How To Find and Finance a Farm
(Page 4 of 8)
Once you've located your homestead, there are a number of
ways to arrange financing. If you know what they are, you
can ,save yourself a sizeable sum on interest rates, your
payments can be substantially less and you can avoid the
usual finder's fee by arranging your own mortgage. Here's
what is generally available:
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LIFE INSURANCE COMPANIES have broad investment powers and
are often the best bet for financing an off-beat real
estate transaction. Some of the smaller concerns deal
almost exclusively with residential mortgages and the
little private and fraternal insurance companies can lend
at an extremely low interest rate. American Mutual Life
Association of Cleveland, for instance, now makes loans at
6% to its members which isn't bad in today's market of 8
1/2%. These small companies seldom require the payment of
discounts or "points".
SAVINGS AND LOAN ASSOCIATIONS are the major source of
mortgage funds for residential purchases. The usual loan
limits are $40,000 with a maximum loan-to-value ratio of
90% and an average of 70%. However, since farmland is often
bought at less than its appraised value on today's market
and since it is possible to obtain maximum loans on
exceptionally good purchases, you might finance your
acreage with virtually no out-of-pocket cash through a S
& L:
I bought a suburban home through a Savings and Loan bank.
It was willing to finance the entire selling price so that
I only had to pay the closing costs . . . which were less
than the security deposit I would have had to make on an
apartment. The market value of my home has now increased
enough to finance the down payment for a farm when I sell.
The new FEDERAL HOME LOAN MORTGAGE CORPORATION has been set
up to purchase both conventional and government mortgages
with greater flexibility than in the past and to increase
the supply of money available for home mortgages.
Conventional financing has been encouraged to provide for
lower down payments, longer payoff periods and lower
monthly payments—particularly for low and
middle-income families. Authoritative sources indicate that
new laws enacted by congress should provide for even more
federally subsidized housing at lower interest rates during
the next few years.
The FARMERS HOME ADMINISTRATION Farm Ownership Program
currently makes 40-year loans at 5% interest for the
purchase, enlargement or development of farms no larger
than family farms for persons unable to obtain required
credit elsewhere. Maximum loan plus debts against the farm
cannot exceed $60,000. To qualify, you must be certified by
the local County Farmers Home Administration as qualified
to farm. "Qualified" usually means that you have had farm
experience. Veterans are given preferential treatment. Once
you have enough equity in your farm through full-time
operation, you are expected to refinance through a
conventional mortgage.
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