People who want to live out in the “sticks” in North Carolina don’t have to drive too far from a major metro area. USDA offers loans for residential housing in Rural parts of NC, however the USDA RD loans are NOT for Commercial Farms. In a ruling that just came out, USDA gave some guidance on how to tell if a property might be ineligible due to commercial farm outbuildings and which properties that just HAPPEN to have a couple of outbuildings ARE okay for USDA Loans.
USDA requires that the property be located within the USDA Footprint, and then it says that, “A non-farm tract to be purchased or improved with loan funds must not be closely associated with farm service buildings.” Well, what if you want to have a horse, or a couple of goats in the pasture outback? Does that count as “Farm Service Buildings?”
If a barn can be used for this purpose without significant repair, regardless of the applicant’s intended use for the structure, then it is considered a functional farm service structure for rural housing purposes. This type of farm service structure typically adds value to the subject property as evidenced by an appraisal report.
In a clarification, USDA stated that outbuildings that have some functionality, maybe you want a place for your riding lawn mower, do not have to be considered “farm service” IF the land the house is own is not income producing, and it’s typical for homes in that area to have structures like that.
If you have a couple of goats, or a horse or two of your OWN, and the property is clearly for the resident’s use, and NOT income producing – this is still a great program to use! The problem will come when the appraiser notes that it appears to be an Income Producing property – so boarding 8 horse, probably isn’t going to work.
The BAD NEWS is that the value of the Structure is going to be DEDUCTED from the value of the property. Meaning, if you are buying a house with the land and outbuildings for $100,000 and the appraiser assigns $10,000 to the “barn” (outbuilding) then all USDA is going to allow us to loan you is $90,000.
Additionally, USDA has a Land to Value of the House ratio that it uses. The Value of the land can not be worth more than 30% of the total value. So, going back to the example above, the Original price for the whole deal is $100,000. They deduct $10k for the Barn – now they are saying that the HOUSE has to be valued for at least $60,000 for this to work. If the appraisal shows the house is worth $42,000 and the rest of the value is the 18 acres of land… no deal.
It’s not just Outbuildings that can be difficult to finance with USDA Home Loans – in ground swimming pools can also be difficult to finance with a USDA Loan…
If you have questions about purchasing a home in NC that’s located in a USDA area – please call Steve and Eleanor Thorne 919 649 5058 we do tons of these loans, and we KNOW the underwriting requirements for a USDA loan! Connect with us on Google Plus or Facebook! Remember, the USDA Home Loan Maps could be changing September 30, 2013… in fact, almost 1/3 of North Carolina could LOSE the ability to do USDA Home Loans! Yikes!