When you need a farm loan, it may not be as easy to find a lender as it is when you buy a home. You just walk into any bank and ask for a farm loan. The banks must be FSA-approved, which can be hard to find. The
FSA does allow banks without agricultural experience to write FSA loans, but their experience is limited, which may not be something that you want.
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Before you choose a lender for your FSA loan, consider the following steps.
Ask About Experience
When you shop for a farm loan, you should interview banks as you would interview for a job. You want to know that the bank can handle the task at hand. If you are just starting out and are buying your first piece of land yourself, you may not have as extensive needs as the experienced farmer that knows he will expand in a few years.
Regardless, ask the lender about their experience with farm loans, especially FSA guaranteed loans. These government-backed loans have specific guidelines and requirements in order for you to get approved. If you choose a lender that doesn’t know what they are doing, it could leave you without your farmland and even losing money.
Ask About Their Level of Support
Loan servicing is one area of support you’ll want to consider. Does the lender work well with clients? Are they able to answer all questions and come up with solutions to the issues at hand? What about when farmers experience a downturn, such as can occur during a drought? Does the bank have a plan in place to support farmers in this situation?
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Again, if you choose an inexperienced bank that doesn’t understand the way farming works, you may not receive the level of support that you need. If you choose a bank that has a lot of capital and has experience in farm loans, you may find the support helpful, giving you options during your downtime.
What are the Underwriting Requirements?
The FSA provides FSA-approved lenders with specific guidelines they must follow. But because the loans are guaranteed, the lender does the underwriting and funding. If a lender feels that there’s reason to make the requirements a little stricter, they are able to do so. This could make it harder for you to get a loan from them though.
Talk to various lenders about their overlays or additional requirements. Are they something that you can meet or do you need a more flexible lender? These questions are best asked up front so that you know what you need to do. There’s nothing worse than wasting weeks in the underwriting process only to find out that you don’t meet the lender’s additional requirements.
Using the FHA’s List
If you want to make things easier on yourself, you can use the FSA’s list of
approved lenders. While the list may be up-to-date, it’s always worth calling and asking lenders about their FSA status before moving forward with the application.
The right lender for your FSA loan is the one that offers the loans you need along with the level of service you desire. As with any loan, make sure that you shop around to find the lender that offers the best interest rates and terms to save you the most money on your loan.
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