The U.S. Department of Agriculture’s Farm Service Agency (FSA) offers both direct ownership loans as well as guarantees for ownership loans from private banks. Direct loans have lower income requirements and generally do not require as extensive farm practice as private loans. Additionally, unlike most private lenders, FSA will work with producers with brief or tarnished credit histories.
While FSA’s operating loans are intended to pay for production materials, FSA’s ownership loans are used for buying or adding property to a farm or ranch, improving facilities, conservation efforts, purchasing easements, making down payments, or paying loan-closing costs.
FSA ownership and operating loans have similar eligibility requirements: having no prior convictions for illegal farming practices and being the owner-operator of a family farm after the loan closes. Applicants must also have an eligible farm enterprise, which does not permit for the finance of show dogs, exotic birds, racehorses, etc. Farm ownership loans also require participation in the business operations of a farm or ranch for at least 3 years out of the 10 years prior to application. FSA, as the lender of first opportunity for producers, cannot make a loan to a farmer or rancher who can obtain credit elsewhere.
There are three available options when deciding on an ownership loan. First, there are regular direct ownership loans capped at $300,000, with a 40-year repayment term. Second, there are joint financing loans in which FSA lends up to 50% of the costs associated with the purchase. The maximum amount of this loan is also $300,000 with a 40-year repayment period. Third, there are down payment loans only available to eligible beginning farmers and ranchers, minority, and women applicants. These loans require applicants to provide 5% of the purchase price for a farm. The maximum down payment loan amount is the least of $300,000, or 45% of the purchase or appraisal price of the farm being purchased.
Did you know the different farm ownership loans offered by FSA? Is access to private credit preventing you from buying farmland? Please share your thoughts in the comments below.