RURAL HOME MORTGAGE Q&A


Too many rural home buyers pay higher interest rates, settle for adjustable rate mortgages, balloon mortgages or even lose their dream home in the country because they realized too late that their lender was unable to loan them the money for their rural property.


  What is a Purchase Agreement?
What is a Counteroffer?
What is Earnest Money?
Why are my closing costs more than I was expecting?
What items and documents do I need to bring with me at closing?
Are there any tax breaks associated with buying a home?
Will I need my closing documents in the future?
Why work with Compeer?


    Is my dream property "un-mortgageable?"

    Rural properties often possess unique characteristics that make them “un-mortgageable” with many lenders. If your country home has any of the following attributes, it’s better to start from the beginning with a lender who specializes in financing rural properties.

    • Income producing land such as tillable acres that can be farmed
    • Real estate with timber harvest and income capabilities
    • Outbuildings that are capable of producing income and/or housing livestock
    • Zoning restrictions at the county or local government level
    • Livestock on the property now or in the future
    • Equine properties
    • Real estate classification on county property taxes
    • Properties with two habitable residences
    • Unique properties such as, shed-homes, berm homes, earth homes, barn-homes
    • Seasonal properties without year-round use
    • Double wide and single wide manufactured homes on your property
    • Unlivable homes with value in the site alone
    Compeer Financial can provide mortgages for the types of homes listed above that many traditional lenders are unable to handle!



    Where do I start my home buying journey?

    With your budget. Knowing and understanding key numbers and how they impact your buying power helps eliminate hassles, delays and barriers when the time is right to find your new home.


      How much do I need for my down payment?

      Most mortgages require a down payment that is at least five percent of the purchase price. As your down payment increases, your private mortgage insurance (PMI) costs decrease. And, if your down payment is 20% or more, you won’t have to pay PMI at all.


        How do other buyers put away enough for their down payment?

        Most people begin by saving as much of their paycheck as possible. Some augment their savings by liquidating assets or selling items they no longer need or use. Using gift money may be an option. Sometimes a loved one will help prospective home buyers achieve their goals by contributing to a down payment. If this is the case for you, make sure you understand any parameters that may be tied to your situation so you don’t get caught by surprise.


          What is a credit score and why is it important?

          A credit score is a rating individual consumers are assigned that relates to their buying and spending habits. Your credit score is an important part of the financial review process when applying for a mortgage. Without a credit score greater than or equal to 660, it will be challenging to find a mortgage for your home.


            How can I maximize my credit score?

            • Obtain a copy of your credit report. Federal law allows you to get three free copies of your credit report a year at annualcreditreport.com.
            • Correct your report. Review your report and if you notice a mistake, contact the financial institution or the credit reporting company that issued the report and ask that it be corrected.
            • Pay down credit cards. As a guideline, your credit card balances should be less than 30 percent of the available credit amount in order to maximize your credit score. For example, a credit card with a $10,000 limit should have a balance less than $3,000.
            • Minimize credit inquiries. When you apply for a credit card or loan, lenders pull your credit report. These inquiries may affect your score and typically stay on your credit report for 24 months. It’s usually a good idea to take this into consideration before you apply for new loans or credit cards.
            • Livestock on the property now or in the future

            Should I get preapproved when looking for a home in the country?

            “You’re preapproved” are three words every home buyer should want to hear. Getting preapproved for a mortgage before you start looking for houses is a smart move financially and emotionally. Preapproval provides clarity and peace of mind so you can focus on finding your perfect home in the country without any anxiety or hassles while waiting to hear back on whether or not you qualify for the mortgage. Check out the following section to learn more about preapproval, the process and how to best position yourself for the answer you hope to receive.


              How does preapproval work?

              A preapproval provides you with the dollar amount you can spend before putting an offer on a property. You’ll also avoid falling in love with a property that you can’t afford. The preapproval process is quite simple:

              1. Contact one of Compeer Financial’s Loan Officers

              2. Submit your personal information

              1. Applicant name(s)
              2. Social security number(s)
              3. Mortgage amount sought
              4. Monthly income
              5. Estimated value of the property

              3. Submit your financial information

              1. 30 days’ worth of paystubs
              2. Last two years of W-2’s
              3. Last two years of federal tax returns, all pages
              4. Bank statement from bank, all pages
              The preapproval letter will include everything from how much you can afford. By getting preapproved, you’ll know your buying power, credit score, down payment options, and what payment amount your unique financial situation indicates you can afford. Having preapproved status can help make the process go more smoothly and rapidly. Some sellers even require their buyers to have a preapproval letter before they review the offer.

              What is a Purchase Agreement?

              The purchase agreement is an agreement between a buyer and seller providing the terms for the sale of the property. It also may include details such as which appliances come with the house and when you’d like to take possession.


              What is a Counteroffer?

              The counteroffer is the seller’s response to your offer, made in part to continue negotiations toward a purchase agreement.


              What is Earnest Money?

              Earnest money is a small deposit that demonstrates your commitment to buying the home. It helps sellers understand you are serious about purchasing the property, as they get to keep it if you should choose to walk away. Usually, the deposit is a small percentage of the asking price that will later be applied to your down payment.


                Why are my closing costs more than I was expecting?

                Finalizing the purchase of your country home comes with additional costs you may not have anticipated. There are fees charged by lenders and third parties, as well as other pre-paid expenses such as, homeowners insurance and interest. These costs are in addition to the down payment, and must be paid at closing, so it pays to be educated and prepared. Your lender is required to provide you with a Loan Estimate so you understand what closing costs will be.




                  What items and documents do I need to bring with me at closing?

                  • Driver's license
                  • Check/Payments – Make sure you have certified funds. Personal checks will not be accepted at most closings!
                  • Any additional documents required by your lender or the closing agent.
                  You’ll also receive a Closing Disclosure prior to your closing date. The Closing Disclosure will provide a reconciliation of all the costs involved in your mortgage. These will include your Lender’s closing costs, your down payment and various other expenses or pre-paid items associated with closing your transaction. These might include:
                  • Property taxes — the cost of pre-paid real estate taxes may vary based on when the closing takes place. Lenders who collect this money at closing pay property taxes when they come due.
                  • Homeowner’s insurance premium — the entire homeowner’s insurance premium for one year must be paid at closing. Some buyers pay their insurance company directly, while others do so at closing.
                  • Interest —typically at closing, the buyer is required to pay the interest amount not included in the first monthly mortgage payment. For example, if you close on your home June 15, your first mortgage payment (due on Aug. 1) covers the interest for the month of July. The interest collected at closing is from June 15 thru July 1. Closing close to the end of a month will minimize the amount of pre-paid interest required.
                  • Escrow Account — if required by law or your lender, the escrow account is set up with reserves at closing. When property taxes or homeowner’s insurance come due, the lender pays them with the funds in the escrow account.

                  Are there any tax breaks associated with buying a home?

                  Tax breaks are among some of the most touted benefits of homeownership. If you buy, build or improve your home, you stand to benefit. However, the rules are changing in 2018. Below are areas you should explore with your tax professional to determine deductibility and maximize your tax benefits of homeownership.
                    • Settlement costs on purchase of home — take your Closing Disclosure and any settlement statement you receive to your tax preparer, along with the Form 1098 your mortgage company will send at the end of the year. Some of the costs associated with a home purchase may be deductible.
                    • Home mortgage interest deduction — points paid to obtain a loan or reduce your interest rate, as well as interest paid on a home mortgage, may be deductible on Schedule A.
                    • Real estate tax deduction — real estate tax paid on your home may also be deductible on Schedule A.
                    • Personal residence sale exemption — after living in your home for two or more years, you can sell it and generally exempt up to $250,000 ($500,000 per couple) of gain from income tax on its sale. This allows you to shelter the appreciation on your home, build equity and move it into another home or investment without paying income tax on the gain.

                  Will I need my closing documents in the future?

                  It’s likely you will need some of your paperwork for tax purposes. Keep them in a safe spot, but easily accessible if needed.
                    • Keep your Closing Disclosure and any settlement statement you receive with your tax records.
                    • Make sure to “homestead” your property if applicable to you. This election is generally made at the local county level and can reduce your property taxes.

                  Why work with Compeer Financial?

                  Compeer Financial's focus on financing properties in rural Illinois, Minnesota, and Wisconsin means we can provide services and benefits for buying, building and refinancing that many traditional lenders cannot. Mortgage lending in rural areas and towns of 2,500 people or less is our specialty. Nobody understands the nuances, exceptions and intricacies better than our team. Here are five unique reasons to consider Compeer Financial for your next home mortgage:

                  1. Loans available for “as is” purchases — Compeer Financial may be able to provide financing for homes that don’t qualify for other lenders’ programs. This includes properties that are sold “as is,” making financing possible for the ultimate fixer-upper challenge.

                  2. We come to you — we know you’re busy, and we want to make working with Compeer Financial as convenient as possible. That’s why we offer many options for meeting to discuss your mortgage options or application. We’ll even come to you!

                  3. Be your own contractor — we have unique construction loans that allow clients to serve as their own general contractor when building a new home. This is a great option for clients who want to use their knowledge to reduce costs by doing some of the work themselves.

                  4. Appraisals based on comparable properties — since we specialize in rural home mortgages, we have a broader comp base from which to conduct appraisals on properties with unique features, giving our clients accurate and well-researched valuations.

                  5. We share our success with you — as a cooperative, Compeer Financial returns profits to clients through our patronage program. Clients with an in-house, portfolio loan are eligible for patronage. You can learn more about the program on Compeer.com.


                    RURAL HOME MORTGAGE Q&A


                    Too many rural home buyers pay higher interest rates, settle for adjustable rate mortgages, balloon mortgages or even lose their dream home in the country because they realized too late that their lender was unable to loan them the money for their rural property.


                    Is my dream property "un-mortgageable?"
                    Where do I start my home buying journey?
                    How much do I need for my down payment?
                    How do other buyers put away enough for their down payment?
                    What is a credit score and why is it important?
                    How can I maximize my credit score?
                    Should I get preapproved when looking for a home in the country?
                    How does preapproval work?
                    What is a Purchase Agreement?
                    What is a Counteroffer?
                    What is Earnest Money?
                    Why are my closing costs more than I was expecting?
                    What items and documents do I need to bring with me at closing?
                    Are there any tax breaks associated with buying a home?
                    Will I need my closing documents in the future?
                    Why work with Compeer?


                      Is my dream property "un-mortgageable?"

                      Rural properties often possess unique characteristics that make them “un-mortgageable” with many lenders. If your country home has any of the following attributes, it’s better to start from the beginning with a lender who specializes in financing rural properties.

                      • Income producing land such as tillable acres that can be farmed
                      • Real estate with timber harvest and income capabilities
                      • Outbuildings that are capable of producing income and/or housing livestock
                      • Zoning restrictions at the county or local government level
                      • Livestock on the property now or in the future
                      • Equine properties
                      • Real estate classification on county property taxes
                      • Properties with two habitable residences
                      • Unique properties such as, shed-homes, berm homes, earth homes, barn-homes
                      • Seasonal properties without year-round use
                      • Double wide and single wide manufactured homes on your property
                      • Unlivable homes with value in the site alone
                      Compeer Financial can provide mortgages for the types of homes listed above that many traditional lenders are unable to handle!



                      Where do I start my home buying journey?

                      With your budget. Knowing and understanding key numbers and how they impact your buying power helps eliminate hassles, delays and barriers when the time is right to find your new home.


                        How much do I need for my down payment?

                        Most mortgages require a down payment that is at least five percent of the purchase price. As your down payment increases, your private mortgage insurance (PMI) costs decrease. And, if your down payment is 20% or more, you won’t have to pay PMI at all.


                          How do other buyers put away enough for their down payment?

                          Most people begin by saving as much of their paycheck as possible. Some augment their savings by liquidating assets or selling items they no longer need or use. Using gift money may be an option. Sometimes a loved one will help prospective home buyers achieve their goals by contributing to a down payment. If this is the case for you, make sure you understand any parameters that may be tied to your situation so you don’t get caught by surprise.


                            What is a credit score and why is it important?

                            A credit score is a rating individual consumers are assigned that relates to their buying and spending habits. Your credit score is an important part of the financial review process when applying for a mortgage. Without a credit score greater than or equal to 660, it will be challenging to find a mortgage for your home.


                              How can I maximize my credit score?

                              • Obtain a copy of your credit report. Federal law allows you to get three free copies of your credit report a year at annualcreditreport.com.
                              • Correct your report. Review your report and if you notice a mistake, contact the financial institution or the credit reporting company that issued the report and ask that it be corrected.
                              • Pay down credit cards. As a guideline, your credit card balances should be less than 30 percent of the available credit amount in order to maximize your credit score. For example, a credit card with a $10,000 limit should have a balance less than $3,000.
                              • Minimize credit inquiries. When you apply for a credit card or loan, lenders pull your credit report. These inquiries may affect your score and typically stay on your credit report for 24 months. It’s usually a good idea to take this into consideration before you apply for new loans or credit cards.
                              • Livestock on the property now or in the future

                              Should I get preapproved when looking for a home in the country?

                              “You’re preapproved” are three words every home buyer should want to hear. Getting preapproved for a mortgage before you start looking for houses is a smart move financially and emotionally. Preapproval provides clarity and peace of mind so you can focus on finding your perfect home in the country without any anxiety or hassles while waiting to hear back on whether or not you qualify for the mortgage. Check out the following section to learn more about preapproval, the process and how to best position yourself for the answer you hope to receive.


                                How does preapproval work?

                                A preapproval provides you with the dollar amount you can spend before putting an offer on a property. You’ll also avoid falling in love with a property that you can’t afford. The preapproval process is quite simple:

                                1. Contact one of Compeer Financial’s Loan Officers

                                2. Submit your personal information

                                1. Applicant name(s)
                                2. Social security number(s)
                                3. Mortgage amount sought
                                4. Monthly income
                                5. Estimated value of the property

                                3. Submit your financial information

                                1. 30 days’ worth of paystubs
                                2. Last two years of W-2’s
                                3. Last two years of federal tax returns, all pages
                                4. Bank statement from bank, all pages
                                The preapproval letter will include everything from how much you can afford. By getting preapproved, you’ll know your buying power, credit score, down payment options, and what payment amount your unique financial situation indicates you can afford. Having preapproved status can help make the process go more smoothly and rapidly. Some sellers even require their buyers to have a preapproval letter before they review the offer.

                                What is a Purchase Agreement?

                                The purchase agreement is an agreement between a buyer and seller providing the terms for the sale of the property. It also may include details such as which appliances come with the house and when you’d like to take possession.


                                What is a Counteroffer?

                                The counteroffer is the seller’s response to your offer, made in part to continue negotiations toward a purchase agreement.


                                What is Earnest Money?

                                Earnest money is a small deposit that demonstrates your commitment to buying the home. It helps sellers understand you are serious about purchasing the property, as they get to keep it if you should choose to walk away. Usually, the deposit is a small percentage of the asking price that will later be applied to your down payment.


                                  Why are my closing costs more than I was expecting?

                                  Finalizing the purchase of your country home comes with additional costs you may not have anticipated. There are fees charged by lenders and third parties, as well as other pre-paid expenses such as, homeowners insurance and interest. These costs are in addition to the down payment, and must be paid at closing, so it pays to be educated and prepared. Your lender is required to provide you with a Loan Estimate so you understand what closing costs will be.




                                    What items and documents do I need to bring with me at closing?

                                    • Driver's license
                                    • Check/Payments – Make sure you have certified funds. Personal checks will not be accepted at most closings!
                                    • Any additional documents required by your lender or the closing agent.
                                    You’ll also receive a Closing Disclosure prior to your closing date. The Closing Disclosure will provide a reconciliation of all the costs involved in your mortgage. These will include your Lender’s closing costs, your down payment and various other expenses or pre-paid items associated with closing your transaction. These might include:
                                    • Property taxes — the cost of pre-paid real estate taxes may vary based on when the closing takes place. Lenders who collect this money at closing pay property taxes when they come due.
                                    • Homeowner’s insurance premium — the entire homeowner’s insurance premium for one year must be paid at closing. Some buyers pay their insurance company directly, while others do so at closing.
                                    • Interest —typically at closing, the buyer is required to pay the interest amount not included in the first monthly mortgage payment. For example, if you close on your home June 15, your first mortgage payment (due on Aug. 1) covers the interest for the month of July. The interest collected at closing is from June 15 thru July 1. Closing close to the end of a month will minimize the amount of pre-paid interest required.
                                    • Escrow Account — if required by law or your lender, the escrow account is set up with reserves at closing. When property taxes or homeowner’s insurance come due, the lender pays them with the funds in the escrow account.

                                    Are there any tax breaks associated with buying a home?

                                    Tax breaks are among some of the most touted benefits of homeownership. If you buy, build or improve your home, you stand to benefit. However, the rules are changing in 2018. Below are areas you should explore with your tax professional to determine deductibility and maximize your tax benefits of homeownership.
                                      • Settlement costs on purchase of home — take your Closing Disclosure and any settlement statement you receive to your tax preparer, along with the Form 1098 your mortgage company will send at the end of the year. Some of the costs associated with a home purchase may be deductible.
                                      • Home mortgage interest deduction — points paid to obtain a loan or reduce your interest rate, as well as interest paid on a home mortgage, may be deductible on Schedule A.
                                      • Real estate tax deduction — real estate tax paid on your home may also be deductible on Schedule A.
                                      • Personal residence sale exemption — after living in your home for two or more years, you can sell it and generally exempt up to $250,000 ($500,000 per couple) of gain from income tax on its sale. This allows you to shelter the appreciation on your home, build equity and move it into another home or investment without paying income tax on the gain.

                                    Will I need my closing documents in the future?

                                    It’s likely you will need some of your paperwork for tax purposes. Keep them in a safe spot, but easily accessible if needed.
                                      • Keep your Closing Disclosure and any settlement statement you receive with your tax records.
                                      • Make sure to “homestead” your property if applicable to you. This election is generally made at the local county level and can reduce your property taxes.

                                    Why work with Compeer Financial?

                                    Compeer Financial's focus on financing properties in rural Illinois, Minnesota, and Wisconsin means we can provide services and benefits for buying, building and refinancing that many traditional lenders cannot. Mortgage lending in rural areas and towns of 2,500 people or less is our specialty. Nobody understands the nuances, exceptions and intricacies better than our team. Here are five unique reasons to consider Compeer Financial for your next home mortgage:

                                    1. Loans available for “as is” purchases — Compeer Financial may be able to provide financing for homes that don’t qualify for other lenders’ programs. This includes properties that are sold “as is,” making financing possible for the ultimate fixer-upper challenge.

                                    2. We come to you — we know you’re busy, and we want to make working with Compeer Financial as convenient as possible. That’s why we offer many options for meeting to discuss your mortgage options or application. We’ll even come to you!

                                    3. Be your own contractor — we have unique construction loans that allow clients to serve as their own general contractor when building a new home. This is a great option for clients who want to use their knowledge to reduce costs by doing some of the work themselves.

                                    4. Appraisals based on comparable properties — since we specialize in rural home mortgages, we have a broader comp base from which to conduct appraisals on properties with unique features, giving our clients accurate and well-researched valuations.

                                    5. We share our success with you — as a cooperative, Compeer Financial returns profits to clients through our patronage program. Clients with an in-house, portfolio loan are eligible for patronage. You can learn more about the program on Compeer.com.



                                        
                                        

                                      HOW MUCH CAN YOU AFFORD?

                                      PROPERTY CONSIDERATIONS

                                      TRANSITIONING TO PERMANENT FINANCING

                                      How does preapproval work?

                                      A preapproval provides you with the dollar amount you can spend before putting an offer on a property. You’ll also avoid falling in love with a property that you can’t afford. The preapproval process is quite simple:

                                      1. Contact one of Compeer Financial’s Loan Officers

                                      2. Submit your personal information

                                      1. Applicant name(s)
                                      2. Social security number(s)
                                      3. Mortgage amount sought
                                      4. Monthly income
                                      5. Estimated value of the property

                                      3. Submit your financial information

                                      1. 30 days’ worth of paystubs
                                      2. Last two years of W-2’s
                                      3. Last two years of federal tax returns, all pages
                                      4. Bank statement from bank, all pages
                                      The preapproval letter will include everything from how much you can afford. By getting preapproved, you’ll know your buying power, credit score, down payment options, and what payment amount your unique financial situation indicates you can afford. Having preapproved status can help make the process go more smoothly and rapidly. Some sellers even require their buyers to have a preapproval letter before they review the offer.

                                      All loans subject to credit, underwriting and property approval guidelines. Offered loan products may vary by state. There is no guarantee that all borrowers will qualify. Restrictions may apply. This is not a commitment to lend or extend credit. Terms, conditions and programs are subject to change without notice. Equal Housing Lender.Equal-Housing

                                      © 2018  Compeer Financial, ACA. All Rights Reserved.
                                      Compeer Financial is an equal opportunity employer and provider, and an equal credit opportunity lender.