Rural Home Loans

[lcertuche]

So has anyone got a rural home loan. How did it work out for you? DH and I are thinking about it. I'm tired of living where we can't even paint a door or put our garden where we want. Not to mention the rats and bad plumbing that never gets fix. We could just keep renting but few landlords give you much flexibility. DH hates the idea of commitment to a 30 year loan but we have to live somewhere and a realtor friend told me house payments are often lower than rent.

 

[Latestarter]

House payments are virtually always lower than rent... If the rent didn't cover the cost of the home to the owner, he/she wouldn't be able to stay in the rental business for long. I've owned rental properties and I can say from experience that I can't/couldn't/wouldn't "subsidize" my tenants. The problem is the lender wants to verify that you'll be able to pay the mortgage and makes you "earn" it while the landlord "hopes" you'll pay the rent and if you don't, you end up on the curb. Foreclosure is a much more difficult, time consuming, & expensive routine for a bank/lender. My daughter is renting/living in a 1 bedroom, maybe 400 square foot apartment, costing about $1,000 a month. I live in a 1600 square foot, 3 BR 2 bath home on ~20 acres and my principle and interest is ~$525/month. Even adding in taxes and insurance, my monthly cost is less than hers, and I can write off the property taxes and interest on my income taxes. My daughter gets no tax benefits from renting (and neither do you).

Getting a rural home loan can be a little more difficult/challenging than a loan for a cookie cutter house in a cookie cutter subdevelopement. But there are lenders out there that specialize in that type loan. I just bought my rural place down here in TX but I had the advantage of earning the ability to do a VA loan. I did mine through my credit union (that is for military folks; Navy Federal). Really, in the long run, it's no different than any other residential mortgage situation. You just have to do what's required to get what you want.

You're right... you have to live somewhere and the only real/major difference between paying a mortgage and paying rent is that it's much easier to "walk away" from a bad rental situation. Don't like the place? fine... at lease end, you move someplace else. Not quite so easy to walk away from a mortgage and a home you own. The other difference is financial... rent gains you nothing and is throwing money at something that is only helping you "right now" (roof over your head). Essentially, you are buying the house for someone else. it's costing you money and making them money. When you buy a place, you are basically putting your money into a large physical savings account. You aren't losing that money and can (almost) always get it back down the road when you sell (provided you don't trash the place or the housing market doesn't crash).

 

[babsbag]

Check out the USDA rural home loan. It can be work if you find the right person to guide you through it all.

 

[Baymule]

We bought a HUD repo with a FHA loan and it was pure hell. We hung in there and finally got it closed, but it was a horrible experience, including vandals breaking in and stealing the inside furnace, outside AC unit, breaker box wiring and cut the wires under the house. It was worth every bit if the misery I went through. After we sold out old house, we paid this one off. Just needed the loan to secure the property and make it ours.

By all means you should buy a home. You're making a payment, might as well be yours.

 

[Bruce]

I can think of only a few reasons when renting is better:

1. Housing bubble, prices skyrocketing for no reason other than "buy it NOW because it will cost more tomorrow". That "pressure" to buy just pushes prices ever higher. Never buy in that sort of market.
2. You have no sense of job security and if you lose your job finding another in the same area is unlikely. You don't want to be in the position of having to move and sell the house especially if the market is "soft".
3. You can't come up with the down payment and closing costs.

The last one is a catch-22. When you are paying a landlord, it can be hard to save up the money to buy.

I sort of love/hate the HGTV home "flipping" programs (no TV so I don't see them often) but there is a basis there for people who have the ability to do a fair bit of repair/remodel themselves. Find an area you like and a property you like where the "bones" are good but it is run down and someone is more interested in getting out than getting rich. That may be the house for you. And, if you've seen those shows, often they aren't putting in high end stuff but they charge a high end price because the house is in a neighborhood that commands such prices. And, they are putting in "stuff" they think/know? people "demand" but YOU may not care about those things.

If you do it yourself you can get higher end (since you aren't paying someone to install) and only those things YOU want. I made the door and window trim in my last house. Cherry and Red Birch, custom to the windows including the sills. Rosettes in the corners, fancy shape on the moulding. I have the tools, I made it from rough lumber. I love the look of hardwood but if I had to pay someone $40+/hr to install, it would have to be cheap pine and I'd be painting it.

As @Latestarter said, the OWNER of the property writes the property tax off their income taxes. The renter is PAYING the taxes. You don't come out ahead paying someone else very often.

 

[greybeard]

I haven't done a loan since '72 and went VA then so I can't really comment on the current process. It was fairly simple and straightforward then tho.
There are certainly tangible financial advantages to home ownership, and other less tangible advantages to it.
But, in addition to the mortgage and taxes, there are also other expenses to ownership new buyers often don't think about. Those expenses are sort of 'hidden' in a rent payment, but have to come right out of pocket at very inconvenient times if you are buying or own the place.

Lawn maintenance. When renting, in many if not most cases, the landlord has multiple rentals and the cost is spread out to all the tenants.
Many new home owners are aghast at the cost of buying and maintaining a lawn mower, especially if you have a large lawn.
Major appliances.. washing machine, oven, water heaters, air conditioners, heating units..if they crap out, just call the landlord or property manager and it's rare your monthly rent will increase because of something that had to be repaired or replaced, but in home ownership, it can amount to thousands of $/year right out of your wallet.

Insects invade your home..call the property manager and he generally sends out his contracted exterminator. If you are buying, that too is right out of your pocket, whether you do it yourself or call someone.
Roof starts leaking? Again, the landlord takes care of that, and your rent stays the same. Fixing or replacing a roof is very expensive if you have to absorb it alone without a good home owner insurance.

Torrential rain washes out your driveway or turns it into an non-navigable quagmire? That's on you too, and it's above what your monthly mortgage payment is.

Plumbing? Sewer plugged? Landlord calls his plumber or the maintenance guy--but you will have to either learn to be a plumber or pay someone out of pocket to get the toilet to flush right or the kitchen sink to stop leaking under the cabinet and rotting out your floor.
Before you know it, the real cost of home ownership has exceeded what a rental or lease property costs/year.
And that, is just the home itself. Add in any ag related problems or pasture upkeep and remediation and it just gets more expensive.

I would never discourage anyone from buying their own home, but everyone needs to go in to it with eyes (and wallet) wide open.

In the past year, just in the 1 acre homestead and house, I've replaced a water heater, a kitchen oven, had 2 repairs done to my 9 year old central unit, replaced a microwave oven, fixed a washout on my drive that had us marooned on our own property with the river rising from the other direction, sprayed home and yard for termites and other insects, replaced broken entry lockset, paid to have my wastewater treatment plant serviced and replaced both a pump and compressor, had the solid settling tank pumped out, replaced some rotting 2x8s on my back steps, replaced a kitchen sink faucet set, replaced 2 faulty exterior GFI receptacles, and probably 1/2 dozen or more other things that are just part of the regular ongoing maintenance that comes with home ownership.

 

[babsbag]

Home ownership may be the American dream but they often don't tell you that that dream can be a nightmare. I wouldn't rent because I like to move walls and paint doors and I have 2 dogs and 4 cats that live in the house. And I like to know that my landlord isn't going to kick me out for reasons like they are selling or they died. But when the roof leaks or the plumbing breaks calling a landlord looks awfully tempting.

 

[Bruce]

All true, but have a good landlord if you rent. My first apartment was a basement. Lots of rain one spring, came home from work on a Friday to soaking wet carpet in the living room. Not just damp, visible water. Called the landlord. OK, he'll be over. Saturday morning, not there, called back. He'll be there. Mid afternoon, not there. I went to the store and rented, I think, a carpet shampooer to suck the water up. He showed up on MONDAY late afternoon. Said he thought it was just a small spot in the corner. Never mind that I TOLD him Friday the carpet was waterlogged. The apartment also had a hole in an interior hollow core door. After several calls, he finally came to pick it up for repair. He showed up UNANNOUNCED at 10 PM one night with the repaired/replacement door. I moved after 1 year, several others in the 6 apts in that building moved as well.

And then there was a lady renting one of the 3 apts in a converted house in my prior neighborhood. Small enough that there was only room in the kitchen for a 3 burner stove (didn't even know they made those). 2 of the burners didn't work. Did the landlord fix it? NO! She stuck it out 2 years, he NEVER fixed it. She finally moved.

So yes, eyes wide open and yes, if you do buy, try to make sure you keep a "maintenance" account for those things @greybeard mentioned.

 

[babsbag]

I always had good landlords when I rented as a young person, but haven't rented in over 36 years. Our neighbor (renter) wanted a drive through garage so he took out the back wall. He also wanted different kitchen cabinets so he took out the originals and put in some used ones. He just sat the top ones on top of the counter. The list goes on as to what he did to that house. Meanwhile the older land lady had a son that she was caring for that was dying from AIDS and she was trusting her other son (druggie, unbeknownst to her) to be watching over the house. Nightmares can work both ways.

 

[Bruce]

Ouch. And true. I suspect "bad" tenants are more numerous as a percentage than "bad" landlords. After all it isn't THEIR property so they may not care about "wear and tear" like a homeowner would.