There are various theories and predictions on the future of the real estate market, but one thing is for sure: real estate continues to be a hot topic—and a hot commodity. Purchasing a house or farm may seem daunting for a first-time buyer, and even the seasoned or informed buyer may have some questions given the current environment. If you are considering pulling the trigger on buying a house or farm, we at Malvern Bank are here to equip you with answers and help make your process as smooth as possible.
I will be talking to experts from different corners of the industry to answer your questions and shed some light on relevant topics (We already consulted Malvern Bank friend and equestrian realtor David Miller for questions that arise with his clients). I recently sat down with Malvern Bank’s Senior Vice President Residential Loan Officer, John Stack, for an initial one-on-one to pick his brain on the steps to get you started with a mortgage. John has over 30 years of experience in the mortgage industry and specializes in assisting borrowers in the mortgage process, so he is the person to help you along the way.
I hope this snippet of our conversation gives some helpful tips on how to get the ball rolling with a residential mortgage. Let us know what’s on your mind, and e-mail Equestrian@MyMalvernBank.com with your questions or comments. Let’s start the conversation today and get you on your way to that dream house or farm!
HD: John, thank you so much for talking with me today. You and I have explained the residential mortgage process together to clients more than a few times now, but I think it is a timely topic for Phelps Sports readers and particularly relevant given the current market. Let’s jump right in – if I were a buyer, where would I start if I were looking into getting a mortgage?
JS: I always tell people to get prequalified Here at Malvern Bank, we pride ourselves on doing a complete application to get the borrower a prequalification that best suits their needs. ?
At Malvern Bank, there’s no cost for a prequalification. There’s no fee. Which is not the norm, by the way. A lot of lenders do charge a fee.
HD: So that’s the first important piece. What’s next? What are the next steps in the process?
JS: So, you’ve found your house/farm. Now these are the next steps:
- Complete a mortgage application
- Submit a sales contract
- Gather all of your income information (W-2’s, paystubs, tax returns).
- Gather your asset information (checking/savings accounts, where the down payment came from).
- Then it gets submitted into underwriting.
HD: What is the difference between buying a farm and a house?
JS: The major difference is that a residential house can be sold to Fannie Mae, and there are many more lending opportunities. With farm/equestrian-type properties, they’re limited to what private investors and small community banks will offer. At Malvern, we are very committed to the equestrian space, and generally offer the same rate as residential lending. There are no add-ons. Again, that is not the norm in the industry.
HD: What about a second residence vs. primary?
JS: At this point, no. Generally, second homes/vacation homes have the same criteria as owner-occupied.
HD: How has COVID specifically impacted the process from your standpoint? What, if any, changes can Borrowers expect?
JS: There are currently major process delays with appraisals and surveys. This is simply due to the backlog of volume in the current market conditions. The truth is, it’s hard to get these done right now. It’s not our responsibility – it’s the surveyors and appraisers getting out to the properties to do their due diligence for us to make a lending decision.
HD: Speaking of appraisals, what should a buyer expect with respect to an appraisal for a farm?
JS: Generally speaking, appraisals for a farm are more expensive than residential housing, depending on the property. From a cost factor, you would expect to pay more for that type of appraisal.
HD: Are farm properties more difficult to comp out?
JS: Absolutely. When they come up with a value, you are looking for a similar type property. So, if it’s 50 acres, you are looking for another 50-acre plot, and that’s hard to do. You’re looking for the same type of property in a 1-5-mile radius, and that doesn’t always happen.
HD: Some folks we have helped have seen super low rates being advertised and are then surprised when their farm’s rate is quoted a bit higher. Do you have any insight on that?
JS: Keep in mind, these are specialty properties. Generally, farms are larger lot sizes, have several structures on the properties, and in some cases, are working horse farms.
HD: It seems most lenders don’t share our appetite for equestrian property lending. Why is that?
JS: A lot lenders and major banks won’t even entertain farm properties or equestrian-type properties. Perhaps they are too complicated or complex from their perspective. But this is something in which we specialize! The CEO of Malvern Bank is passionate about these opportunities – he’s a horse guy. He created and developed the Equestrian Program specifically for this area. But you’re right. Many lenders won’t entertain these properties.
HD: That flows into one of my other questions: ‘What sets Malvern Bank or Malvern’s process apart from other lenders?’ You answered part of that by touching on the fact that we specialize in lending for equestrian properties. What else comes to mind?
JS: Malvern Bank is a smaller community bank with roughly $1.3 Billion in assets that caters to the needs of the communities it serves. We pride ourselves on helping equestrians achieve their goal of buying a farm/residence.
We’re more than just lenders though. Malvern Bank is a full-service bank, not just a mortgage company. We have deposits, good accounts, offer Private Banking, Investment Management. On the lending side, we aren’t just looking for equestrian farmland – we do residential housing, commercial lending.
HD: That’s right. As I like to say, “a one-stop-shop” for your banking needs. Now, to wrap it up, do you have any parting words or insider tips to make the mortgage process go more smoothly?
JS: Yes, to fall back to the first question – you have a phone conversation with a lender to go through all the documents, to have the expectations set up front, to know what is needed and what can be gathered as you’re looking at properties. That’s the biggest thing. The biggest thing is making sure you have everyone on the same page before you begin looking at properties.