How Many Acres Can You Buy With a Mortgage in Montana?

How many acres can you buy with a mortgage in Montana? Fannie Mae's general property eligibility page doesn't list an acreage limit. It asks whether the property is residential in nature. Use, road access, zoning, the number of homes on the land and the appraisal can also play a part.

Some listings with a lot of land may be a better fit for a conventional loan than others, and it helps to know why before you fall for one.

What Fannie Mae's general property eligibility page asks

Fannie Mae's general property eligibility rules don't list an acreage limit. Instead, they say the property must be residential in nature, judged by the characteristics of the property and the surrounding market area.

Whether a particular parcel meets that test is something the lender and appraiser will need to determine.

One more thing: this post covers Fannie Mae's guidelines. Ask your lender how the loan you're considering treats land.

When a big parcel becomes a problem

How the land is used can matter as much as how much of it there is. Fannie Mae says it does not buy mortgages on agricultural properties, such as farms or ranches, or on vacant land.

Here's what can make a parcel harder to finance under Fannie Mae's guidelines:

• It's a farm or ranch. Fannie Mae lists agricultural properties, such as farms or ranches, as ineligible. If there's farming or ranching on the land, ask your lender early.
• There's no house on it yet. Fannie Mae does not buy mortgages on vacant land.
• You can't reach it on a proper road. Fannie Mae requires the property to be readily accessible by roads that meet local standards.
• It's several parcels with more than one home. When a purchase includes more than one parcel, Fannie Mae says the entire property may contain only one dwelling unit, and each parcel must have the same basic zoning.

If the land has barns, shops or other outbuildings, ask your lender early how they'll be reviewed.

The appraiser values the whole parcel

Under Fannie Mae's appraisal rules, the appraisal must include the actual size of the site, not a hypothetical portion of it. Its example is that an appraiser may not appraise only five acres of an unsubdivided forty acre parcel.

The appraised value must reflect the whole parcel. On an unsubdivided parcel, that value covers the land as well as the house.

Why comparable sales matter so much in rural Montana

An appraiser supports a home's value with recent sales of similar properties. Fannie Mae's comparable sales guidance recognizes that rural properties often have large lot sizes and that there may be a shortage of truly comparable sales nearby.

The guide gives appraisers some room here:

• They can use sales a considerable distance away if those are the best indicators of value and using them produces credible results. The appraisal must explain why those sales were chosen.
• In a rural area with minimal sales activity, they may use sales older than twelve months if they explain why.

There's a Montana wrinkle worth knowing. According to the state's Tax Appeal Board, sales prices are not public records under Montana law. That's worth keeping in mind as you size up a property, and it's a good question to ask your agent and lender about how comparable sales are found where you're looking.

Questions to ask before you make an offer on acreage

Before you write an offer on a Montana home with land, these questions can save you a surprise:

1. Is the main use residential? If there's active farming, ranching or a business on the land, ask your lender early how that affects the loan.
2. How is the land zoned, and is it one parcel or several? Fannie Mae's guidelines have extra rules for multiple parcels.
3. How many homes, cabins or living spaces are on it? Ask your lender how a second dwelling would be treated.
4. How do you get there? Ask about the road and who maintains it.
5. Have similar properties sold nearby? Your agent can help you get a feel for how common this kind of property is in the area.

If the home also runs on a well and septic system, this guide to well and septic homes was written for Colorado buyers, but it covers the kind of checks that can come up on rural property.

Your next step toward a Montana home on land

If you're still renting and land is part of the plan, start with what you can control. Take the homebuyer quiz to see where you stand, and read more about buying a home in Montana with Diane.

Diane also helps buyers in Arizona, Montana and Florida.

Found a property and not sure how a lender would look at it? Call Diane at 719-687-2112.

Diane Beaumont, Mortgage Loan Originator, NMLS #247026. Benchmark Mortgage, a dba of Ark-La-Tex Financial Services, LLC, NMLS #2143. Equal Housing Lender. Not a commitment to lend.