When getting a traditional mortgage, is it bad to have income producing land?

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When getting a traditional mortgage, is it bad to have income producing land?

When going to the bank to get a refinance loan, they told us that since we had land that was being farmed and producing income, that they couldn’t give us a traditional mortgage and that no bank would either. Something having to do with Fannie and Freddie, although they said they could do it “in house”. We don’t understand why. We have great credit (above 800), no loans (other than our mortgage), and almost no credit on our credit cards.

Asked on January 18, 2012 under Real Estate Law, Illinois

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

What they probably meant is that you could not get a residential loan, because the fact that the land is income-producing most likely means that you need a commercial loan. A residential mortgage is restricted only to residences, not income-producing, investment, or commercial properties. You should still be able to get a loan, but it will be a different one, under different terms. Note that banks are *never* obligated to lend to anyone--banks are free to decide to whom to lend, under what terms, based on their underwriting criteria and risk assessments, as well as the availability of government support (e.g. Fannie and Freddie).


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