The Housing Scene by Lew Sichelman

Loans for Buyers Moving Away

This year has been a moving experience. For one thing, it has been mentally taxing, what with the virus and all. For another, more people than ever are switching addresses -- many as they try to get away from the maddening crowds and put down roots where life is more tranquil, if not safer.

In August, Toni Church and Marquil Jones-Walker moved from their place near downtown Wichita, Kansas, to rural Mulvane, a community of about 6,500 people about 20 miles south of the city. “We liked going downtown,” Church told me. “We’re still not too far away, but being away from people is better.”

Most of all, though, the soon-to-be married couple liked the fact that they qualified for a nothing-down mortgage from the U.S. Department of Agriculture. More on that in a moment. First, let’s look at the latest trends in moving, which include a definite shift from urban to rural areas.

That’s not to say big cities are dead; many experts believe they’ll make a comeback. But for now, homebuyers are heading out -- and out, and farther out.

For example, online networking service LinkedIn reports that between April and August, net new arrivals were down 23% in New York City, 21% in the San Francisco Bay Area and nearly 11% in Seattle. At the same time, Jacksonville, Florida, enjoyed almost an 11% gain in net arrivals, Salt Lake City scored nearly a 10% gain, and Sacramento registered a 7.6% jump.

U.S. Postal Service data shows similar trends. Change-of-address requests analyzed by Bankrate found that, for the most part, people who moved farther out still stayed in the same metropolitan areas. The most popular destination for folks leaving Houston was Katy, Texas, about 30 miles away. For those leaving Dallas in their rearview mirrors, Mesquite, Texas, about a dozen miles out, was the top terminus.

Coldwell Banker lumps movers into three groups: “Explorers” looking in the exurbs and “hidden gem” towns where they can stretch their dollars; “New Suburbanites” who seek personal space, including dual home offices, a bedroom for each child and perhaps a dose of city culture; and “Resorters” who are relocating to famous destinations to begin a whole new lifestyle.

Of course, there are other reasons to move. Many people are simply changing jobs. Others are fleeing areas prone to natural disasters such as wildfires and hurricanes. The Bureau of Labor Statistics says people tend to switch employment every four years. And a recent Redfin survey found that more than 1 in 4 people want to move from their current hometowns because of a recent flood, fire or storm.

But data from Realtor.com shows more people are searching for property outside their home metros. “Urbanites,” says research analyst Sabrina Speianu, “are increasingly looking to move to suburban areas.”

(At the same time, some young adults are moving back in. Not into the city, but in -- as in, back in with their folks. Pew Research says they’re heading back to the nest at unprecedented rates: In July, 52% of young adults resided with one or both of their parents, boosting the total to 2.6 million.)

If you’re among the many who are hunkering for more wide-open spaces, you may want to consider the kind of financing Church and Jones-Walker corralled. It’s one of the few government-backed loans available solely in rural and exurban locations. And it is booming.

According to the latest figures from the USDA’s Rural Development agency, the number of loans under its single-family guaranteed loan program at the midyear mark is up 38% from the same point a year ago. And the dollar volume of those loans is up 55%.

“It’s a great program” for people who want to be outside the city limits, says Church and Jones-Walker’s loan officer, Planet Home Lending’s Michelle Crubaugh.

Actually, Rural Development offers a variety of loans, grants and loan guarantees for those who want to build, buy or improve single and multi-family properties.

Under the guaranteed loan program, the government provides a 90% guarantee to approved lenders to reduce the risk of extending 100% mortgages. But there are limits based on family size and income. Folks who have moderate incomes -- 115% of the national median -- qualify.

In the greater Boston metro area, two-, three- and four-person households earning up to $154,900 qualify. And in the Cape Coral-Fort Myers, Florida, metro, two- to four-person households making up to $90,300 make the cut.

Under the USDA’s Section 502 direct loan program, Uncle Sam makes 100% loans to applicants whose incomes are no greater than the low-income limit for their areas and are unable to obtain financing elsewhere. Generally, houses can be no more than 1,800 square feet with a market value that doesn’t exceed the applicable loan limit.

If your intent is to buy some land along with a house, you might want to consider financing from Farmer Mac, a little known government-sponsored enterprise similar to Fannie Mae and Freddie Mac. It was chartered in 1988 to increase the availability of long-term credit for ranchers, farmers and rural homebuyers.

Like Fannie and Freddie, Farmer Mac doesn’t make loans directly. Rather, it buys loans made by local lenders. And among the loans it purchases are those for part-time “hobby” farmers who just want to dabble in raising or growing almost anything.

Eligible properties must be owner-occupied, single-family detached residences, or second homes with enough acreage to support agricultural production. There are no geographic restrictions, and you can buy as much land as you like. If the property is less than five acres -- not a lot of ground in many rural markets -- you must produce at least $5,000 annually. If the land is more than five acres, there is no such restriction.