If you want to buy a farm or expand an existing farm, you need money to do so. The FSA, Farm Service Agency, offers two loan programs to help make this possible. Like any loan program, though, you probably worry about the down payment. What if you don’t have the funds to put down on a farm?
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The good news is that there is help for you. The FSA offers a couple of programs that help you get the funds you need to purchase a farm.
The Direct Farm Loan
Direct Farm loan is for those that don’t qualify for any other type of farm financing. As the name suggests, the financing comes directly from the FSA. You don’t go through a lender to get your funds – you go through your local branch of the FSA.
The Direct Farm Loan doesn’t require a down payment. This means you can borrow 100% of the cost of the farm. The Direct Farm Loan limit, however, is $300,000. Direct Farm Loans have a term of up to 40 years. You’ll pay the current FSA interest rate, which they publish on the 1st of each month.
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The Guaranteed Farm Loan
Guaranteed Farm Loan is another FSA loan, but you don’t go through the FSA to get it. Instead, you must find an approved FSA lender. The Guaranteed Farm loan requires just a 5% down payment from your own funds. The FSA also requires that you qualify for a farm loan equal to at least 50% of the cost of the farmland. The remaining down payment funds can come from the FSA Down Payment Loan.
Note that with the Guaranteed FSA loan, you do need 5% of the funds to come from your own money. For example, if you purchase land worth $400,000, you need at least a $20,000 down payment. The remaining 50% of the funds can come from the Down Payment Loan.
The FSA Down Payment Loan
The Down Payment Loan is for beginning farmers or minority farmers. It helps fund the purchase of farmland. This loan is a direct loan from the FSA, but it does require a 5% down payment from your own funds.
In order to be eligible for the Down Payment loan, you must prove that you can secure funding for the remaining 50% of the purchase price of the farm. The minimum interest rate you’ll pay on the Down Payment Loan is 1.5%, but the rates can change based on the market rates at the time of application.
You can apply for the FSA Down Payment Loan directly through your local branch of the FSA.
As you can see, the most you would need down on an FSA farm loan is 5% of your own funds. You can get the total of the other funds through one or more of the FSA loan programs. The programs have flexible guidelines and help beginning farmers secure the funds they need to start their own farm.
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