Neither Lonnie nor Kay wanted to sell the farm, it had been in the family for decades. However, the maintenance burden was becoming difficult to manage with social security income alone and a small IRA. And then there was the big question no one seemed to be able to answer with certainty yet – was 45 acres zoned “farmland” eligible for a Reverse Mortgage?
Financially, Social Security income was sufficient for monthly cash-flow and they were comfortable. The worry was they had no fund set aside for long term maintenance on the property, life having to resurface the long driveway every five years and eventually, the barn would need a new roof. Lonnie and Kay were concerned that tapping their IRA for these items would lower the chance that these funds would last their lifetime.
All these decisions were daunting and they didn’t want to rush into them without taking time to thoroughly consider all their options. However, time was not going to hold back the rain that was eroding away part of that long driveway.
Kay jumped on the internet searching for a LOCAL reverse mortgage SPECIALIST. She came up with a few and reached out. The first loan officer she talked to was from a company that advertised everywhere; she thought certainly they would be able to answer her questions. The person she was connected to told her that FHA doesn’t loan on farms. And that was basically the end of that conversation.
Kay found Kim Dodge through Google Reviews and decided Lonnie needed to make the next call. She was discouraged and afraid she would not ask the right questions.
Lonnie and Kim connected via phone and the ‘approach was quite different’ from the other loan officer. Kim asked detailed questions about the property beyond the zoning. Kim and her team went off to do the research and came back to Lonnie and Kay with knowledge.
The Solution and Acreage Property Eligibility:
Kim and her teammate Cheryl did extensive look ups on the property. It was over 40 acres, zoned farmland and the parcels also had easements recorded on them. They called upon their title and escrow and lender partners for help, so they could give Lonnie and Kay solid information.
Yes, their acreage property was eligible for an FHA Reverse Mortgage under certain conditions.
- FHA will loan on homes that are not zoned residential if the appraiser determines that the property’s “highest and best use” is residential; even if the property is zoned farmland. The key point is the property is not income producing or being used as a ‘farm’. The term ‘best’ here is related to an appraiser’s evaluation of the property under FHA regulations.
- The property cannot have commercial income producing activities on it. Examples include a tree farm, or food production for commercial purposes.
- The appraiser determines the proportion of land to ‘improvements’ ratio.
- The improvements are the structures, including the home and outbuildings. WHY is this important?
- FHA makes loans on homes; they do not make land loans nor commercial loans, so the appraised value has to be in the structures/improvements.
- Should the borrower on a property default and FHA has to foreclose, they do not want to foreclose on a borrower’s source of income if that income is derived from the land.
- This list is not all encompassing. Call us with your questions, every property is different.
Kim and Cheryl did the research and provided a Reverse Mortgage solution to meet Lonnie and Kay’s desires. Good thing they got a second opinion from a team that digs in for the answers.
The Reverse Mortgage loan was closed and the long driveway into the home on the 40 acres was repaired and ready in time for winter.
And a side note, from the first conversation with Kim to the closing of the loan, it was 5 months. WHY? Lonnie appreciated that Kim wasn’t a high-pressure loan officer. He said clearly in the initial call that he didn’t like to feel rushed and Kim respected that. After the research, and options were presented, Kay and Lonnie take their time with their decision. He did call back to make sure Kim knew he was interested though. Once they decided to proceed, the loan was processed and closed within 51 days.
Kay and Lonnie took a draw at closing to fix the road immediately. Now they have reverse mortgage credit line funds for upgrades and to take care of the deferred maintenance on the family farm (plus a financial fund if emergencies come up.) They can stay where they love to live as long as they like with all their furry friends!
What to Do Next:
Call Kim and Cheryl today to find out if a reverse mortgage can let you stay in the home you love! 503-595-1600 Be Retirement Ready!