Farm Ownership Loans

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Farm Ownership Loans

With FSA's Direct Farm Ownership Loans, "we keep America's farming growing."

Farm Ownership Loans use up to 100 percent financing and are a valuable resource to assist farmers and ranchers purchase or enlarge household farms, improve and expand current operations, boost agricultural performance, and assist with land period to save farmland for future generations. With a maximum loan quantity of $600,000 ($ 300,150 for Beginning Farmer Down Payment), all Farm Ownership Loans are financed and serviced by the Agency through local Farm Loan Officers and Farm Loan Managers. The financing comes from Congressional appropriations as part of the USDA spending plan.

Fact Sheet: Farm Loans Overview (PDF, 807 KB).

Direct Loan Making Handbook 3-FLP (PDF, 2.5 MB).

National Agrability Project.

Farm Answers Library.

Farmers.gov.


Frequently Asked Questions

FSA's Direct Farm Ownership loans are used to:

- buy a farm or cattle ranch.

- expand an existing farm or cattle ranch.

- make a down payment on a farm.

- purchase of easements.

- construct, purchase or enhance farm dwellings, service buildings or other centers and enhancements important to the farm operation.

- promote soil and water preservation and security.

- pay loan closing costs.


There are 3 kinds of Direct Farm Ownership Loans: "regular," joint funding, and deposit depending upon private requirements. FSA likewise uses a Direct Farm Ownership Microloan for smaller monetary requirements.

Direct Farm Ownership Joint Financing Loan

Also referred to as an involvement loan, joint financing permits FSA to provide more farmers and ranchers with access to capital. FSA lends approximately 50 percent of the cost or worth of the residential or commercial property being acquired. A commercial lender, a State program, or the seller of the farm or cattle ranch being purchased offers the balance of loan funds, with or without an FSA warranty.

Direct Farm Ownership Deposit Loan

Available only to qualified beginning farmers and ranchers and/or minority and females applicants, a Down Payment loan is a special kind of Direct Farm Ownership loan program that partially funds the purchase of a household size farm or cattle ranch. Beginning farmers do not need to determine themselves as a minority or woman, and minority and females loan applicants do not need to be starting farmers.

The Down Payment Farm Ownership loan is the only loan program that does not supply one hundred percent funding. Deposit loans require loan applicants to supply a minimum money down payment of 5 percent of the purchase price of the farm.

As established by the Beginning Farmer definition, loan applicants thinking about the Deposit loan might not own more than 30 percent of the typical size farm at the time of the application. The applicant may exceed the 30 percent after the loan is closed. The most existing Census of Agriculture information is utilized in this calculation.

The optimum loan quantity for a "regular" Direct Farm Ownership loan is $600,000. The optimum loan amount for a Joint Financing or Participation Farm Ownership loan is $600,000.

Direct Farm Ownership Deposit optimum loan quantity works in a different way. The optimum loan amount under this loan program will not surpass 45 percent of whichever is the lower amount of:

- the purchase price;.

- the appraised value of the farm being purchased; or.

- $667,000.


The balance of the purchase price not covered by the down payment loan and candidate down payment might be financed by a business, cooperative, or personal loan provider, consisting of the seller. The funding offered by FSA and all other lenders can not go beyond 95 percent of the purchase rate. An FSA guarantee might be utilized if funding is provided by eligible lenders.

The optimum payment period for the Direct Farm Ownership loan and the Joint Financing loan is 40 years.

The payment term for FSA's portion of a Down Payment loan is twenty years. The non-FSA funding portion is needed to be at least a thirty years repayment period with no balloon payment permitted within the first twenty years of the loan.

There are 3 various kinds of qualifications for a direct farm ownership loan which require to be fulfilled:

- eligible farm business.

- general eligibility requirements.

- farm management experience.


First, the operation needs to be an eligible farm business. Farm Ownership loan funds can not be used to finance nonfarm business, such as exotic birds, exotic fish, pets or horses used for non-farm functions (racing, pleasure, show and boarding).

All loan candidates should have the ability to fulfill the following general eligibility requirements:

- need to not have Federal or State conviction( s) for planting, cultivating, growing, producing, gathering, keeping, trafficking, or ownership of illegal drugs.

- have the legal ability to accept obligation for the loan commitment.

- have an appropriate credit rating.

- be a United States citizen, non-citizen nationwide or legal resident alien of the United States, including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and particular previous Pacific Trust Territory.

- have no previous debt forgiveness by the Agency, consisting of a warranty loan loss payment.

- be not able to get sufficient credit elsewhere, with or without an FSA loan guarantee.

- not be delinquent on any Federal debt, besides IRS tax debt, at the time of loan closing.

- not be ineligible due to disqualification resulting from Federal Crop Insurance offense.

- have the ability to reveal adequate farm supervisory experience through education, on-the-job training and/or basic farm experience, to ensure sensible prospect of loan repayment capability.

- should be the owner-operator of a family farm after loan closing.


Managerial Experience Requirements

The Direct Farm Ownership loan is various from all the other FSA loan offerings since Congress composed into the law an extra 3 year farm management experience requirement. These 3 years of experience should be within 10 years of the date of loan application.

Loan applicants may replace 1 year of those 3 years if they have 1 of the following:

- post-secondary education in an agriculturally-related field; and/or.

substantial service management experience; and/or.

- leadership or management experience while maintenance in any branch of the military.


To gain credit for 2 out of the 3 years, loan applicants should show 2 of the following:

- not less than 16 hours of post-secondary education in an agriculturally-related field; and/or.

significant organization management experience with at least 1 year of management in a non-agriculture associated field where the applicant's daily obligations consisted of direct management experience, such as personnel choices, payroll, and inventory purchasing. Simply put, not a person who is a manger in title just; and/or.

- having actually been honorably discharged from the militaries of the U.S.; and/or.

- a minimum of 1-year experience as worked with farm labor with substantial management duties; and/or.

- effectively completed a farm management curriculum used by a cooperative extension service, a community college, an adult trade agriculture program, a non-profit company, or a land grant college or university; and/or.

- successfully completed a farm mentorship, apprenticeship, or internship program with an emphasis on management requirements and day-to-day farm management choices; and/or.

- successfully paid back an FSA Youth loan; and/or.

- have an established relationship with a person who has experience in farming or ranching, or is a retired farmer or rancher, and is getting involved as a counselor in the U.S. Small Business Administration's Service Corps of Retired Executives (SCORE) program or with a regional farm or ranch operator or company, approved by the Secretary, that is dedicated to mentoring the farmer or rancher.


There are 2 ways to by-pass the 3 year farm management experience requirement totally:

- use the Guaranteed Farm Ownership loan program, which overcomes a business lender; or.

- have at least 1-year experience as hired farm labor with substantial management responsibilities and be working with a SCORE mentor.


Credit History Basics

Many responses are discovered in our pamphlet, "Your Guide to FSA Farm Loans" (pdf, 3.53 MB). It is also suggested that you call and make an appointment with your nearby Farm Loan Officer or Farm Loan Manager. Agency officials are needed to:

- help loan candidates total FSA kinds and collect details essential for a total application;.

- explain the application procedure, procedure, and the requirements for a complete application;.

- help loan candidates in finishing FSA forms and recognizing sources of details required for a total application, if support is asked for;.

- notify loan applicants of other technical help service providers who might be of support at very little or no charge. Some examples consist of, and are not restricted to, the Cooperative Extension Service, non-profit companies and organizations, the Intertribal Agriculture Council, and other comparable organizations; and.

- advise applicants of options that will assist get rid of any possible barriers to being identified eligible for an FSA loan.


Advice for First Meeting with a Farm Loan Officer

1. Have a basic idea of what it is you wish to do and have the ability to determine your goals. What kind of operation do you have or want to have? What do you need to run that farm or ranch? How will you market your item( s)? What kind of loan(s) will you need? How much do you need? What are your projections?

2. Good recordkeeping is very crucial. If you do not have your records arranged, it is a good concept to try and put all your income and expenses into an easy to understand format. It does not have to be elegant. Also, what is happening inside the household is simply as important as your business needs. Expenses such as food, clothes, mortgage or lease, insurance coverage, taxes, medical expenses, credit card payments, education costs, and other customer financial obligation become part of the farm plan computations. Know your costs. Bring your records with you.

3. If you do not have total monetary or production records, it is best to provide your farm service strategy as realistically as possible. If your anticipated rates or yields surpass normal market requirements, it will be hard for you to support your information.

4. Remember to bring your tax returns for the last 3 years; your last couple of pay stubs if you have off-farm earnings; and your most recent credit card statements.

5. If you desire a farm ownership loan, you will need to bring a signed purchase choice, agreement to buy, or other comparable form.

6. Bring copies of any written leases to the workplace with you if you are leasing land or devices.


Additional Information

We encourage you to call your regional office or USDA Service Center to read more about our programs and the information you will need for a total application. You must find a listing in the phone book in the section set aside for governmental/public organizations under the U.S. Department of Agriculture, Farm Service Agency.