Rural Real Estate Lending

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Banking on Rural Real Estate
by Katie Dickie Stavinoha

Lenders from four local banks, all with a strong farm and ranch loan portfolio, agree having a lender local to the area in which you are buying is the way to go.

Dave Weishuhn, president and chief financial officer for Round Top State Bank; Timothy Knesek, senior vice president of Capital Farm Credit; Bill Landiss, president of First National Bank of Giddings; and Tracy Harris, vice president of National Bank & Trust in La Grange, all offered their perspective on the current real estate lending climate.

All emphasized the value local lenders, who understand real estate and the local communities, have an advantage over mortgage companies or other institutions more familiar with traditional mortgages in urban or largely residential areas.

Rural Real Estate Lending
Round Top-area bankers share information on rural real estate lending.

Likewise, they agree loan demand has been strong and looks to remain strong barring some significant economic tragedy. There is attention to the oil and gas market, but as one lender said, people seem to continue to believe investing in land is safe.

Weishuhn, who has been with the Round Top bank (founded 1912) for 25 years said, “Texas has a more diversified economy than during the last oil downturn in the 1980s. We are seeing people continue to want a second home, or recreational property or preparing to retire in this area. We have not seen any great impact from lower crude prices.”

Landiss echoed those sentiments saying loans for rural and/or recreational properties in the Giddings bank’s service areas has grown by 50 percent over the past five years.

Nick Hinze, First National’s loan officer serving the Round Top area said, “Some buyers may be taking more time right now, but 10 to 20-acre tracts, especially if they have water, a view and oaks, don’t last very long.” First National Bank in Giddings just celebrated its 125th anniversary.

Weishuhn agreed that Round Top State Bank’s rural loans are largely for people who want small acreage with an older home or who have plans to build a second home.

What’s bringing people to the Roundtopolis?

Knesek, who says that statewide a significant part of the Farm Credit System’s borrowers have addresses in the Houston area, pointed to the antiques shows and the BP MS 150 bike race as key referrers.

“We have customers who search the antiques fields and bike the hills of Fayette County—and then come back a few months later ready to buy,” Knesek said. “They enjoy the countryside during these events and return ready to invest in the area.”

“As they say, they’re not making any more land,” said Harris, who has been with Fayette County’s oldest bank for the last year. “We’ve seen steady increases in land prices in this area.”

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What to expect when seeking a loan for land and/or homes with land:

  • A slightly larger down payment—up to 40 percent —will likely be required than with a traditional home mortgage.
    Loan products differ from traditional home mortgages. Some lenders may offer adjustable rate mortgages because they fund their loans in-house.
  • Faster close—unless there are delays with surveys or title searches—loans for land can sometimes be done much more quickly than a traditional home mortgage.
  • Area banks keep loans “in house” so you always know with whom you are dealing.

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