USDA Farm Service Agency (FSA)
These Loans Are Designed For Farm/Ranch Income Producing Properties
(Not Hobby Farms For Personal Production Only)
Your Key To Farm Ownership.
One of such opportunity honors beginner ranchers and farmers or those individuals who want to start a farming business even without prior operation experience.
Backed by the US Department of Agriculture, the Farm Service Agency offers what is called the
Direct Farm Ownership Loan.
This program has no current or previous farm ownership requirements
and offers up to 100 Percent Financing.
Here’s a quick run-through of everything you need to know about the program:
For what purposes can I use the Direct Farm Ownership Loan?
You can use the loan proceeds to:
- purchase a farm or a ranch
- expand current farm or ranch size
- make a down payment on a farm or ranch
- property easements
- build or improve existing buildings and improve farm operations
- promote the conservation and protection of soil and water resources
- pay for the closing costs of a loan
Are there different types of Direct Farm Ownership Loans?
Yes There are, namely:
a) Regular or Joint Financing and
b) Down Payment Loan (Regular or Joint Financing)
Down Payment Loan
This is exclusively available to beginning farmers or ranchers and/or minority women applicants
It does not provide 100 percent financing and requires borrowers to pay 5 percent of the farm or ranch’s purchase price.
What is the maximum loan amount of the program?
For the Joint Financing or Participation Farm Ownership loan, the maximum loan amount (MLA) is $300,000.
For the Down Payment loan option, the MLA won’t exceed 45 percent of whichever is the lesser of:
a) the purchase price
b) the farm or ranch’s appraised value
($667,000 which is subject to the Direct Farm Ownership dollar limit of $300,000)
How much interest is charged on the loan?
The rates are calculated and posted every first of the month.
The rate followed is whichever is lower in effect at the time of closing or approval.
How long is the repayment period of the loan?
For the Joint Financing Loan, the maximum allowed years of payment is 40 years while for the Down Payment loan, the repayment period is 20 years.
How about credit scores?
The FSA does not use credit scores. Credit History is one of the basis for decisions, where the ability to show payments were attempted, not credit score itself.
Loan Timeframes and Business Planning:
You First Must Have a property under contract.
A 10 day application review for 'application completeness' occurs.
If deemed incomplete, an additional 20 days to cure the incompleteness occurs.
If still deemed incomplete, another 10 day to cure timeframe occurs.
Once the application is deemed complete, or complete from the start, it takes up to 42 days for a "Direct" loan to process and up to 60 days for other loans to process your application.
Once Approved, a Certified General Appraiser appraises the property, which must appraise out to value.
It is recommended to have a 6 month to close on property contract.
Your Business Plan must be realistic and be viable.
It is highly recommended to start small and get your farm and farm started instead of 'going big' wanting all of the tractors, toys and livestock to start and not yet proved your viability. The other loans are available for expansion at any time.