If you have a farm, or are getting a farm, that you want to take out a
first or second mortgage on, you're going to need to apply for a farm
mortgage; and that will require some special considerations. While the
lines between the two are becoming more blurred all the time, farm
mortgages are not classified as residential mortgages and so, the
process and what will be required of you will be slightly different
than it would be for a conventional mortgage. This thought is enough to
send many farm owners into a panic; but don't run just yet. Follow
these farm mortgage tips, and you'll be well on your way to reaping a
fine harvest, and financing it too.
The first thing you must do when getting a farm mortgage is know what type of mortgage you need, and what type of mortgage lender you need to work with. Your farm might be classified as a ranch, a private farm, agricultural farm land, commercial farm land, or any other type of farm. And that might determine the type of lender that you need to finance the loan. There are many mortgage lenders that focus on farm mortgages and cater to those clients; while a commercial lender may also be more than willing to take on your farm loan.
You will probably also need a deed to the property that completely outlines what kind of property it is, what kind of farming is done on the land, and how long the property has been designated as farmland. Often, a legal description of the property will also be enough for the lender. If the farm is already making an income, you will definitely need to have the balance sheets and income statements from the farm's business readily available.
If your farm is not yet up and running, or you have a secondary income source, you'll also need this paperwork when it comes time to apply for your farm mortgage. It's also important when you're collecting this paperwork, to make sure that any financial statements are not more than 60 days old, as the lender is going to want the most current information possible.
If you're going to be taking out a second farm mortgage, it's recommended that you only do so in order to put money back into the farm. While extra equipment, hiring help, buying more land, or constructing new farm buildings are all great reasons to take out a second mortgage on farmland, taking out a farm loan to go on a family vacation is not.
While putting money back into the farm will help improve it and possibly increase business, you don't want to put your farm and your income at risk for something frivolous, in case you can't pay back the loan.
Farm mortgages can be somewhat tricky to navigate through, as they are quite different from traditional residential mortgages. But follow these few tips, and know what you need to do ahead of time and you'll find that getting a farm mortgage can be pretty painless.
The first thing you must do when getting a farm mortgage is know what type of mortgage you need, and what type of mortgage lender you need to work with. Your farm might be classified as a ranch, a private farm, agricultural farm land, commercial farm land, or any other type of farm. And that might determine the type of lender that you need to finance the loan. There are many mortgage lenders that focus on farm mortgages and cater to those clients; while a commercial lender may also be more than willing to take on your farm loan.
You will probably also need a deed to the property that completely outlines what kind of property it is, what kind of farming is done on the land, and how long the property has been designated as farmland. Often, a legal description of the property will also be enough for the lender. If the farm is already making an income, you will definitely need to have the balance sheets and income statements from the farm's business readily available.
If your farm is not yet up and running, or you have a secondary income source, you'll also need this paperwork when it comes time to apply for your farm mortgage. It's also important when you're collecting this paperwork, to make sure that any financial statements are not more than 60 days old, as the lender is going to want the most current information possible.
If you're going to be taking out a second farm mortgage, it's recommended that you only do so in order to put money back into the farm. While extra equipment, hiring help, buying more land, or constructing new farm buildings are all great reasons to take out a second mortgage on farmland, taking out a farm loan to go on a family vacation is not.
While putting money back into the farm will help improve it and possibly increase business, you don't want to put your farm and your income at risk for something frivolous, in case you can't pay back the loan.
Farm mortgages can be somewhat tricky to navigate through, as they are quite different from traditional residential mortgages. But follow these few tips, and know what you need to do ahead of time and you'll find that getting a farm mortgage can be pretty painless.
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