
You’ll need water tests and possible soil tests and most likely a new survey to make sure that electric lines or gas pipelines aren’t within your easement or will be a certain distance away from the house.
If you are pre-approved for the loan, will you still run into these problems?
It’s possible. Pre-approval is not enough in the case of a rural property because of these property and improvement requirements. The underwriter might decline the loan if the property doesn’t fit its requirements. It is important that the contract state that the deal is contingent on the underwriter accepting the property.
The bottom line is that rural properties will take more time – water and soil tests can take weeks to come in, for example.
Another snag may be in the appraisal process. Since country appraiser cover hundreds of miles of properties, you want to make sure you get someone who is at least familiar with your home the area it is in.
For more specific details, check out this article from Mortgage Currentcy.com, which gives a chart of specific FHA and VA requirements for rural properties – the guidelines followed by most underwriters.