Land Loans For First Time Land Buyers

Find Your Favorite Place Podcast Cover Art

Podcast Transcription: Land Loans For First Time Land Buyers

Billy McOwen
Neil Songer

Hey everybody, welcome. This is episode number five of "find your favorite place." My name is Billy McOwen and I'm your host, I am joined today by my good friend Mr. Neal Songer. Neil's Vice President over at southern bank here in our hometown of Manteo, North Carolina. I have known Neil a long time. He was my original banker when we moved here back in 2004. It's great to have him on the podcast today. How you doing, Neil?

I'm doing great. Thank you for having me.

It's good to see you, brother. So we've been threatening to do this one for a while. In the last couple of podcasts, we've been talking a lot about working with buyers and all about land loans and that kind of stuff. So today's episode is going to be about just that. We are going to talk about land loans, what you got to do to get them all the bells and whistles and everything that goes along with that. But first, let's get to know Neil a little bit. Neil wants you to tell us a little bit about your background little story and about you and let's let's let everybody know who you are what you what you're doing with southern bank,

Billy, I don't think you know this about me, but I was born and raised in Los Angeles, California. I moved back to North Carolina when my father retired and lived in Winston Salem a couple years.

Was your mom a movie star? I mean, what?

No, my dad just retired and moved us back to where my mother was originally from, Winston Salem. I was blessed to go to East Carolina University go pirates. I got to see eastern North Carolina loved eastern North Carolina and married a a wonderful woman who was from eastern North Carolina.

There you go! So you when we first moved back to Manteo here with my family, we were with another bank. You were the branch manager there. And we got to know each other right away. I think we we started doing some service and the local Rotary Club here together, did we? So that was that was pretty good. Then you made the move over to southern bank. So talk about that a little bit.

Well, I'll start off by saying it was the best move I ever made in my career. Southern Bank is a wonderful bank. Their core values are much like yours and mine. It's integrity. It's trust. Having respect for our clients, being simplict, and just having the passion to go above and beyond for each and every one of our clients. I can't say enough about southern bank, great company.

Let me tell you a cool story. I'll never forget, this is really a main driver for me with the relationship that we have with southern bank. It was one of our very, very first deals and at the time he Haywood Quinn was in Jason's role over at the bank, and Jason was in your role over at the bank. And these guys together, came all the way out to Tyrrell county to walk a 37 acre timber track with me and a buyer client to see if they could do the loan. So I'm talking about I got a VP and a branch manager out getting Mud on their wingtips walking around in a track a Woods out in Tyrrell county to work with me and a buyer to see if they could do a loan. I thought my goodness, man, these guys are taking time out of their day to go out and walk around in the woods with me and that was the start really of what we started doing with you guys. I gotta tell you, man, after that, I never looked back. If asked "who do we go to if we want to get a land loan", I say you go to southern bank. I mean, there's other options out there. The truth of the matter is when the rubber meets the road with customer service, I got two guys that are going to leave the office, drive an hour west of here to walk a tract land with me and my buyer and that's customer service. I gotta tell you, I've been a fan ever since. 

You're speaking of two great guys, Jason Wahtail and Haywood Quinn. Ive worked with them for over 10 years. However, besides that, they're great people, great families, and just hard workers. They're great friends as well.

We're gonna dive right into it. We have got listeners that have questions about all this stuff. As I said earlier, we've talked a lot on the last several podcasts about working with buyers, landloans, all these things. There's a lot that people want to know about this. So, I'm going to jump right into it. What can first time land buyers expect when coming to southern bank for our land loan?

southern bank is just a small community bank, we take care of our clients, we're gonna treat you like family. We want to make sure that you feel comfortable, and experienced the same thing that where we love, where we raise our children, where we hunt, where we fish, we want you to love it as much as us.

That's everything, man. You're in a relationship, I'm in a relationship too. These things are really, really important. I don't want to hand off a buyer client, to a lending institution that doesn't share the same core values, as we do as a company. You think about that, when I hand somebody off, I'm handing off somebody who's making a decision about an absolute dream that they've had for a long time. We have a stream of landownership, and about moving to the Carolinas and moving to Virginia, and we really want to have this experience be wonderful. Handing that off to some lending agency or something else, that's not going to serve as them with the same type of value system that we have is just not a good idea. This is one of the things that I think, is really a great alignment between us and southern bank, is these core community values that make it you know, just one of the crew. You're an East Carolinian, do people need to bank at southern bank to be able to get a loan? What if you're coming from out of town and you live someplace else? You're coming here to buy a piece of land? Or a farmhouse when something like that? Do people need to live here? Will you lend to folks that live out of state?

Absolutely, Billy, it's a relationship. We do not demand our clients or our prospects to bank with us. Now, we would love for them to bank with us, because that's a part of the relationship. Here in eastern North Carolina. I think you've touched on just a moment ago. We want to share our experiences with them. So we're excited that they're moving down here. We're excited that they love our land, and they share those same core values. But no, they don't have to deposit with us or bank with us on that side.

I can bring you a client, they could live in New York, New Jersey, Pennsylvania, you're going to treat them with the same as if the guy who went to church with you on Sunday. That's what that's what I love about you guys. Alright, so here's the big question. I think everybody needs to understand how much downpayment is usually required for a land loan with Southern Bank?

Southern bank requires 30% down on land loans.

Well, let me ask you a question about that. Let's say for example, I've got a client with absolute stellar credit - 815 on his credit score, he's got an unbelievable debt to income ratio. Is any of that negotiable?

Absolutely. As southern bank, like I was just saying, We're a relationship bank, we're going to look at the big picture. If a client might have a mitigating factor, the client might be wanting to move down here in 12 months and build a home of their dreams. We're going to go outside that box on an individual basis and help the client achieve their goals.

So what are the driving factors for qualifying for a land loan? If I bring somebody to you? Tommy John over here, and he's looking to make a $200,000 purchase. Let me do any introduction. Neal, take it over from here. What are the first things you're going to ask these people for?

Billy, we try to make it as simple as possible, as you well know. I've worked with you on many, many clients. All we're looking for is last two years tax returns an updated personal financial statement, and the copies of driver's license.

That's it, that's all they need to be prepared to provide. So let's say I'm prepping somebody for you. I'm going to get you in touch with Neil or one of his people, you need to go ahead and prepare the last couple of years tax returns. I'm going to get you a personal financial statement form to fill out. You're going to make me a copy of your driver's license, and then we're going to get that over to Neil and see if you qualify. So let's say all that's done. How long are we looking before they can get approval on a loan?

Typically, you're looking at 48-72 hours, we try to make it as simple as that.

I don't got to wait 30 days? 

No, you don't. Now, you might have to wait a little bit longer. During this COVID-19 environment, however, I think we get you in and out the door, closing documents from a great attorneys we have, in 30 days.

I mean, this COVID thing is, is no joke. I'll give you an example, I've got I got a deal that we're doing up in Virginia, and I'm not going to name the lending institution, but 60 days before to get this through underwriting? You know, that's a deal killer for me. This is what I love about working with you guys. 72 hours!? As a rule, I can get through pre -qualification once all the documentation is in hand. Rarely do we go past a week. I know you're being gracious by saying 30 days. But Neil, the truth is that we've never really gone past a week with you guys.

I love when people tell me oh, well, you have bankers hours. And I'm say what, seven days a week?

Yeah, seven days a week, 14 hours a day? Here's another question that's come down from some of our clients, is there an application fee? (Neil - "No") Well, some of our other lenders have application fees, and, even some other fees that go on top of that, like if you need to join a co op or something like that, it can get pretty expensive. So the fees are what?

We have a 1% origination. 

You do appraisals and stuff like that?

Yes, they typically run $500. 

Alright, tell us about the process of being approved for a loan. How does that process work with underwriting? Is there is there anything outside of what you and I have just talked about? Is there anything that complicates that, that could draw that out beyond just us? 

Typically, it's that straight forward.

So everybody listening out there, okay, it's just that straightforward. So here's another good one that was sent us. What options do buyers have if they intend to build on the property? I know you and I talked earlier that we're going to bring in one of your other bankers for another for another podcast to talk more about this. So just touch on what options are available if somebody wants to build on a property and what kind of products that you can bring to the table for them?

Well, we have our regular straight lot loan - land loan product, however, we have a lot of clients who are looking to experience what we experience here in eastern North Carolina and build on their property. So at southern bank we have a construction and permanent financing options for them.

They don't have to look at going and getting a mortgage from another lender? They can't just do just a land loan with you and then have to go to another lender to get it, you guys can do it all.

Absolutely, full service bank.

Let's say somebody wants to buy a piece of property with a farmhouse on it, I can bring them to you for a regular mortgage right?

I hope you bring them to us, Billy.

Do you do the Fannie Mae's? The Freddie Mac's, the other things. Are you part of that?

Yeah, absolutely. We are a full service bank. Sonia Payne is our mortgage lender here in the area, and she handles all of our Fannie and Freddie Mac 30 Year, 15, 20 year mortgages. 

What different loan packages do you typically offer? There's a deal that you guys do. So you've got this product, I think it's a 15 year and it's a five year ARM on a 15 year AM. It renews like every five years. Tell us a little bit about the different products, but that one in particular because a lot of our guys like using that.

I would say that all of the clients that we work with, appreciate having a five year ARM. It's a five year balloon that comes due, we then modify it with some simple updating, it's a 15 year ATM. So it spreads out the payment a little longer, and allows them to hunt, fish, on that property or many times before that five years up. What I find is a lot of clients build the home of their dreams.

It's almost like a little carrier loan. Do you find that people renew those? So at the end of five years, let's say I want to redo it. What do we do?

I'll simply contact you by letter, also pick up the telephone. Ask how you been doing. We'll get some updated financials, no more than what you initially did. Right and move on.

So I could redo that again. How many times can I renew that five year ARM?

It'd be two more times. 

Okay, perfect. What are the terms and rates of those options?

Currently, what we're looking at is a five year balloon with a 15 year AM. We're looking at rates right around four and a quarter to 5%.

That's awesome. What creates that range, the four and a quarter to five? 

We look at a couple of things. We look at the loan to value on the property, we looked at the debt to income of the borrower and their repayment history.

We were talking a little bit earlier, and you were referring to me, the five C's, okay. The pillars or the value system for southern bank. Can you take let's take a second now and just talk about those five C's and what they mean to you and what they mean to our clients?

Well, it's been traditional that we go by the five C's. We look at the character, the capital, the capacity, the collateral, and the conditions of the loan.

It don't we talk about that a little bit - character. Alright, so if I got $2 million, but I just got out of jail, you're gonna give me a loan?

Well, character is a big thing here at southern bank. Like I said, at the beginning of the podcast, we're looking at the character of the individual, this is not a transaction, this is a relationship.

What about the other points there?

We're always looking for the client to have a good liquidity position. We always want good collateral.

So the appraisal of the land, the appraisal of the property, like for example, standing timber or good agricultural land, those are things that are well, collateralized, right? I mean, if it's cut over, and it's $2,000, it's not going to have the same collateral base as something that has 40 year old timber on it, right? This is the baseline of all of your decision making the three C's, the pillars, hit us with that one more time.

So we've got the five C's - it is the character of the individual, the capital, the capacity, the collateral and the conditions in the loan.

Thanks for covering that with us. Alright, so next question I got is, do you require buyers to have a survey of the property?

Yes, we sure do.

If a client does not have a survey, but we've got a really good accurate deed description, are you going to require them to go out and spend 10, 15 $20,000 to get a survey to complete this deal? Or is a good title search, and an accurate Property Description done by a qualified title attorney going to be enough for you guys?

Ordinarily, we'd like to see a survey. However, Billy, you're absolutely right. We will lean on a qualified professional, the closing attorney, to give us their advice. We'll work through it.

Some of these surveys that we see are astronomical. Bryan and I were laughing about it on one of the other podcasts, we used to be able to predict what these things would cost. Nowadays, we have no idea. This track that you and I are working on out there in Tyrrell County, it's a lot of acreage, and you're talking about a 20 - $25,000 survey. It's bounded by a river bounded by two roads, and then another property with a survey to the north. So we're going to get a really, really good property description. We've already got the title work done from a local attorney before we even listed it. So we know it's got a rock solid title on it and everything like that. Are those factors important when you're considering whether or not a property is is really going to require a survey? Or can we move forward with a really, really good property description from a qualified title attorney?

I think that's where we set ourselves apart at southern bank. Not only do we know that property, we know the owners, we know the adjacent property owners, we know the attorneys. Yeah, we've been hunting, fishing, and living on this property for years and years and years. That's the relationship there.

I'm not gonna get that with some bank out of Charlotte, Raleigh or someplace like that. This is the difference between working with a community bank and somebody that knows the land, that knows the people. It makes a big difference.

Billy, a lot of the times the attorney will say, "Oh, I know this property. I hunt right across it. I have this property down the street from there that I hunt all the time." That's relationship. Market knowledge.

When you're doing a loan on a piece of property, do you require that property have deeded access? (Neil - "Absolutely.") It goes without saying, right? I mean, you need to have it. It collateralizes the property. A value on something that has deeded access, you're able to get utilities to, the value of that property is significantly more than something that's a half a mile down a farm path with three or four landowners in between because if one of those landowners changes hands, and you don't have deeded access, and you've been riding a farm path across their property. Then one day he decides, I'm not gonna let anybody cross my property anymore. He puts up a gate now you got a real problem, right? I mean,

Yeah, you just touched upon one of the five C's collateral.

So here's the next question. Is title insurance required? (Neil - "Absolutely.") It has to do with marketable title. Is it encumbered? Is somebody going to show up 10 years from now and say, Hey, this was my great grandfather's land, get off of it. So, definitely deeded access, definitely title insurance. These are some of the big deals that has to happen. Alright, so here's one for you. How long does it usually take for a loan package to be ready for closing?

I'll just run through a little bit of a situation. Once I receive all the documentation from the buyer. It's going to take about 72 hours to get it through underwriting, spreading the financials, and getting an approval. In this situation today with COVID-19 we're looking probably a closing within 30 days.

It's just gonna take a little bit of time, I think. We're, preparing for 30 days due diligence, 45 day closes. What regions of North Carolina and Virginia does southern bank service?

Southern bank services all the way up into the southeastern part of Virginia, into North Carolina, as far west as Raleigh, as far as east is Outer Banks and Wilmington, North Carolina.

I'm going to change gears a little bit here. I'm going to kind of go to the AG stuff. I know we're going to invite back some people to talk about this. So let's just touch on this briefly. Sort of yes or no answers on this. Do you work with the FSA or other USDA loans for first time farmers?

Yes, we do.

We did a couple of big deals with you guys over in Jones County with a young farmer that was coming to here from New York, big family farm up there. One of the big vegetable suppliers for fresh market. He bought a big chunk of land and you guys helped him get up with FSA and the USDA loans for first time farmers that was really great, because a lot of other a lot of other banks are not gonna work with the FSA and USDA loans. You guys did a great job with that. Can you help clients by rural homes?

Absolutely. We do that all the time.

So but you can help people get rural homes with some of the products and offerings that we talked about earlier. The Freddie Mac's the Fannie Mae's the other programs that are available for just regular house mortgages.

That's right Billy. Yeah.

I thought so. Okay, great. So what type of down payment requirements do you have for rural homes? How's that work? I'm asking because I don't I rarely do them. As you know, we're land brokers. We were selling more land, than we are rural homes, but we're seeing a huge uptick in that. So how does that work? It's different than landlines obviously, right?

It's a little bit different. Typically, we're looking at investment properties. If its a primary home we're looking at 20% down, investment property is 25% down.

Billy McOwen  
Any program that's going to go through those Freddie Mac, Fannie Mae programs, those have specific guidelines, right? Those programs are offered by a lot of lending institutions and they followed up pretty standardized, kind of program, does each bank individually get to sort of toggle those down payments according to what the bank standards are or is that because that sort of a government backed kind of loan does that is that more got rigid in their offerings.

Neil Songer  
It is very much more rich.

Billy McOwen  
I you know, we've covered some great ground here, man. I think really, we've set ourselves up for another podcast to come in here and really talk about some nitty gritty stuff with more traditional rural home loans. I think we want to bring in another one of your guys and talk about AG loans, working with first time farmers, and other stuff like that. If you are looking for a place that you can go and and get that good old fashioned hometown Community Bank service, southern bank is the way to go. This is going to wrap up, episode number five of "find your favorite place." My name is Billy McOwen. And I've been your host. I was joined today by Mr. Neil Songer, the Vice President of southern bank here in the Manteo branch. Thanks so much for being with us today. Neil. Really enjoyed having you here.

Neil Songer  
Thank you so much for having me.

Billy McOwen  
You bet. All right, everybody, peace out. We'll see you next week.

Transcribed by