Last Updated February 1, 2007
Downpayment Farm Ownership Loan Program
Offering loans for beginning farmers and ranchers and purchase options on inventory farmland
The Farm Service Agency (FSA) has a special down payment farm ownership (FO) loan program to help beginning farmers and ranchers to buy a farm or ranch. This program also helps retiring farmers transfer their land to a future generation of farmers and ranchers.
FSA provides direct and guaranteed loans to beginning farmers and ranchers who are unable to obtain financing from commercial credit sources. Each fiscal year, FSA targets a portion of its direct and guaranteed operating loan (OL) funds to beginning farmers and ranchers.
In fiscal year 2003, the obligations incurred for down payment FO loans exceeded $8.1 million. In addition, FSA advertises acquired farm property within 15 days of acquisition. For the first 75 days after acquisition, eligible beginning farmers and ranchers are given first priority to buy these properties at the appraised market value. If more than one eligible beginning farmer or rancher offers to buy the property, the buyer is chosen randomly.
Application and Financial Information
Apply for direct loan assistance at the FSA
county office serving the county where the operation
is located or at a USDA Service Center. For
guaranteed loans, applicants must apply to a commercial
lender who participates in the
Guaranteed Loan Program. Local FSA offices have
lists of participating lenders.
Maximum amounts of indebtedness are:
- Direct FO or OL: $200,000
- Guaranteed FO or OL: $782,000
Beginning farmer or rancher applicants may choose to participate in a joint financing plan that is also available to other applicants. In this program, FSA lends up to 50 percent of the amount financed, and another lender provides 50 percent or more. FSA will charge a reduced interest rate on the loan.
Eligibility, Uses, and Restrictions
A beginning farmer or rancher is an individual
or entity who (1) has not operated a farm or
ranch for more than 10 years; (2) meets the loan
eligibility requirements of the program to which he/she is applying; (3)
substantially participates in
the operation; and, (4) for FO loan purposes, does
not own a farm bigger than 30 percent of the
average-size farm in the county.
To qualify:
- An applicant must make a cash down payment of at least 10 percent of the purchase price.
- FSA may provide a maximum amount equal to 40 percent of the purchase price or appraised value, whichever is less. The term of the loan is 10 years at a fixed interest rate of 4 percent.
- The remaining balance may be obtained from a commercial lender or private party. FSA can provide up to a 95 percent guarantee if financing is obtained from a commercial lender. Participating lenders do not have to pay a guarantee fee.
- The purchase price or appraised value, whichever is lower, may not exceed $250,000.
Note: Applicants for direct FO loans must have participated in the business operations of a farm or ranch for at least 3 of the past 10 years. If the applicant is a business entity, all members must be related by blood or marriage, and all stockholders in a corporation must be eligible beginning farmers or ranchers.
Contact
FSA is organized on a national, state, and county
basis. Applicants apply directly through the county
or USDA Service Center. Individuals can locate the
nearest FSA office by checking in the telephone
white pages under U.S. Government, Department of
Agriculture, Farm Service Agency.
James F. Radintz, Director
National Program Office
Farm Service Agency
Farm Loan Programs Loan Making Division
14th & Independence Ave., SW, Stop 0522
Washington, DC 20250-0522
Phone: (202) 720-1632; Fax: (202) 690-1117
Internet
www.fsa.usda.gov
