Buying a Farm Residence with an FHA Loan
December 4, 2024
Borrowers who want to buy a farm residence are in luck with the FHA loan program, which includes options to purchase farm residences.
Those purchases must be made under specific conditions when the primary focus is on the residence itself. This distinction is crucial: the FHA loan program is intended to support homeownership, not business ventures.
Getting an FHA Farm Residence Loan
A successful FHA farm loan is one in which the buyer wants a home that happens to be situated on a rural property rather than trying to pay for the purchase of a working farm. For farm residence loans, the appraisal process is crucial.
While the FHA appraiser will consider the land surrounding the home, the emphasis is on its value as a residence, as mentioned above. The appraisal amount will not include its business or agricultural potential.
Things to Know
- A reasonable amount of acreage typical for a homeowner in the area will be included in the appraisal. Don’t expect more consideration than for a typical front and back yard.
- Excess farmland, barns, silos, outbuildings used for commercial farming operations, and specialized equipment are considered commercial assets and do not contribute to the appraised value for FHA loan purposes.
- Outbuildings or land areas that are intended for personal use may require you to provide documentation to support this claim.
- Beyond the appraisal, several other FHA requirements must be met. The borrower must intend to occupy the farmhouse as their primary residence. The property must also meet FHA's minimum standards for health, safety, and structural integrity requirements.
- Finally, borrowers must meet FHA's debt-to-income ratio requirements and have a credit score that meets the lender's standards.
Despite these requirements, FHA loans often have more relaxed eligibility criteria, making them accessible to a wider range of borrowers. They typically offer competitive interest rates, which can translate to significant savings over the life of the loan.
However, potential challenges and considerations should be acknowledged. FHA loans have maximum loan limits that vary by county, and these limits may be lower in rural areas, potentially impacting purchasing power.
FHA loans also require both upfront and annual mortgage insurance premiums (MIP), which increase the overall cost of the loan. Discuss your needs with a lender before committing to a farm residence loan to better know your options and obligations.
FHA Loan Articles
July 30, 2026There is a common misconception about FHA loans that only a first-time home buyer can use the program. This is not true; repeat buyers can qualify for an FHA loan, but why does this misconception exist? Partially because state and local programs have first-time buyer requirements for down payment and/or closing cost assistance programs. So while you do not need to be a first-time buyer to get an FHA loan, you may need to meet that definition to qualify for down payment help.
July 29, 2026When you buy a home with an FHA mortgage, you have an option to apply for a cash-out refinance to take equity in your home out in cash. These loans are offered to those with 80% equity in the home or better, and you can apply for this type of cash-out refinancing once you hit that 80% mark. Many choose to wait until their equity is much higher to achieve the best results, and it pays to factor in your closing expenses and lender fees when running the numbers to assess how affordable this option is given your budget and financial goals.
July 28, 2026FHA loan rules require escrow, and the funds used to fund escrow must come from approved sources. FHA loan rules require the lender to verify funds for earnest money or closing costs and will not allow sources such as payday loans, credit card cash advances, or non-collateralized loans. If you have never opened an escrow account before, there are some important details to know before you start.
July 20, 2026Escrow accounts play a central role in managing property taxes and insurance for FHA mortgages. Understanding escrow accounts is an important part of being a new home owner, especially if you have plans to refinance the property at some point and want to know your options to get out of escrow. We examine some key points here about revising and canceling escrow on an FHA mortgage.
July 18, 2026Many home purchasers hold incorrect assumptions about FHA mortgage rules and restrictions. These loans are not limited to first-time buyers, for example, and there is no age limit for FHA loans. FHA borrowers may apply for more than one FHA mortgage, but these loans are for owner-occupied residences only. We examine some important points on these issues, including when you can and cannot have more than one FHA loan at a time.
