The hurdle of down payments is not exclusive to homebuyers. Prospective farm owners and ranchers too don’t have it easy getting a farmland. The USDA Farm Service Agency has a special down payment loan program as an option for eligible borrowers.
Are you eligible for an FSA down payment loan? Find out about its qualifications, requirements and more.
Find a USDA-approved lender here.
Rising Agricultural Land Values
The average farm real estate (buildings and land) in the U.S. was valued $3,080 per acre for 2017, a 2.3% increase from 2016, according to the USDA’s Land Values 2017 Summary as of August 2017.
It was in the Corn Belt region where the most expensive farm real estate was found, valued at $6,260 per acre. On the opposite scale was the Mountain region whose farm per acre value was at $1,130.
On a regional basis, farm real estate values ranged from an 8.7% increase in the Pacific Region to a 1.8% decrease in the North Plains region.
Since 2003, the price per acre of farms in the U.S. has been on the rise. If you want to own a farm, where do you get help in buying one?
Eligibility for FSA Down Payment Loan
If you meet the following requirements, you could qualify for a special down payment loan from the FSA.
First off, participants must be:
- Beginner farmers and ranchers defined as an individual or an entity who has not operated a ranch or farm, or who has operated a farm for not more than 10 years.
- Socially disadvantaged farmer or ranchers as those who have been subjected to racial or ethnic prejudice because of their membership in a group. These groups may include women and minority farmers.
Notably, these individuals are eligible for targeted farm funding where this special down payment loan program falls under.
The down payment loan is structured as a tie-up between public and private lenders whereby FSA provides a guarantee. Take a look at the features/requirements of the down payment loan and the private financing:
- A cash down payment of 5% of the purchase price.
- A maximum loan amount is $225,000. It must not exceed 45% of the least of (i) the purchase price of the farm, or (ii) its appraised value or (iii) $500,000.
- The loan must be repaid in 20 years.
- The interest rate on the down payment loan is 4% below the interest rate on direct farm ownership (FO) loans but not lower than 1.5%.
- The remaining financing (50%) can be sourced from a private or commercial lender.
- The FSA will guarantee up to 95% of the financing and will not require the private lender to pay a guarantee fee.
- The loan term of the private financing is 30 years at the minimum. It must not have a balloon payment due within the first 20 years of the loan.</li.
Retiring farmers may also use the loan to facilitate the transfer of farm ownership to future generations.
In sum, these down payment loans are not 100% financing loans. You need a 5% cash down payment and may have to source the remaining 50% of the purchase price.
But with their low interest rates and FSA’s guarantee, down payment loans can be an option for targeted farmers.
You can inquire with your local FSA office or the FSA website about these down payment loans.