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Freddie Mac Requirements for Rural Properties Q&A

Explore the rural housing market and open your business to new opportunities. We'll work with you to better understand our appraisal and underwriting requirements for rural properties so you can help more borrowers in rural communities purchase a home.

The following Q&As help clarify common misconceptions about our requirements for mortgages secured by rural properties.

Eligible Properties in Rural Areas

  1. Does Freddie Mac purchase mortgages secured by rural properties?
  2. Does Freddie Mac purchase mortgages secured by properties with agricultural zoning?
  3. Does Freddie Mac have eligibility requirements regarding size or acreage of the property site?
  4. Does Freddie Mac purchase mortgages secured by farms or ranches?
  5. Does Freddie Mac purchase mortgages secured by properties considered hobby farms? For example, if a homeowner has a small roadside stand to sell produce from their garden, is this property acceptable?
  6. Are properties with agricultural-type outbuildings acceptable?
  7. It's common for rural properties that are no longer working farms to contain old outbuildings. Are such properties eligible for Freddie Mac financing?
  8. If the homeowner is leasing their property for farming or ranching purposes but does not personally engage in farming or ranching activity, is the property eligible for financing?
  9. If the property is in a market area that has properties and land uses that are non-residential in nature, will a mortgage secured by this property be eligible for Freddie Mac financing?

Appraisal Requirements

  1. What is Freddie Mac’s guidance related to the appraisal of properties located in rural locations?
  2. Are Sellers required to use appraisal management companies (AMC) to order appraisals?
  3. Are Sellers required to use AMC or a third-party vendor to ensure the required separation between the mortgage production and appraisal functions?
  4. Can smaller Sellers, who may not be able to separate functions due to limited staff, use an in-house team to do the appraisal?
  5. Can appraisers use comparable sales older than 12 months?
  6. Can appraisers use comparable sales that are far from the subject property?
  7. Can appraisers use comparable sales that are not similar to the subject property?
  8. Does Freddie Mac purchase mortgages secured by unique properties?

Eligible Properties in Rural Areas

  1. Does Freddie Mac purchase mortgages secured by rural properties?

    Yes. We buy mortgages secured by residential properties in all markets, including rural locations, as long as the subject property is adequate collateral for the mortgage transaction based on the value, condition and marketability of the property.
  2. Does Freddie Mac purchase mortgages secured by properties with agricultural zoning?

    It depends. If a property is zoned for agricultural use, the Seller must ensure that the property is residential in nature, its residential use is a permissible use under the zoning classification and its use does not primarily involve commercial activities such as farming or ranching.
  3. Does Freddie Mac have eligibility requirements regarding size or acreage of the property site?

    Freddie Mac does not have site size or acreage limitations. However, when a property consists of a large acreage parcel(s) and is in a location where commercial farms or ranches are typical, the Seller needs to perform additional analysis of the property characteristics to make sure the property is residential.
  4. Does Freddie Mac purchase mortgages secured by farms or ranches?
    No. Freddie Mac will only purchase mortgages secured by residential properties. The mortgage must not be secured by vacant land or property primarily used for agriculture, farming or commercial enterprise.
  5. Does Freddie Mac purchase mortgages secured by properties considered hobby farms? For example, if a homeowner has a small roadside stand to sell produce from their garden, is this property acceptable?
    Yes. Hobby farms are typically small farms where the homeowner engages in farming activity for personal use and are eligible properties. In this case the primary use of the property is residential and the secondary use is for insignificant farming activity. Therefore, the existence of a small roadside stand used for selling fruits and vegetables does not result in the property being ineligible. Ineligible properties include properties used primarily for farming or ranching.
  6. Are properties with agricultural-type outbuildings acceptable?
    It depends. Agricultural-type outbuildings such as silos, facilities for farm animals and large barns may be an indication that the property is a farm. The Seller needs to determine whether the property is primarily residential based on the property characteristics, zoning and land use of the property. If the primary use of the property is residential, despite the presence of agricultural-type outbuildings, then the property is eligible for Freddie Mac financing. But if the property is used primarily for farming or ranching, then the property is ineligible.
  7. It's common for rural properties that are no longer working farms to contain old outbuildings. Are such properties eligible for Freddie Mac financing?
    Yes. A property that is no longer a working farm is eligible for delivery to Freddie Mac. Evidence such as photographs of the property and outbuildings, neighborhood description, etc. must be provided in the appraisal report showing that the property is no longer a working farm.
  8. If the homeowner is leasing their property for farming or ranching purposes but does not personally engage in farming or ranching activity, is the property eligible for financing?
    No. Regardless of whether the homeowner is personally engaged in the activity or not, if the property is being used for farming or ranching, the property is not eligible.
  9. If the property is in a market area that has properties and land uses that are non-residential in nature, will a mortgage secured by this property be eligible for Freddie Mac financing?
    It depends. A market area with agricultural properties, undeveloped land and land development properties does not necessarily make a residential property in this location ineligible. To be eligible for sale to Freddie Mac, the mortgage must be secured by a property that is residential based on the property characteristics, zoning and land use. The appraiser must consider these non-residential characteristics when performing the market area analysis.

Appraisal Requirements

  1. What is Freddie Mac's guidance related to the appraisal of properties located in rural locations?

    Appraiser selection is very important. Freddie Mac requires that in every appraisal assignment the appraiser must have the knowledge and experience in appraising the type of property they have been asked to appraise. In rural areas this is particularly important because an appraiser with local market experience will be able to provide the Seller with information to help determine property eligibility. For example, the appraiser will be able to describe the past, present and future land uses. Sellers might consider speaking directly with the appraiser on these challenging assignments so the appraiser can answer questions as well as describe nuances of the property or the neighborhood that are not readily apparent when reading the appraisal report.
  2. Are Sellers required to use appraisal management companies (AMC) to order appraisals?

    No. We do not require the use of an AMC or any other third-party vendor to order appraisals. Single-Family Seller/Servicer Guide Exhibit 35, Appraiser Independence Requirements (AIR), allows Sellers to use staff (or in-house) appraisers to obtain and prepare appraisal reports. We require Sellers to obtain appraisals in a manner consistent with the AIR.
  3. Are Sellers required to use AMC or a third-party vendor to ensure the required separation between the mortgage production and appraisal functions?

    No. The Appraiser Independence Requirements (AIR) does not require the use of an AMC or any third-party vendor to achieve the required separation between the mortgage production function and appraisal ordering and quality assurance functions.
  4. Can smaller Sellers, who may not be able to separate functions due to limited staff, use an in-house team to do the appraisal?

    Yes. Appraiser Independence Requirements (AIR) provides an exception where a Seller's small size and limited staff do not permit the separation of the mortgage production function and appraisal ordering and quality assurance functions. In such cases, it must be clearly demonstrated that safeguards are in place to isolate the appraisal ordering and collateral review functions from influence or interference of the mortgage production process.
  5. Can appraisers use comparable sales older than 12 months?

    Yes. Freddie Mac allows appraisers to use comparable sales that are older than 12 months. Rural areas often have much less real estate sales activity than more populated locations and property sales in rural locations often involve a wide variety of properties. The appraiser must be knowledgeable about the varying conditions that characterize properties in a particular geographic area and justify the use of older comparable sales.
  6. Can appraisers use comparable sales that are far from the subject property?

    Yes. Freddie Mac does not require comparable sales to be any particular distance from the subject property. Properties in rural locations often have relatively large sites compared to other locations. Appraisers may use comparable sales that are located a considerable distance from the subject property as long as they can justify and support the use of such comparable sales in the appraisal report.
  7. Can appraisers use comparable sales that are not similar to the subject property?

    Yes. Freddie Mac allows appraisers to use comparable sales that may not be very similar to the subject property. The appraiser must justify and support the use of such comparable sales in the appraisal report.
  8. Does Freddie Mac purchase mortgages secured by unique properties?

    Yes. Freddie Mac purchases mortgages secured by properties that are unique or may not conform to neighborhood residential characteristics in terms of type, design, age or the materials and techniques used in construction. Appraisers must be able to evaluate and report on how the nonconformity affects the value and the marketability of the subject property. When evaluating a unique property, appraisers may use more traditional homes as comparable sales. However, they must determine and adjust for differences between the subject property and the comparable sales and justify and support the use of the comparable sales in the appraisal report.

Get More Information

Take advantage of the following resources so you can be familiar with our property and appraisal requirements for mortgages secured by rural properties.

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