Obtaining a Mortgage for a Horse Property

Buying an equestrian estate, ranch, or a horse farm is an exciting undertaking. However, it can also be an enormous financial stressor and it’s common to rely on a mortgage. Long-term planning is smart, which will allow you plenty of time to get organized. Here are some useful tips to help you prepare for the mortgage process and become an astute horse property owner.

Build Up a Good Credit Score

Work on creating the best score possible. Better scores equal better offers. Attain a copy of your credit report, which can be done for free. Pay all of your bills early, create a monthly budget, and keep credit card balances low or paid off. Sometimes, it can take months and years to improve your credit score. Therefore, it is good to know your score and make a plan to raise it if needed.

Get Financially Organized

Having your finances in order is fundamental. You will need to show proof of income and show financial stability. You must prove that adding this new debt is something you can take on financially. Here is a checklist of the items you will need:

• At least three months of recent pay stubs.
• Two years of tax returns.
• W-2s.
• Checking and savings account information.
• Investment and retirement account information.

Save for a Down Payment

Some loans require as little as 3% down. However, 20% down is the traditional standard for a farm loan. Regardless of the percentage, it is still a large sum of money. Therefore, getting in the habit of putting money aside every month is smart. A $300,000 estate may require a minimum of $9,000 or require a minimum of $60,000. Therefore, long-term financial planning is necessary. The more you can put down, the lower your loan amount will be, which means less interest paid and lower monthly payments.

Get Pre-Approved

Searching for a horse property is the fun part. However, it is better to search for your perfect farm or ranch with a set price point in mind. Guessing or having a general idea about your budget may not always be accurate. Buyers can get overzealous and later learn that their dream estate is out of reach. It is a typical heartbreak that realtors witness. To set yourself up for success, know how much you have to work with and get pre-approved early on in the process. Also, having a pre-approval letter demonstrates to the seller that you are serious about buying an estate.

Shop Around for Lenders

Each lender is different. Although there are some general processes and guidelines, there are variations in fees, requirements, and interest rates. For example, a large national bank may require that you have been employed by the same employer for a minimum of 2 years, with no exceptions. In general, they will have stricter criteria. In contrast, a small independent lender may be more flexible. There is also a difference in processing fees and interest rates. It is highly recommended that you compare lenders. Obtain rates on the same day since mortgage rates can fluctuate from day to day. What are the fees involved? How much is it to buy down a lower interest rate? Compare an independent lender to a larger financial organization. Each will have its pros and cons.

Stay Within Budget

It can be enticing to increase the budget just a little more to get better features, one more bathroom, or more square-footage; however, it behooves you to buy less than you can afford. The economy can be unstable, and so is life. Locking yourself into a 30-year mortgage may become financially stressful at times, especially if there is a dip in the economy or if you lose your job. Therefore, instead of tying up a large portion of your daily budget in the house, aim to buy under budget. This will allow you to use your assets elsewhere and save money.