Is there a way around the USDA home loan land/home ratio requirements?

Question

Our prospective farm (house + acreage) was appraised at the land 45%, the home 55% of the appraised value. Apparently USDA has a strict 30% max land value to 70% home value requirement. The appraisal was off in my opinion but our mortgage bank can't pick USDA's appraisors for this loan. Any thoughts on whether, the seller (who is a friend of ours desperate to sell) can only sell us 10 acres and "retain the rest himself" thereby only "officially selling us a portion of the land improving the ratio. I'm considering working that angle with the seller and a new lender... Any input, suggestions, experience with this would be greatly appreciated. Thanks.

5 months ago - 0 answers

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Subdivision of acreage is a big undertaking, which could (if it's even possible) take months or years, and costs lots of money. Generally, land can be subdivided into multiple 40 acre parcels without a lot of work, in most states, depending on your zoning. You could try an FHA home loan, which ignores all but 2 A of the land. The rest is considered to be no value. For example: Suppose you owned this: 100 Acres, 2000 ft2 house = $1,000,000 value FHA would appraise a home loan, which would probably be about this: 2A, 2000 ft2 house = $500,000 To get an FHA loan, but still have $1M in value, if you COULD subdivide into 40 Acre parcels without going through a whole subdivision process, you would have to hope for this result in your appraisal: 40A, 2000 ft2 house = $500,000 (38A ignored) - new registered lot 60A, no house = $500,000 to be sold seperately - rest of current farm

by realmom

5 months ago

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