3 Tips for Purchasing Rural Property

Tip#1 – What value will the lender consider?

One thing that is often overlooked when people are buying rural property is that most lenders will only consider the value of the house plus the first 5-10 acres when financing a property. That excludes outbuildings, however a garage is allowed and can be attached or detached. Most major banks will only consider the first 5 acres, however CMHC will consider up to 10 and we have numerous lenders who will as well. If the lender or the insurer questions the value, then they will generally order an appraisal.

 

With the recent changes that took effect for most banks on November 1st, 2012, we have seen a drastic increase in the amount of appraisals being ordered. If the appraisal comes in lower than the purchase price, there are several options:

·         consider putting more than 20% down to avoid the insurers (CMHC, Genworth, CG)

·         You may still have to go through a credit union as they are generally more flexible with their property types

·         Pay for the difference in value if possible. For example, if the purchase price is $300,000 and the appraisal comes in at $290,000 for the house and first 10 acres then you can generally pay the additional $10,000 outside of your down payment to compensate for the shortfall in value

Tip #2- How is the property zoned?
If the property is not zoned for the purpose that you are purchasing it for, you could run into trouble in the financing process. is a link to the City of Prince George zoning Bylaw’s

Tip #3 – Water potability and septic certificates

Your lender may require a water potability test and/or a septic certificate. Some lenders will accept title insurance in lieu of this however, be aware that it could be requested from you

Remember that even if you are pre-approved, the lender and insurer still have to approve the property. Please contact me with any questions.

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