In the first segment of this two-part discussion about USDA Farm Loans, all the basics of the USDA Direct Farm Ownership Loan have been tackled over.
As a quick recap, the USDA Direct Farm Ownership loan:
- Is directly funded by the USDA through the Farm Service Agency (FSA). Its budget comes from the annual appropriation set by the Congress.
- Can be used in a variety of ways, including buying new farms and ranches, and expanding existing ones.
- Has three major types: 1. Regular Financing, 2. Joint Financing, 3. Down Payment Financing
- These are certain eligibility requirements that an applicant(s) need to meed in order to get the financing they need.
In part 2, we will discuss all the basic knowledge there is to know about the other type of USDA Farm Loan, the USDA Guaranteed Farm Loan.
Its ultimate purpose is still the same as the Direct Farm Loan and that is to provide farmers, new or tenured, the access to credit in order for them to build or purchase new farms or continue and expand their operations.
This farm financing program is made available by the USDA through the FSA.
USDA Guaranteed Farm Loans
Unlike the direct farm loan, the Guaranteed Farm Programs are funded by USDA-approved commercial lenders and banks. The USDA makes sure that the terms are reasonable for both the borrowing farmers and ranchers and the lending party.
By guaranteeing these farm loans, the FSA provides commercial lenders a safe cushion from possible financial loss. The FSA ensures up to 95 percent of the guaranteed farm loan.Get Matched with a Lender, Click Here.
The Four Types of Guaranteed Farm Loans:
Basically, this type of guaranteed farm loan can be used to fund the purchase of a new farm or ranch. It can also be used to buy additional acreage for the expansion of an existing farm or ranch.
This type of loan may finance developments needed to continue and/or improve farm or ranch operations. The money can also be used to purchase, build or renovate service infrastructures and other facilities that are vital to the operation of the said farms and ranches.
Land Contract Guarantee
The purpose of this guaranteed loan is to finance the purchase of a farm on a new land contract with a purchase price of up to $500,000.
These are the two types under this program: the Prompt Payment Guarantee and the Standard Guarantee.
This guaranteed loan allows farmers and ranchers who want to implement conservation practices on their land gain access to the necessary credit.
These conservation measures have to be approved by the Natural Resources and Conservation Service ( NRCS). These practices may involved but not necessarily limited to the reduction of soil erosion, improvement of water quality and the promotion of organic and sustainable farming practices.Connect with a Lender, Click Here.
How Do You Qualify for a USDA Guaranteed Farm Loan?
- The applicant(s) must exhibit ability to take legal responsibility for a loan
- Must be able to show proof of adequate credit history. This will depend on the lender’s requirements.
- Must not have caused the agency any financial loss by debt forgiveness from April 5, 1996, onwards. Prior to this specified date, there must be no more than 3 occasions of debt forgiveness. This applies to both FSA direct and guaranteed loan.
- Must not be delinquent on any Federal debt.
- Must be the owner-operator or the tenant-operator of a family farm after the closing
- For Ownership Loan, the producer must own the farm after the loan is closed. For Operating Loan, the producer must be the operator of a family farm after closing.
- Must meet the citizenship requirements set by the USDA FSA.
- The applicant must have tried with no luck in obtaining any other financing without FSA guarantee.
What are the Maximum Loan Limits:
For Farm Ownership Loans, Operating Loans and Conservation loans, the FSA can guarantee up to $1,399,000. This maximum loan limit is adjusted for each fiscal year based on inflation. For Land Contract Loans, the loanable amount may not exceed $500,000.
These are some of the basic information about the USDA Guaranteed Farm Loans. You may read more about the Direct Farm Loan Program by clicking here. For more information about each program, you may speak with a USDA-approved lender or visit the USDA website.Click to See the Latest Mortgage Rates»