813.910.8020 Apply Now

Mortgage Broker Tampa, FL | Mortgage Lender Tampa Florida | Marimark Mortgage

  • Home
  • Homebuyers
  • Homeowners
  • Realtors
  • Investors
  • About Marimark
  • Contact Us
  • Mortgages
  • Apply Now
  • Current Mortgage Rates
  • Calculators
  • Testimonials
  • Blog
  • Videos
  • Featured In
Home / Blog / Buying a Home / Mortgage Challenges When Purchasing a Property with Acreage or Agricultural Zoning

Mortgage Challenges When Purchasing a Property with Acreage or Agricultural Zoning

May 14, 2015 By Mary Catchur

Mortgage for Homes with Acreage or Agricultural Zoning
Photo Credit: Mark Moz/Flickr.

We have recently seen many of our borrowers wanting to purchase rural properties with significant acreage. In many cases, these properties are also zoned agricultural. Many people do not realize that properties considered to be agricultural cannot be financed with traditional financing under Fannie Mae and Freddie Mac. However, zoning alone is not the determining factor in whether a property will be considered agricultural. As such, we have been successful in obtaining financing for rural properties  with acreage under certain circumstances.

Here are some of the limitations and factors to consider if you are interested in purchasing or refinancing a property with acreage.

Mixed Use, Zoning, and Farming Activities

Many rural properties have mixed use, mixed zoning or other unusual characteristics that can make determining property eligibility difficult. Many believe that Fannie Mae has a restriction on properties greater than 10 acres. This is not the case. The acreage alone does not make the property ineligible. The lender/appraiser will look more at what is the intended use of the property and what is typical for the area where the property is located. They will also look at “outbuildings” such as barns, stables, etc. in determining how the property will be used.

If a property has an agricultural pre-fix in its zoning, the appraiser must determine whether the primary use is residential. A large part of that determination will be what is typical for the area. The existence of an outbuilding does not necessarily render the property ineligible; as long as its value is minimal, it can be determined that the primary use of the property is residential, and the building is not being used for farming activities. The existence of livestock on the property will be a problem, because it’s an indicator of farming activity.

We have seen loans denied, even when the agricultural activity is minimal.

In one instance of a client trying to refinance his property, the appraiser noted a few goats and rabbits, and the borrower’s tax return reflected farming income from the sale of the goats’ milk to a next-door neighbor. As a result, the property was considered to be used for farming activities.

So, even activity that you may not consider to be “farming” can create difficulties under conventional financing. Farms, orchards and ranches are all considered to be ineligible properties under conventional financing.

Appraisal Process

Another challenge in financing properties with acreage relates to the appraisal process. Because most of these properties are in rural areas where comparable sales history is limited, determining a reasonable valuation may be difficult. Appraisers are typically required to determine the market value of a property by utilizing comparable sales of neighboring properties that are within 1 mile and that have sold in the last 90 days. Such sales data may not be available, and the appraiser will have to look for properties that are further in distance or sold less recently. When making comparisons to other properties, appraisers are required to make adjustments to value to account for such differences with the properties. But the allowable percentage adjustment is limited, which can pose further challenges when appraising these properties, since the available sales can vary greatly in location, site, size, age and other features.

Lenders will also consider the ratio of the home value to the value of the land. If the majority of the value is in the land and not the home, there could be a problem with the appraisal. The appraiser will document what is considered typical for the area in these situations.

Multiple Parcels with Different Parcel Identification Numbers

We have also seen many of these properties have multiple parcels with different parcel identification numbers. This is also reviewed on a case-by-case basis. In general, if the parcels meet the following requirements they can be financed:

  • Each parcel must be conveyed in its entirety.
  • The parcels must be adjoined to each other.
  • Each parcel must be zoned residential.
  • Only one parcel may have a dwelling unit. Limited nonresidential improvements are acceptable, such as a garage.

Consult Your Lender Before Purchasing a Property with Acreage

Because of the challenges of financing properties with acreage, it’s a good idea to consult your lender if you are planning to purchase a rural property with acreage.

A good lender can educate you on the red flags that could make the property difficult to finance, and give you an idea of properties that are likely to be eligible for conventional financing.

Opt In Image
Stay Informed, It's Your Money
Marimark Mortgage Newsletter

The Marimark Mortgage Newsletter will keep you informed with important events in the mortgage industry that could impact your finances.

We especially focus on ways to save money on your current and future mortgages. And, we continually share the information we share with our clients, because we believe informed consumers are the best consumers.

Real estate agents, and other professionals in the industry, will receive an ongoing wealth of information that will help them serve their clients.

Thank you for signing up!

Filed Under: Buying a Home Tagged With: Acreage, Agricultural Zoning

Opinions, estimates, forecasts and other views contained in this page do not necessarily represent the views of Marimark Mortgage or its management and should not be construed as an offer to provide financing at the rates or terms mentioned. Due to market fluctuations, interest rates are subject to change at any time and without notice. Interest rates are also subject to credit and property approval. Although Marimark Mortgage attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. Information from this page may be used with proper attribution.

Save with a Mortgage from Marimark

Whether you are buying a home or refinancing, you can save with a mortgage from Marimark Mortgage!

    Search

    Post Categories

    Testimonials

    Refinancing with Mary an absolute pleasure

     
    Refinancing with Mary has been an absolute pleasure. I have never been through the process before and she took the time to explain each step. She was prompt (had a rate locked in right away) and most importantly always answered the phone or emails almost immediately! The communication line alone made the refinancing process every bit worth it. Would recommend to anyone, and will be back for any future purchases! Bret Brennan, March 2021
    See More Reviews
    Marimark Mortgage LLC
    5327 Primrose Lake Circle
    Tampa, FL 33647-1328
    (813) 910-8020
    (866) 910-8020

    Accessibility
    Privacy Policy
    Terms of Service
    Sitemap

    Reviews

    Website Testimonials
    Google Reviews
    Zillow Reviews
    Trulia Reviews
    Facebook Reviews
    Yelp Reviews
    BBB A+ Rating

    FOLLOW US

    • ‎
    • ‎
    • ‎
    • ‎
    • ‎
    • ‎
    Marimark Mortgage is a BBB A+ Accredited Business

    Recent Posts

    • FHA Announced a 30-Basis Point Reduction to Annual Mortgage Insurance Premiums
    • How Can You Improve Your Credit Score?
    • Historical Mortgage Rates From The 1970s
    • What You Need to Know About Mortgage Forbearance
    • Top Tips to Save Money for a Down Payment

    © 2023 Marimark Mortgage, LLC All Rights Reserved. | Internet Marketing by Image Building Media. | RSS Feed

    Reviews / Recommendations: Google, Zillow, Trulia, LinkedIn, Facebook, Yelp, BBB

    Licensed in Florida by the Office of Financial Regulation, Mortgage Lender License #MLD77.
    Licensed in Virginia by the Virginia State Corporation Commission, License MC#4556.
    Licensed in Pennsylvania by the Department of Banking and Securities, License #40222.
    NMLS#248318 – www.nmlsconsumeraccess.org.