If you are anticipating a farm land loan and anxious to know what happens next after you have been approved for a loan, you have come to the right place. Farm land loans, especially during the closing process, can get complicated and overwhelming. So today, we will talk about the various scenarios farmers can expect during this time.
Knowing what to expect can ease your mind when anticipating a loan, so make sure you read and understand the following information.
What Happens During Farm Land Loans Closing Stage?
During a loan closing, you have already provided all the necessary information and worked with your lender to agree on the loan terms. The closing stage is the transition into the last stage, which is closing and securing the loan—which can be stressful until you get your hands on the loan that could get you the farm land you always wanted. Here are some scenarios that may happen during this transition period:
You Might Be Asked for Additional Information
Most of the closing process is facilitated by third parties. Although you may have already submitted all the requirements for the loan to get approved in the first stage, there are some instances when these parties will ask for additional information. Some of the information they might need is:
- Information about your current lender
- A loan note or documentation about your existing loans, if you have any
- Information about your business structure, including bylaws, trust agreement, and preferred title company
- Information about your current insurance agent
- The responsible parties for signing documents or representative
During the closing stage, make sure you have these documents on hand and ready in case you might need them. If you want to expedite the process, having all these documents ready when they ask for them is the best way to do so. Another tip would be to communicate with each of them (insurance agent, current lender, business partners, if any) to ensure you can access every document you need.
Lenders Will Do Their Due Diligence
During the closing stage, the lender will do their due diligence to ensure they grant the loan to the right person. The process will take some time, so if you are anxious because the lender or third party that is facilitating the closing stage is taking some time—don’t worry because it is completely normal. Closing farm land loans is an involved process between third parties and the lender, so it is best to manage your expectations when it comes to the duration and consider factors like communication between parties, the climate in the area, missing documents, and other factors that may affect the time of approval.
Why Do Some Farm Land Loans Take Too Long to Close?
During closing time, many things are happening behind the scenes, which typically makes this stage a lengthy process. Aside from those things, there are a few factors that affect closing times, such as:
- Size of the land—It will take more time to appraise land with larger acreage
- The location and accessibility of the property
- Cooperation between the local clerk’s office, especially in remote rural areas
- The climate in the area, especially during the rainy or flood season
- New purchases take longer than refinancing
- Lacking the needed documents during the closing period
- Your availability to communicate can also affect the closing stage duration, and the process can cause unnecessary delays
- Changes in the business structure and adding a new entity to take property can also cause delays
- Being underinsured or filing a loan without acquiring the necessary insurance needs
What Happens During Farm Land Loans Closing Stage?
Once you get approved for the loan, the lender will communicate with third-party firms to take action and close the loan. Here are some of the steps the lender will take during the closing period:
To get the most up-to-date information and value of the land you are about to purchase with the loan, the lender or a third-party firm will appraise the land to know the exact loan amount they will lend to you. A larger land with minimum access will take longer to appraise and could last up to 2 months.
The lenders will take a closer look at the property you want to purchase, as well as the documents provided—such as liens or judgments, mortgage notes, and restrictions on the property.
Verification of Insurance
Lenders will also want to ensure that the property is insured and protected, which is why they will verify the property’s liability, flood, and hazard insurance.
The closing stage is when the official loan papers are created to match the appraisal and other changes to the already approved loan.
Calculation of Fees and Mortgage
The calculation of fees usually starts as soon as your loan is approved. However, the lender will finalize this step only when the other processes are complete. They will need to calculate the property taxes, real estate commissions, monthly amortization, and more before closing the deal—which gets you on your way to getting the farm you wanted.
How can Borrowers Prepare for Loan Closing?
Now that you know what happens during the closing process, as well as the different scenarios that might happen during this time, here are some tips to help you prepare for closing the loan:
Organize Your Documents
Always keep your documents organized and accessible for use. Some of the most important documents you want to consolidate in one place are your organization or incorporation articles, company bylaws, insurance, private land, tax ID number, and purchase contract. However, aside from the documents we stated, you might need additional documents depending on your case.
Keep Your Documents Updated
Whenever there is new information and changes to your operation, you must be forthcoming with your loaning officer to avoid unnecessary delays down the road.
Consult With Your Lawyer
Although some people deem it unnecessary, it is still best to consult with your attorney and have them review the paperwork to ensure they are correct.