Last Updated January 26, 2010
Downpayment Farm Ownership Loan Program
Offering a special loan program to assist beginning farmers and ranchers and Socially Disadvantaged applicants purchase a farm
The Farm Service Agency (FSA) has a special down payment farm ownership (FO) loan program to help beginning farmers and ranchers and socially disadvantaged applicants (SDA) buy a farm or ranch. This program also helps retiring farmers transfer their land to a future generation of farmers and ranchers.
Application and Financial Information
FSA may provide a maximum amount equal to 45 percent of the purchase price or appraised value, or $500.000, whichever is lower. The term of the loan is 20 years at a fixed interest rate 4 percent below the direct FO rate and not lower than 1.5 percent. The repayment period is scheduled in equal, annual installments for a term not to exceed 20 years.
The maximum loan amount financed by FSA is $225,000. A producer can apply for beginning farmer and rancher downpayment FO loan assistance at the FSA county office serving the county where the operation is located or at a USDA Service Center.
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) materially and substantially participates in the operation of the farm; and, (4) for FO loan purposes, does not own a farm bigger than 30 percent of the median acreage of the farms in the county. A Socially Disadvantaged applicant includes American Indians, Alaskan Natives, Asians, African Americans, Native Hawaiians or other Pacific Islanders, Hispanics and women.
- An applicant must make a cash down payment of at least 5 percent of the purchase price.
- Financing provided by FSA and all other creditors must not exceed 95% of the purchase price or appraised value of the farm or ranch, whichever is the lessor, and 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.
- Financing from participating lenders must have an amortization period of at least 30 years and cannot have a balloon payment due within the first 20 years of the loan.
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 must be beginning farmers or ranchers. For entity SDA applicants, the majority interest must be held by socially disadvantaged individuals. Also, all entity members must materially and substantially participate in the operation of the farm or ranch.
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.