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USDA Loan Rates, Lenders, Guidelines and Information

USDA Business & Industry Loan Guarantees 101

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What are USDA Business & Industry Loan Guarantees and how can it be used to further a business’s entrepreneurial cause?

Food and agriculture is a vital industry in the United States. Not known to many, the country is a major player in the industry that meets some of the largest agricultural demands in the international market. Yet aside from taking care of the world’s agricultural needs, the federal government also sees to it that our domestic demands are met. To make sure this is taken care of, the government established the United States Department of Agriculture. This executive department sees to it that the agricultural foundation in the country stays solid by providing technical assistance through loans and grants to the country’s farmers and ranchers.

Of course, these services are not only limited to individuals but also to community groups such as cooperatives. And if you are an entrepreneur by nature, you can also look into the department’s Business and Loan Guarantees.

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What are these Business & Industry Loan Guarantees?

The Rural Development Business and Industry (B&I) Guaranteed Loan Program guarantees loans made by eligible lenders to rural businesses. it bolsters the availability of private credit by insuring loans given to rural businesses.

Who can apply and qualify for this program?

The program is open to lenders who have the legal authority, substantial years of experience, and the financial capacity to operate a successful lending program. This includes federal or state-chartered banks, savings and loan lenders, farm and credit banks, and credit unions.

What kind of businesses can qualify for these loan guarantees?

For-profit entities, non-profit organizations, cooperatives, tribes recognized by the federal government, public institutions, as well as individuals can qualify for said loan guarantees.

Are there any restrictions on the borrower/s?

For individuals trying to qualify for the guarantee, you must be a US citizen or have resided in the country after being legally admitted for permanent residence.

For private entity borrowers, you must be able to demonstrate that the proceeds of the loan funds will be used within US soil and that the facility being financed will primarily create new or save existing jobs for rural residents of the country.

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What is considered an eligible area?

Any region outside a city or town with a population size of 50,000 or more as well as the urbanized areas of that city or town. The borrower may be headquartered in a larger city as long as the project service area is within an eligible territory.

The lender, however, can be based anywhere.

Projects located in rural and urban areas can be funded via the Local and Regional Food System Initiative.

How can funds be used?

The proceeds of the loan can only be used for the:

  • conversion, enlargement, repair, modernization, or development of a business
  • purchase and development of land, easements, rights-of-way, as well as the establishment of buildings and facilities
  • purchase of equipment, leasehold improvements, machinery, and inventory
  • refinancing of debt if the refi can ease cash flow or create and save jobs
  • acquisition of businesses and industry when the loan can create or save jobs

The proceeds of a Guaranteed Loan fund CANNOT be used for the:

  • acquisition of lines of credit
  • acquisition of owner-occupied housing
  • establishment of golf-courses
  • establishment of racetracks or gambling facilities
  • building of churches or church-controlled organizations or charitable organizations
  • establishment of fraternal organizations
  • establishment of lending, investment, and insurance companies
  • funding of projects that involves more than $1 million and the relocation of 50 or more jobs
  • production of agriculture with certain exceptions
  • distribution and payment to a beneficiary of the borrower or an individual or entity that will retain an ownership interest in the borrower

Is there a required collateral?

The collateral must have a demonstrated value that is enough to protect the interest of the lender and the Agency. The discounted collateral value must be at least equal to the loan amount. Lenders will discount collateral consistent with sound loan-to-value policy. The collateral must carry a hazard insurance with an amount equal to the loan amount or depreciated replacement value, whichever is less.

Maximum Advance Rates

Real Estate: 80 percent of fair market value
Equipment: 70 percent of fair market value
Inventory: 60 percent of book value (raw inventory and finished goods only)
Accounts Receivable:  60 percent of book value (less than 90 days)

What is the maximum amount of a loan guarantee?

  • 80 percent for loans of $5 million or less
  • 70 percent for loans between $5 and $10 million
  • 60 percent for loans exceeding $10 million, up to $25 million maximum

What are the terms of the loan?

The maximum term for real estate is 30 years. For machinery and equipment, lifetime or 15 years, whichever is less. For working capital, it should not exceed 7 years. The loans must be fully amortized and balloon payments will not be allowed. Interest-only payments can be scheduled in the first three years.

What are the interest rates?

The interest rates can be negotiated by the lender and borrower, subject to Agency review. It can be fixed or variable. Variable interest rates will not be adjusted more often than quarterly.

What fees are applicable?

An initial guarantee fee that costs around 3 percent of the guaranteed loan amount will be required. There is also a fee for annual renewals currently at 0.5 percent of the outstanding loan principal. Other customary fees can be negotiated between borrower and lender.

What are the underwriting and security requirements?

  • The proposed operation must have a realistic repayment ability
  • New enterprises may be asked to obtain a feasibility study by a recognized independent consultant
  • The business and its owners must have a good credit history
  • At loan closing/project completion, the business must have a tangible balance sheet equity position of:
    • 10 percent or more for existing businesses, or
    • 20 percent or more for new businesses.
  • Key person life insurance may be required and the amount negotiated. A decreasing term life insurance is acceptable
  • Personal and corporate guarantees are normally required from all proprietors, partners (except limited partners) and major shareholders (i.e., all those with a 20 percent or greater interest)

How to get started

The USDA accepts applications year-round. Borrowers can ask their lenders about the program. Lenders should visit their local USDA offices or contact the USDA Rural Development Business Programs Director in the state where the project is located.

Source: USDA website

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USDA Business Loans? Consider the RMAP

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Are you based in rural America and plan on taking your entrepreneurial goals a step forward? Look into your USDA loan options – consider the Rural Microentrepreneur Assistance Program (RMAP.)

The United States Department of Agriculture is the institutional wing of the federal government that manages the development and execution of laws relating to agriculture, forestry, and food. As an executive department, it holds full power over the promotion of agricultural trade and production, as well as in meeting the needs of farmers and ranchers, while ensuring the protection of natural resources and the meeting of domestic and international food demands.

These general goals are cascaded into programs that help meet needs in the micro level. Among the most common ways that the USDA extends help to America’s farmers and ranchers is through grants and financing options.

The USDA has programs not only for individuals and cooperatives but for businesses as well. If you are in the agricultural business and looking for such programs to fund your entrepreneurial efforts, you might want to consider the USDA’s Rural Microentrepreneur Assistance Program.

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What is the Rural Microentrepreneur Assistance Program (RMAP) and what does it do?

The RMAP is a program that provides loans and grants to Microenterprise Development Organizations (MDOs). These are non-profit organizations, community-based financial institutions, and local economic development councils that provide technical and financing services to small businesses in the rural communities

The RMAP helps the MDOs to:

  • provide microloan programs that help microenterprises establish themselves as players in the industry via a Rural Microloan Revolving Fund;
  • offer training and technical assistance to microloan borrowers and micro-entrepreneurs

Who can apply and qualify for RMAP?

Nonprofits, tribes recognized by the federal government, and higher education institutions can all qualify as MDO and therefore be eligible for the program.

To get a loan from an MDO, the business must be located in an eligible area with ten or fewer full-time employees.

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What is this eligible area?

Eligible areas in this sense refer to rural regions outside a town or city with a population size of less than 50,000. The borrower may be headquartered in a larger city as long as the project service area is within an eligible territory.

The lender, however, can be based anywhere.

You can check out the list of eligible addresses here.

What are supplemental requirements?

An MDO must be able to demonstrate that they can handle or manage a Revolving Loan Fund, OR

a) show proof of certification that they or their employees were recipients of education and training from a qualified microenterprise development training entity;

b) show that they are participating actively as an intermediary lender in good standing under the US Small Business Administration (SBA) Microloan Program or other loan programs determined by the Administrator

How much can an MDO procure from the program?

Grants for the provision of technical assistance to rural microentrepreneurs or enterprises can total up to $205,000 per year. You cannot guarantee funding as requested and a minimum of 15 percent matching fund will be required.

For the purpose of establishing a Rural Microloan Revolving Fund, loans can range from $50,000 to $500,000. Recipients of the loan cannot have a debt total of more than $2.5 million.

What are the loan terms for the MDOs?

Loan term maximum is capped at 20 years with a 2-year payment deferral. The MDOs must also be able to establish a loan loss reserve fund.

What terms are required on loans to ultimate recipients?

They can get a loan of up to $50,000 with fixed-rate interest and limited to 75 percent of the total project cost.

Are there limitations on how these funds can be used?

Microlenders are allowed to make microloans for qualified business activities and expenses such as for working capital, debt refinancing, purchase of equipment and supplies, and the improvement of real estate, among others. Lenders will not approve fund use for purposes determined to be not covered by the program.

Where should we start?

The USDA is now receiving applications for the program. You may contact your local state office for more information and to apply for RMAP.

Source: USDA site

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What are Some Available Mortgage Programs for Teachers?

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Teachers are perhaps some of the most underpaid and undervalued professionals in the US. The typical American educator earns only roughly $30,000 to $50,000 annually. That being said, most teachers find themselves in a difficult place when it comes to deciding to buy a home.

What options are available for them? Are there any existing special programs that specifically cater to the needs of this demographic?

There in fact are. Let’s look at these options.

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The Good Neighbor Next Door Program

The Good Neighbor Next Door Program is a homeownership initiative created by the United States Department of Housing and Urban Development or the HUD to encourage the renewal of revitalization areas in the country by “providing law enforcement officers, firefighters, emergency medical technicians and teachers an opportunity to purchase homes in these communities.”

Eligible participants are given a 50 percent off from the list price of HUD foreclosure homes if the home is located in an area designated by the HUD as a revitalization area.

Per the HUD, revitalization areas are “HUD-designated neighborhoods in need of economic and community development and where there is already a strong commitment by the local governments.”

Find an eligible area here.

Teachers are at the front row of these benefits. But how does the HUD define a qualified educator for the program?

Per the program, you need to be a K-12 teacher, and use the property as your primary residence for three years.

Teacher Next Door

Another initiative of the HUD, Teacher Next Door helps teachers and educators find the right mortgage option by connecting them to a wide network of programs and organizations that offer reduced mortgage rates and costs. Some of these also offer down payment rebates. The Good Neighbor Next Door program is included in this network but the scope is not limited only to revitalization areas. There are also residency requirements.

Home for Heroes

This program offers a 25 percent off your realtor fee when you purchase or sell a home with a realtor or broker who is signed up as an affiliate of the program. There is also a reduction in closing charges and home inspection fees.

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Other mortgage alternatives

There are many organizations who serve the function, either backed privately or through local governments. You can check with your state for these specialized programs.

To make your hunt easier, use the HUD’s list of homebuying programs categorized by states.

You may receive community lending programs such as one offered by ICC Mortgage. Home loans for teachers also exist at some local areas, while some lenders and organizations offer programs with teacher-specific housing qualifications.

Or, perhaps, you don’t really need a teacher-directed program to get the best deal. If you’re cash-strapped, certain down payment assistance programs can help you get a loan to purchase a home. You can also look into some federally-insured mortgage programs such as the:

FHA loan – a loan program for first time homebuyers that offer competitive interest rates with only 3.5 percent down payment requirement for those who can meet the program’s eligibility requirements

USDA loan – a program for low-to-moderate income borrowers to purchase homes within areas designated by the US Department of Agriculture as rural (but includes many suburban areas)

If you’re low on your options, it might be worth your while to explore these programs as well.

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HUD Allocates $5 Billion Towards Disaster Recovery Efforts in Texas

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The HUD recently announced a $5 billion budget towards disaster recovery efforts in the state of Texas. Who will benefit from the appropriation?

The past few months have been a nightmare to some Americans in areas hardly hit by hurricanes Harvey, Irma, and Maria. Flood waters destroyed crops and homes, vehicles are damaged, and many of our fellow citizens are left to rebuild with the anxiety of not knowing how.

Various government relief and recovery efforts have been established to help these homeowners and their families recover from the disaster. One of the most recent of these efforts if the HUD’s provision of $5 billion to the state of Texas to aid recovery from Hurricane Harvey.

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On Friday, HUD deputy secretary Pam Patenaude and Texas Gov. Greg Abbott announced that the United States Department of Housing and Urban Development is to appropriate $5.024 billion to the state of Texas as part of the federal government’s effort to hasten disaster recovery in the hard hit areas of the state.

Extend help to the uncovered, underinsured

The aim of the funding is to address the needs not met by other federal assistance programs and private insurance companies.

Prior to allocation, the HUD gathered data with the help of the Small Business Administration and the Federal Emergency Management Agency to get an estimate of how many homes and businesses aren’t adequately insured and who weren’t able to get assistance from both public and private sources. They then used this information to determine the budget for the recovery efforts.

The funding is appropriated to the state in a form of a grant via the department’s Community Development Block Grant – Disaster Recovery Program. The money will be used primarily for the repair of damaged homes, buildings, and other critical infrastructures in the state.

Per the HUD’s data, there are over 230,000 housing residences damaged by the hurricane. Some 65,000 of these properties have been severely damaged. Furthermore, over 4,000 businesses without insurance coverage were also devastated by the hurricane. These entities will be the target of the appropriation.

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Trump laws

The budget allotment was brought to fruition by Continuing Appropriations Act of 2018 and the Additional Supplemental Appropriations for Disaster Relief Requirements Act of 2017 which was signed by the president on September 8.

In a statement, HUD Secretary Ben Carson said his department will work with the governor and his staff to “do whatever is needed to rebuild damaged homes and to restore shuttered businesses in some of the hardest-hit areas of the State.”

“As President Trump has said from the beginning, the whole federal family is with the people of Texas to help them recover from this devastating storm as quickly as possible,” Carson adds.

The bill essentially appropriates $7.4 billion for major disasters during the year, including the Category 4 Hurricane Harvey that damaged areas in Texas.

“Texans hit hardest by Hurricane Harvey face unprecedented hurdles as they rebuild their homes and businesses, and these funds will help them move forward after the storm,” says Sen. John Cornyn, R-Texas.

“I’m grateful for the support Texas has received from Secretary Carson, and I look forward to continuing my work with Senator Cruz, the Texas delegation, and Governor Abbott to ensure Texans aren’t left behind.”

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Revisiting the USDA Mortgage Process

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What is a USDA mortgage? What types of loan programs are available and who can take advantage of these programs? This article gives a quick revisit of the USDA mortgage program basics and its acquisition process.

Real estate site Zillow says that a typical American home costs an average of $220,700. Last year, this average was 6.9 percent lower and is predicted to increase by 3.1 percent next year. Meanwhile, experts expect mortgage interest rates to continue its march forward. If the trajectory of both factors don’t change soon, most home buyers in the country can easily be priced out from the already scarce inventory of available homes. This pushes them to rethink their options and look for potential alternative solutions.

They can either:

  1. Delay home buying or continue to rent and save some more until they can afford a decent down payment.
  2. Move their location preference from areas where prices are high (typically within cities) to to rural and suburban communities.
  3. Look for cheap down payment options.

If you are willing to move and are considering the last two paths, then the USDA’s mortgage programs may just be the solution you need.

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USDA home loan basics

A USDA mortgage is a zero down payment home loan program for eligible rural and suburban homebuyers. They aim to especially help economically challenged individuals and those who cannot obtain a traditional mortgage.

USDA loans come in many forms. Here’s a breakdown of the purpose of each program:

USDA loan guarantees. This program guarantees loans issued by you local lenders which allows them to originate loans at a lower interest rate even without down payment. The borrower would however need to pay for a mortgage insurance premium even if he or she pays any down payment amount.

USDA direct loans. These range of programs is specifically designed for low-to-moderate income borrowers. The average income for every area is used as basis for evaluating eligible applicants.

USDA home improvement loans and grants. If you need financing for the repair and improvement of your home, you can take advantage of these programs.

Eligibility

Qualifying for a USDA-backed mortgage guarantee entails meeting the income limits set by the department. These limits vary by location and the size of the household. You can find the limits for you county here.

Apart from this, the borrower must:

  1. Use the home as his or her primary residence
  2. Be a US citizen
  3. Have a resulting mortgage payment not exceeding 29 percent of his or her monthly income
  4. Have a sum total of other debt obligations not exceeding 41 percent of one’s monthly income (a higher debt-to-income ratio is permitted if the borrower has good credit)
  5. Be able to demonstrate income dependability for at least the last 2 years
  6. Have a good credit history

And more importantly, the property must be located in an area designated by the USDA as rural. Check out the USDA’s map for these areas.

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The USDA home loan acquisition process:

  1. Prequalify for the program. This allows you to get an estimate of how much you can afford allowing you to narrow down your options. This step also helps you determine your eligibility.
  2. Get pre-approved. A more thorough process than pre-qualification, this stage takes account the important qualification documents. A pre-approval letter also helps you make stronger bids and gives your seller the impression that you’re serious about your intention to buy the home.
  3. Make your offer. Inform your lender that you’re using the USDA loan program in order to arrange the offer. If you want to take advantage of the 100 percent financing feature, you can negotiate with the seller so that they would shoulder the costs of closing. However, if you can’t arrive at these terms, you have to pay the costs out-of-pocket or via gift down payments from family members.
  4. Processing and closing. To ensure that the property meets the standards set by the department, a home inspection must be done. Once you are under contract, an underwriter will review your information. If all goes well, you will get your approval and a closing date is set. Before you sign your name on the dotted line, make sure you read and understand every detail of the contract.

With the current market factors affecting affordability for many homebuyers, programs such as the USDA’s mortgage home loan is a great financing choice for those who have limited options.

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USDA Offers Career Opportunities for Vets

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Veterinarians

The United States Department of Agriculture or USDA opens its doors to America’s modern-day heroes by offering careers in farm and ranch operations.

Thousands of young and men women dedicate their lives to protect our freedom. But after their duties are completed and they return to their homes, most of them find themselves conflicted with the dilemma of where to go next?

While many choose to continue their education and go to college, there are those who choose to do business instead. Still, there are others who are stuck in the limbo of looking for a career choice that suits them best.

The USDA hopes to encourage these vets to consider one of the most important yet underestimated career choices today: agriculture. According to the department, various career options are available to American veterans including owning and operating a farm, or “working in one of the many areas that support the nation’s rural fabric.”

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How does the USDA assist beginning farmers and ranchers?

There are plenty of assistance programs that the department offers to all beginner farmers and ranchers, veterans or not. These include the whole array of loan programs directed by the USDA’s Farm Service Agency. These loans can help the veteran acquire land, start operations, fund operations and maintenance, or lease farm land.

With the aim of guiding the country’s veterans along with other beginner farmers and ranchers, the USDA partnered with SCORE to provide the necessary mentorship that they need to order to steer their careers to the right directions.

Whether you have previous farming experience or it is your first time to jump through the hoop, the USDA urges that the career is for anyone as long as they have the dedication and passion for their work.

FSA’s Farm Loan Programs

Programs offered by the Farm Service Agency seek to help its beneficiaries start, improve, expand, transition, market, and strengthen family farming and ranching operations. They also provide value-added, direct sale, organic, and specialty crop operations. They also advocate and support for various farming techniques, encouraging emerging methods that adapt to the needs of the population.

Current interest rates of each program effective as of November 1, 2017:

Program Interest Rates
Farm Operating- Direct 2.750%
Farm Operating – Microloan 2.750%
Farm Ownership – Direct 3.625%
Farm Ownership – Microloan 3.625%
Farm Ownership – Direct, Joint Financing 2.500%
Farm Ownership – Down Payment 1.500%
Emergency Loan – Amount of Actual Loss 3.750%

Agriculture is one of the most important sectors that provide a solid foundation for the country’s Gross Domestic Product. Per a 2015 data, agriculture, food, and related industries contributed $992 to the GDP, a 5.5 percent share. The output of America’s farms alone contributed $136.7 which is one percent of the GDP.

As populations continue to increase exponentially, the department sees the need for the country to supply not just the country’s but the world’s equally increasing demand for food and other agricultural products. The country is one of the world’s biggest exporter of agricultural produce, hence the humongous responsibility towards international demand. They hope that by further efforts to recruit more people into the country’s agricultural wing, they can keep up with the demand that is in equal measure vitally economic in nature.

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Legal Cannabis Firing Up Colorado’s Housing Market

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The legal cannabis market is slowly permeating the housing industry in the country. A close example on how this budding industry is affecting the real estate scene can be seen in the state of Colorado.

Demand for housing surged in the Centennial State as the cannabis industry hauls in people who work in the business.

Many of these individuals wouldn’t have come if not for the available work. But because housing scarcity is universal across all states in the country, the sudden increase in demand has pushed home prices up.

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Mortgage borrowers who are working for the cannabis businesses cannot qualify for a home loan.  Banks and lenders remain reluctant to entertain them due to the nature of their occupation. They are left with no other choice but to compete for rent spaces which is also causing rent prices to skyrocket.

This creates a domino effect in the market as those who are in more traditional lines of work, seeing that rent prices are fast becoming less affordable, are now motivated to get a mortgage seeing it as the cheaper option.

This convergence of factors is firing up the housing market in the state.

“Our supply and demand has really taken a crazy turn in the last five years for lots of reasons, legal marijuana being one of them,” says real estate broker and spokeswoman of the Colorado Association of Realtors Kelly Moye.

An influential market

The recreational, medical and industrial use of marijuana all became legal in 2014. Only three years after the historic move, the industry, even in its infancy, was already able to impact the state’s housing market in a significant way.

Moye disclosed that it all started on the commercial side. As new dispensaries and cultivation labs opened, the demand for retail, growing, and storage space also surged. Then came the workers, thus crowding the demand for rentals and single-family homes.

Home sales for example, increased from just 96,067 in 2013 to 99,434 in 2014 and 107,246 in 2015. The average sale price also increased from $187,900 in 2011 to $298,000 in 2016.

Income from the cannabis business is also helping some millennials get access to homeownership, something they wouldn’t have been able to afford otherwise if not for their high-paying jobs.

Credit access issues

Medical marijuana is legal in 28 states including Washington, and recreational use is allowed in 8 states. However, the drug is still classified as a Schedule I substance under the federal umbrella which means the drug has no determined medical value and has high potential for abuse.

Being illegal on the federal level, many banks don’t want to establish deposit relationships with businesses related to the industry for fear of compliance risks. As a result, employees mostly receive cash as payments.

Although applying for a home with cash does not automatically disqualify a mortgage applicant, it is considered as a red flag among underwriters.

Will this situation remain for long?

Attorney General Jeff Sessions is bent on blocking any progress on marijuana legalization. But with more states passing votes for decriminalization, it’s seems naivete to think that the industry which rakes in millions in tax revenues in most states where they are legal will be hampered by rapidly waning federal barriers.

With the Colorado example, there’s little doubt that the marijuana industry will have a similar impact in other states which have just recently embraced it.

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USDA Offers Support to Help California Fire Victims Rebuild

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The United States Department of Agriculture offers support programs directed at communities, businesses, and homeowners to help the victims of the recent California wildfires rebuild and get back on their feet.

The recent wildfires that devastated Northern California have displaced thousands of people and cost millions in infrastructure and commercial damages. Individuals come home to find their hard-earned homes burned down to ashes. Worst of all, many find themselves helpless due to being underinsured or total lack of coverage. Others are worried about where to get the money to pay for the home that they can no longer benefit from.

As part of federal efforts to provide relief to those affected by the disaster, the USDA announces that the department is making resources available to help rural communities and individuals recover.

Assistant to the Secretary for Rural Development Anne Hazlett said:

“While the full extent of damage from the current wildfires is not yet known, USDA Rural Development is committed to supporting the recovery of impacted rural communities,” Hazlett said. “We have a variety of assistance rural communities can use during the rebuilding process.”

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Community Support

The fires that traversed the state’s wine countries and parts of the Sacramento Valley was estimated to have caused a total damage of around 3 to 6 billion. It also left 1500 homes and other structures destroyed.

Rebuilding these structures would not only take time but also money and human resources. Seeing this need, the USDA offers infrastructure rebuilding support via its Community Facilities Program.

Under this program, citizens of rural California can rebuild their fundamental community buildings as well as replace equipment that has been devoured by the fire.

The Rural Development Community Facilities Program includes:

Aside from this, the department also made it sure that the people can rebuild their water channels and systems as soon as possible to aid for faster relief efforts. Under the Water and Waste Disposal Loan and Grant Program, the communities will be able to rebuild rural water and wastewater systems in the aftermath of the disaster.

Business Support

For business owners whose operations have been totalled by the fires, the USDA extends help by backing some
business loan opportunities. Interested entities may visit to the FAQ pageof the Business & Industry Loan Guarantee Program for a more detailed explainer of the program.

The funds are also made available via the Rural Development’s intermediary lenders.

Housing, Livelihood Support

The Federal Emergency Management Agency or FEMA is the main agency taking the lead in providing temporary housing for individuals and families displaced by the fire.

For long term support, however, the USDA reminds farmers and ranchers in the affected areas that the department has programs that can assist them in recovery.

The Farm Service Agency (FSA) offers assistance to farmers and ranchers who lost their livestock, grazing land, fences or eligible trees, bushes and vines as a result of a natural disaster. This band of programs include:

  • Livestock Indemnity Program
  • Livestock Forage Disaster Program
  • Emergency Assistance for Livestock, Honeybees, and Farm-Raised Fish Program
  • Tree Assistance Program

The Emergency Conservation Program can provide funding and technical assistance in helping farmers and ranchers rehabilitate land damaged by a natural disaster. Emergency loans with low interests are also available to producers in areas which received a primary or contiguous disaster designation. When it comes to protecting non-insurable crops against natural disasters, you may apply to the Noninsured Crop Disaster Assistance Program.

Under the National Resources Conservation Service (NRCS), producers can take advantage of the Environmental Quality Incentives Program provides financial assistance to producers who agree to defer grazing on damaged land for two years. The NRCS can also assist local government sponsors with the cost of implementing conservation practices to address natural resource concerns and hazards via the Emergency Watershed Protection Program in the event of presidentially-declared natural disasters.

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If you are a farmer or rancher holding a federal crop insurance coverage, you are encouraged to contact your insurance agent to discuss your losses.

As for housing, the Rural Development can provide assistance for priority hardship application processing for single-family housing. They can also issue a priority letter for next available multi-family housing units when an area is under a disaster designation.

Reach out to your local USDA Service Center for more information on USDA’s disaster assistance programs.

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What is USDA’s Targeted Loan Funding?

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Miniature house

In a recent announcement, Colorado’s USDA Farm Service Agency (acting) executive director Jenny Peterson reminds the state’s farmers and ranchers to take advantage of the FSA’s especially targeted farm ownership and farm operating loans. These loans especially cater to underserved applications who have a hard time getting a loan anywhere else.

These loans are not limited to Colorado citizens. The FSA’s programs cater to the needs of borrowers nationwide.

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The agency is committed to support the state’s producers by providing them capital opportunities that they need to sustain their operations.

According to the US Department of Agriculture’s Economic Research Service, agriculture, food, and related industries contributed $992 billion to U.S. gross domestic product (GDP) in 2015. Without a doubt, the industry is a major contributor of revenue to the country. Thus, providing support and financial backing to these entrepreneurs must be one of the state’s foremost concerns.

This is exactly the efforts that the Colorado FSA wing is putting forward. For this fiscal year, the state’s FSA allotted $48,554,504 million worth of loans to hundreds of underserved beginning farmers and ranchers.

The mobilization of services not only helps these underserved groups roll out their own farm and ranch operations, it is also keeping the state’s agricultural hub productive, and serving the needs of the country as well as those of international demands.

Who are considered underserved applicants?

The USDA defines “underserved applicants” as those members of a group who are subjected to racial, ethnic, and/or gender prejudice primarily because of identifying to certain groups without considering their individual qualities.

These include women, African Americans, American Indians and Alaskan Natives, Hispanics and Asians and Pacific Islanders.

What are the eligibility requirements for these programs?

The agency has outlined certain standards that an applicant must meet to be approved for the program. They must have operated a farm for less than 10 years. They must actively participate in the farm or ranch operations, and must not own a farm greater than 30 percent of the average size farm in the county at the time of application.

Additionally, they must have participated in the business operations of a farm for at least three years out of the last 10 years prior to the date the application is submitted. If you are applying as an entity, all members of your organization must all be related by blood or by marriage and each must be eligible as beginning farmers.

Loan types

There are two types of direct and guaranteed loans:

a) Farm ownership loan

This loan type can be used to:

  • buy a farm or ranch
  • enlarge a farm or ranch
  • buy easements or rights of way
  • build, repair, or improve existing farm or ranch buildings
  • promote soil and water conservation
  • develop and pay closing costs

b) Farm operating loan

You may use this loan to:

  • buy livestock, farm equipment, fertilizer, and other necessary materials for farm operations
  • fund family living expenses
  • refinance debts
  • pay salaries
  • install and improve water systems

How are the loans repaid?

For direct operating loans, repayment is dependent on the collateral used to secure the loan but typically the repayment period may run from one to seven years.

Direct farm ownership loans cannot be financed for more than 40 years.

When it comes to interest rates, it is the lenders who regulate how much rates goes to guaranteed loans while those of direct loans are set periodically depending on the government’s cost of borrowing.

If you are interested, simply contact your local lender if they offer these special loan programs or you may visit your state’s FSA page to be adequately guided on how to initiate the process.

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Find Approved Lenders for Your USDA Loan

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Small Houses

Compared to other government-backed mortgages, it’s harder to find USDA lenders – much more the good ones. How do you find the right servicer?

 

After searching for viable mortgage products that suit your needs and your finances, you finally decide to get a USDA loan.

Considered one of the best mortgage programs available today, a USDA loan requires no down payment, fixed interest rates, has flexible credit guidelines making room for borrowers with low credit ratings, and has no minimum limit on purchase price.

Unfortunately, finding lenders who offer USDA loans may not be as easy as finding lenders for other government-backed mortgages such as VA and FHA loans.

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Important notes

Before you commit yourself to lender hunting endeavors, it’s important that you first realize that the USDA does not fund USDA loans (there are exceptions); they only insure them (or a portion of them). That means the department pays for all or part of the loan if you ever default on your USDA loan payments.

In exchange for the guarantee, the lenders make sure that only borrowers who meet the USDA’s guidelines are approved for the loan. Both the lenders and the USDA evaluates your application. However, lenders also have the right to turn down your application, even when you meet the USDA’s qualifications. This is an inherent right among lenders since it is their investment placed at stake, after all.

Knowing your loan type is also necessary before you initiate the process of finding a lender.

The USDA has two main loan products:

a) Direct loan – Available to borrowers who earn less than 50 percent of the area’s median income, the USDA’s Direct Loan program offers mortgage for the purchase, construction, and renovation of a property. The borrower must be someone who have exhausted all other loan options but weren’t able to get any, and must not hold any other housing loan for that matter. The loan funds directly come from the department, hence the name.

b) Guaranteed loan – The more common loan option which you can get from a private lender, a Guaranteed loan is available to borrowers who earn less than 115 percent of an area’s median income. You also cannot hold any other housing program, or able to obtain financing from other lending sources.

Other points of consideration

Aside from the important notes above, the following should also be taken into account before you apply:

The property must be located in a place designated by the USDA as rural. Take a look at the USDA’s map for rural-identified areas.

Because the USDA loan program is designed to cater to the needs of low-income buyers, a high income will not land you an approval on this opportunity. Your income is compared to the area’s average income to determine your eligibility. That said, you should also know that the department considers your household’s total income for the same purpose.

Where to find a USDA approved lender

You can start here. This contains a list of lenders approved by the department.

You can also ask your bank if they offer a USDA loan or if they can refer you to one.

You may contact the department as well for some recommendations of available lenders in your area.

Another alternative is to check your local pages, or ask recommendations from friends and family.

Before you settle in a choice, make sure you shop around first. Lenders may vary in their charges and interest rates. You can use these information to compare lenders and narrow down your choices the best option.

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