How To Start A Rural Homestead, Part 7: Buying Your Homestead
This is Part 7, the final part, of the How To Start A Rural Homestead series. Before reading this post, I recommend starting at Part 1: Income and going in order:
Part 2: Pay Off Debt
Part 3: Budget & Save
Part 4: Deciding Between Raw or Developed Land
Part 5: Determining Location
Part 6: Finding The Right Property
This is part 7, the final part, of a series for anyone who is serious about designing a rural homestead lifestyle. Congratulations if you’ve made it this far!
It is my belief that if you begin these steps and really commit to them, within two years you can attain your homestead and have set up a life so that you don’t have to commute away from it every single day to join the rat race.
Let’s talk about the options available for purchasing your homestead!
Paying outright with cash
If you make enough and manage your money well enough, paying for anything outright using cash is always the best way to go.
This is entirely possible, many people do it. Some folks sacrifice comforts for a few years, convert their vehicle into a home, and camp on dispersed land in a given area to save money. Depending on your current lifestyle—work, kids, a spouse who is not on board with the idea, etc.— this may or may not be a viable option for you. If you are willing to consider a whole different lifestyle change in order to save a lot of cash to buy a homestead outright, you might find inspiration from this YouTube channel.
I see this as a middle ground if it’s not reasonable that you would be able to save enough to purchase a homestead in cash but if you also can’t (or don’t want to) go through a bank.
You can owner finance your homestead property!
I touched on this in Part 6: Finding The Right Property. To find owner financing, check local newspapers, talk to local realtors, hang flyers, browse Craigslist and reach out to owners, and inquire about land listings on sites such as Landwatch to see if owner financing is an option. Sometimes owner financing is indeed an option, but isn’t stated explicitly in the listing.
Most owner financing contracts (also called land contracts) require a percentage down, usually 20%, so you still want to budget and save to prepare for that.
Regular financing (mortgage)
If you decide to take the route of getting a mortgage, there are a few different options I would look into depending on your situation:
FHA Loan: this type of loan is for low to moderate income households and is popular amongst those with lower credit scores who don’t have much of a down payment saved. The minimum credit score is around 580 and as little as 3.5% down is required.
Rural USDA Loan: this kind of loan is specifically for low income households who are interested in purchasing a rural home. The down payment can be as little as zero and the credit score has to be around 640 with the ability to show reliable and steady income.
Conventional mortgage: Be sure to save atleast 20% for the down payment and to go for a 15-year fixed rate loan. If you’ve followed the steps outlined in this series, you should have your debt paid off by this point and be able to funnel most of your income into getting your homestead paid off in 15 years (or sooner!). This mortgage needs to be your only debt.
(Important: 20% down payment + 15-year fixed rate)
If you have other ideas of how a person can purchase their homestead other than the ones outlined above, please leave a comment below letting us know!
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