If you are in need of money to buy a farm, you may apply for a loan with the FSA. The FSA Direct Farm loans provide funds directly from the FSA. They offer flexible underwriting requirements and flexible terms. Understanding how to complete the FSA application can help you get through the process with ease.
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Determine Your Reason for the Loan
The first step is to figure out why you need the loan. FSA loans are only for specific uses. Does your reason fall under any of the following?
- Purchase farmland
farm equipment or livestock
- Expand an existing farm
- Refinance existing farm debt
Farm loans cannot be used for personal use or to pay for any non-farm related business.
Completing FSA Forms
Once you know you need the loan for an acceptable FSA reason, you’ll need to complete the proper
- Form FSA 410-1 – This is the loan application directly from the FSA. If there is more than one person on the loan, you’ll need to provide information for each person on it.
- Form FSA 2037 – This is a worksheet/balance sheet for your farm business.
- Form FSA 2038 – This is a projected income worksheet for your farm business.
- Form FSA 440-32 – This is the official form used to verify your assets and debts.
- Form FmHA 1910-5 – This is the form used to verify your employment.
You must complete each of these forms to start the farm application process.
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Verifying Your Information
The application is how the FSA gets the information they need about you. Next, you must provide them with a variety of documents to prove the information that you provided.
You’ll start with a written explanation of your farm business. This lets the FSA know what you do or plan to do with your farm. You must then provide written documentation of the experience and/or training to that you have to run the farm business as you just explained. The FSA wants to see that you have at least one year of experience running, managing, or operating a farm. They also want to see your production history over the last five years. If you haven’t been farming for five years, you can provide the production history for as long as you’ve been a farmer.
Next, you’ll need to provide proof of your income and assets for as much as five years. The FSA wants to see that you have the income and assets necessary to start and run a farm. They will ask for your tax records as well as bank statements to verify this information. If you have any leases on any equipment or land that could affect your farm ownership/operation, you’ll need to provide a copy of those as well.
Finally, you must provide proof that you don’t qualify for any other type of financing. Some farmers have to provide the proof with a rejection lender from other lenders. Sometimes the FSA doesn’t require this, though, depending on your credit/income situation.
Making Your Appointment
Once you complete the required paperwork and have the proper documentation, it’s time to call the FSA and make your appointment. First, you’ll need to find your local FSA office and then you can make an appointment to go in and officially apply for the loan.
The FSA will then process your application. The FSA is good about keeping you in the loop, sending your written confirmation of where you are in the process. They let you know when they receive the application, when it is reviewed, and of course, the decision made. If the FSA cannot provide you with a loan, you will receive the reasons they cannot write the loan so that you can fix the issue and try again in the future.
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