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Moving to the Country? This Overlooked Loan Makes It So Easy

September 22, 2020

country home

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With the COVID-19 pandemic still going strong, many city dwellers may be considering a move to the country—and there’s a specific type of mortgage that can help make this a reality, called a USDA loan.

Offered by the U.S. Department of Agriculture and backed by the agency’s Rural Development Guaranteed Housing Loan Program, these mortgages are designed to help buyers with moderate or low income purchase property outside cities.

They accomplish this by offering several key benefits—such as low or no down payments and looser qualifications for income and credit history.

“More people should absolutely consider using USDA loans to finance their homes,” says Jan Hadder, regional vice president of the builder division at Silverton Mortgage in Columbia, SC. “If you’re not living in the city, this can be a great option to finance your home.”

USDA loans could be a boon to the wave of buyers who are currently contemplating fleeing cities right now.

As it happens, searches for homes in rural ZIP codes jumped more than 15% this May, compared with a year ago, according to realtor.com® data.

Yet many Americans aren’t aware of USDA loans, or assume that they don’t qualify. They may also have other assumptions about these mortgages that aren’t true or in step with recent changes in the terms.

If you want to avoid overlooking this hidden financing gem, here are a few things to know about USDA loans today.

You don’t have to buy a house in the boonies

The biggest misconception about USDA loans is that you have to live in the middle of nowhere.

In reality, homes qualify as long as they’re located outside a metropolitan area. In fact, communities with populations of up to 35,000 may be fine. The USDA offers an online map where you can search for properties that are eligible for the loans.

Matt Ronne, a loan originator at Motto Mortgage Preferred Brokers in Athens, TN, says USDA loans are a “vital asset” to home buyers in his area of southeastern Tennessee.

“It has been a high-demand product,” he says. “My county, McMinn, and most of the surrounding counties are 100% eligible for this type of financing, as long as those clients meet the credit, income, and property requirements.”

You don’t have to be destitute—and income limits recently increased

“Many people think that the USDA loans are meant to be subsidized housing, or that they are only intended for use by those with very low income,” says Gwen Chambers, a mortgage loan originator at Motto Mortgage Superior in Germantown, TN.

But that’s not the case. There are actually two types of USDA loans. Direct housing loans are for low-income individuals; guaranteed loans are designed for moderate-income buyers.

The USDA recently increased its income limits for loans, allowing more home buyers to be eligible. In most locations, the income limit for households with one to four people is $90,300, and $119,200 for households of five to eight people.

USDA loans are easier to get than ever

The income limits have been raised, Hadder says, and some elements of the application process for certain USDA loans have been relaxed.

For example, in response to COVID-19, the period for which certificates of eligibility are valid has been extended for some borrowers, and some parts of the application process will be streamlined, including credit reviews and loan processing.

Although the specifications vary by lender, borrowers typically need a minimum credit score of 640, whereas conventional home loans often require a credit score of 700 or higher.

“These new loan changes are designed to make it easier for a borrower to qualify for a USDA loan,” Hadder says.

Because certain parts of the application process will be waived or relaxed, she says, “borrowers will hopefully have a better chance of getting approved.”

USDA loans aren’t just for first-time buyers

Another misconception about USDA loans, Ronne says, is that they’re just for first-time home buyers.

“USDA only allows a borrower to own one property at a time, so using the USDA loan program allows for additional purchases in the future, as long as the current home is sold, or will be sold prior to closing on the new one,” he says.

As long as buyers continue to qualify, they can use the USDA program as many times as they want, Chambers says.

USDA loans have great interest rates

Mortgage interest rates for traditional loans have dropped to record lows in recent months, and now hover around 3%. The rates for USDA loans, however, are even lower.

As of Sept. 1, interest rates for Single Family Housing Direct Home Loans are 2.5% for low- and very low-income borrowers.

“The rates on USDA loans are often very competitive, and the fees are relatively low,” Chambers says. “In my community, consumers often find USDA loans to be their go-to loan of choice.”

USDA loans carry few added costs

In addition to low interest rates, USDA loans offer families the opportunity to own a home with few out-of-pocket expenses, like closing costs.

In addition, certain USDA loans offer 100% financing with no down payment, welcome news in today’s uncertain economy.

“Now, more than ever, because of the potential instability in the workforce over COVID-19 and possible future furloughs, layoffs, and cutbacks, having money in the bank to fall back on in case of emergencies has never been more important,” Ronne says.

“Personally, as a mortgage broker, I never want to see a buyer exhaust their savings for a down payment when they may not have to, especially a first-time home buyer,” he says.

More investment in rural communities benefits homeowners

The USDA loan programs can also give rural homeowners a boost indirectly. The agency recently announced new initiatives to increase private investment in rural communities across the country, Hadder says.

This includes changes to four of its business loan programs to standardize the requirements for loan processing, credit review, loan service, and loss claims.

These measures could help rural homeowners. New investment could add new jobs to an area, create better schools, and boost local economies.

This could increase property values and attract new residents to the area—all good news for local homeowners.

The post Moving to the Country? This Overlooked Loan Makes It So Easy appeared first on Real Estate News & Insights | realtor.com®.

5 Weird Reality Checks You’ll Get If You Buy a Country Home

July 15, 2020

country house

Akabei / Getty Images

City living may have its perks, but combine the congestion and crowds with the threat of the novel coronavirus, and it’s no wonder that many city dwellers these days are fleeing to greener pastures (or thinking about it).

But what is it really like to transition from the hustle and bustle of a city to the more relaxed pace of rural life? As a New Yorker who bought a summer cottage with my husband in upstate New York six years ago, I’ve come to realize that country life isn’t always so serene. In fact, certain things have happened out yonder that make me very glad that we’ve kept New York City as our main residence.

Curious about what curveballs might await if you buy a country home? Here are a few of my more surprising discoveries.

Country life: Is it right for you?

William Geddes

1. The country’s serene silence is often punctuated by gunfire

People in the country love their guns. I’m fully behind the Second Amendment, but we didn’t realize how much shooting takes place in small towns, especially at local gun and hunt clubs, of which there are many in our upstate county.

In fact, there’s one right across the road from our house, and the members shoot skeet early every Sunday morning—without fail. It’s loud and probably should’ve been a deal breaker for us when we considered the house, but we bought it anyway.  Now we take a long walk with the dog when the popping begins.

2. Cute woodland critters will eat everything you plant

I listened to the nursery specialists and planted the flowers that deer weren’t supposed to eat, but they still come by regularly to nibble. Apparently, in a bad winter, if these animals are hungry enough they’ll forgo their usual diet and consume just about anything.

So I nixed the flowers and went with wild grasses and herbs—and the bunnies thanked me by enjoying a nice salad every chance they could. As a last resort, I’m now letting the garden slowly grow over to grass and adding mulch to tamp down any errant weeds. My dream of colorful flower beds has turned into a patchy lawn with brown bits for accent.

Dozens of flats later,and still the garden is spotty

William Geddes

3. Cute woodland critters probably live inside your house

Rodents are expected in a 200-plus-year-old house, so we set traps every weekend during the colder months. (My husband is charged with mouse eradication.) But I never expected the mice would nest—and birth babies—between our bed sheets. After finding a furry family tucked inside my comfy queen bed, going to sleep has become a bit of a nail-biter, since I’m always wondering what I might find there next.

4. Dogs can’t run free

Our rescue pup pretends to guard the front lawn.

William Geddes

One great joy in owning a country house (we thought) would be the ability to open the door and let Django, our sweet dog, race around. But when she did venture forth, everything went south.

While chasing a possum, Django apparently charged (and frightened) the neighbor across the way and her two lap dogs. Said neighbor let me know that this was not OK on her property. Clearly getting to know our neighbors was getting off to a great start!

Next, Django proceeded to chase a mouse into the downspout of another neighbor’s house and then punctured the metal with her jaws to get the creature out. Needless to say, I was on the hook for a new downspout that had to be custom-fit and painted to match my (now irate) neighbor’s house.

5. Country dogs are huge and scary

Meanwhile, my neighbor on the other side of me has an enormous black shepherd that, I kid you not, looks a whole lot like a black bear. Even worse, this dog doesn’t have tags that jingle when it approaches, so every time it appears on our lawn, I’m convinced it’s a bear and start to panic.

Every. Time.

I’m thinking of giving this neighbor a set of cute tags for the dog’s collar with the hope that it’ll be worn and my blood pressure will finally recover. Until then, I keep practicing deep breaths as I sink back into the deck chair on the porch of my country house and try—and fail—to relax.

All I’m saying is if you think owning a country house ushers you into a life of peace and quiet, don’t be so sure.

It wasn’t me—I didn’t do it!

William Geddes

The post 5 Weird Reality Checks You’ll Get If You Buy a Country Home appeared first on Real Estate News & Insights | realtor.com®.

What Is a ‘Gentleman’s Farm’? A Gardener’s Paradise, With One Catch

August 3, 2018

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What is a “gentleman’s farm”? This term, which crops up in real estate listings, describes property where people farm just for fun rather than to make a living.

“The term ‘gentleman’s farm’ dates back to the 19th century, when retired sea captains and shipping agents returned to Nantucket and started their own farms and dairies,” explains Mark Quindoy, a real estate agent with eXp Realty, in San Diego. “It’s merely a gentleman who farms for pleasure, not for profit or survival.”

Pull up an episode of the 1960s TV show “Green Acres,” starring Eddie Albert and Eva Gabor, and you’ll get the picture of this agricultural pursuit portrayed as a merry pastime, rather than a make-or-break grind where you battle locust swarms, blight, and other problems. Farming can be a good time!

‘Gentleman’s farm’ and the tax implications

Gentleman’s farms are often lumped together with hobby farms—pleasure farms that aren’t necessarily on a big piece of property, but may literally be in your backyard. It’s often part of a larger estate, notes Christy Murdock Edgar, a real estate agent in Northern Virginia and Washington, DC.

“Farming in this context might include raising fruits or vegetables, maintaining an orchard, or raising poultry or livestock,” she says. What you do on your gentleman’s farm is up to you. Grow lavender! Snuggle pygmy goats! Tend to pumpkins!

Just keep in mind that even if you’re not pulling in cash, your taxes may be affected.

“Buying a hobby farm will have different implications depending on the state you live in and the size of your property,” explains Barry Richards, a broker with the EXIT Realty Garden Gate Team, in White House, TN.

For instance, in much of Kentucky, any property that’s 10 acres or more automatically qualifies for agriculture tax exemptions. Richards cautions that county tax assessors do take steps to verify that you’re actually farming.

In Tennessee, on the other hand, a seller is assessed a rollback tax if a property that’s previously been used for agricultural purposes is removed from the greenbelt. That means if you’re buying a working farm with a plan to maintain it only for your amusement and not for profit, the tax burden may be passed on to you in the purchase contract, notes Richards.

So before you commit to this pastime, educate yourself on the specific issues facing agricultural property in your state, and consult a tax professional.

Should you buy a gentleman’s farm?

Charmed by the idea of working the land on the weekends? That’s understandable, but just know it’s still a lot of work.

Case in point: Michael Dinich, a retirement and tax adviser at YourMoneyMatters, grew up watching reruns of “Green Acres.”

“I thought farming would be fun,” he says.

Since buying his own hobby farm, he’s learned a few things: Frost kills plants. Fences can take all day to repair. It’s tough to find homes for all the organic, free-range eggs your chickens lay. And if you think it’s tricky finding someone to take care of your dog when you go out of town on vacation, imagine finding someone to watch your farm.

“It’s easy to romanticize the farm life,” says Dinich. “There’s a whole cottage industry that makes their money on selling the hobby farm dream.”

Gentlemen and women, purchase your own green acres with caution.

The post What Is a ‘Gentleman’s Farm’? A Gardener’s Paradise, With One Catch appeared first on Real Estate News & Insights | realtor.com®.