FSA’s Direct Farm Ownership loans are used to:

• buy a farm or ranch
• enlarge an existing farm or ranch
• make a down payment on a farm
• purchase of easements
• construct, purchase or improve farm dwellings, service buildings or other facilities and improvements essential to the farm operation
• promote soil and water conservation and protection
• pay loan closing costs

There are 3 types of Direct Farm Ownership Loans: "regular," joint financing, and downpayment depending upon individual needs. FSA also offers a Direct Farm Ownership Microloan for smaller financial needs.

Also known as a participation loan, joint financing allows FSA to provide more farmers and ranchers with access to capital. FSA lends up to 50 percent of the cost or value of the property being purchased. A commercial lender, a State program, or the seller of the farm or ranch being purchased provides the balance of loan funds, with or without an FSA guarantee.

Available only to eligible beginning farmers and ranchers and/or minority and women applicants, a Down Payment loan is a special type of Direct Farm Ownership loan program that partially finances the purchase of a family size farm or ranch. Beginning farmers do not have to identify themselves as a minority or woman, and minority and women loan applicants do not have to be beginning farmers.

The Down Payment Farm Ownership loan is the only loan program that does not provide 100 percent financing. Down Payment loans require loan applicants to provide 5 percent of the purchase price of the farm.

As established by the Beginning Farmer definition, loan applicants interested in the Down Payment loan may not own more than 30 percent of the average size farm at the time of the application. The applicant may exceed the 30 percent after the loan is closed. The most current Census of Agriculture data is used in this calculation.

The maximum loan amount for a "regular" Direct Farm Ownership loan is $300,000. The maximum loan amount for a Joint Financing or Participation Farm Ownership loan is $300,000.

Direct Farm Ownership Down Payment maximum loan amount works differently. The maximum loan amount under this loan program will not exceed 45 percent of whichever is the lesser amount of:

• the purchase price;
• the appraised value of the farm being purchased; or
• $667,000, subject to the direct Farm Ownership dollar limit of $300,000.

The balance of the purchase price not covered by the down payment loan and applicant down payment may be financed by a commercial, cooperative, or private lender, including the seller. The financing provided by FSA and all other creditors cannot exceed 95 percent of the purchase price. An FSA guarantee may be used if financing is provided by eligible lenders.

The interest rate charged is always the lower rate in effect at the time of loan approval or loan closing for the type of loan wanted.  Interest rates are calculated and posted the 1st of each month.

The maximum repayment period for the Direct Farm Ownership loan and the Joint Financing loan is 40 years.

The repayment term for FSA’s portion of a Down Payment loan is 20 years. The non-FSA financing portion is required to be at least a 30 year repayment period with no balloon payment allowed within the first 20 years of the loan.

There are 3 different types of qualifications for a direct farm ownership loan which need to be met:

• eligible farm enterprise
• general eligibility requirements
• farm management experience

First, the operation must be an eligible farm enterprise. Farm Ownership loan funds cannot be used to finance nonfarm enterprises, such as exotic birds, tropical fish, dogs or horses used for non-farm purposes (racing, pleasure, show and boarding).

All loan applicants must be able to meet the following general eligibility requirements:

• must not have Federal or State conviction(s) for planting, cultivating, growing, producing, harvesting, storing, trafficking, or possession of controlled substances
• have the legal ability to accept responsibility for the loan obligation
• have an acceptable credit history
• be a United States citizen, non-citizen national or legal resident alien of the United States, including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and certain former Pacific Trust Territo
• have no previous debt forgiveness by the Agency, including a guarantee loan loss payment
• be unable to obtain sufficient credit elsewhere, with or without an FSA loan guarantee
• not be delinquent on any Federal debt, other than IRS tax debt, at the time of loan closing
• not be ineligible due to disqualification resulting from Federal Crop Insurance violation
• be able to show sufficient farm managerial experience through education, on-the-job training and/or general farm experience, to assure reasonable prospect of loan repayment ability
• must be the owner-operator of a family farm after loan closing

Farm Ownership loans also require all loan applicants to have participated in the business operations of a farm or ranch for at least 3 years out of the 10 years prior to the date the application is submitted. This requirement is established by Congressional law and cannot be waived. Applicants also must be able to show documentation that their participation in the business operation of the farm/ranch was not solely as a laborer.

Farm management experience for a Direct Operating Loan and a Direct Farm Ownership loan are vastly different. Under the Direct Farm Ownership Loan program, farm management experience involves all aspects of farm production and such day-to-day responsibilities as deciding crop rotations; when to cull livestock and which livestock to cull; selecting and purchasing breeding or feeding stock; feed formulations; making decisions on the purchase, repair and leasing of equipment; handling transport of grain to grain companies, drying or storage centers, and to buyers; outbuilding and facility maintenance, making decisions regarding chemical and fertilizer usages; marketing and marketing strategies; making short, intermediate and long range goal planning; and the list continues.

With organic operations, farm management may include such responsibilities as insect, disease, nematode and weed management strategies and other management preferences; managing crop rotations and establishing rotation procedures; intercropping and crop sequencing;manage upkeep of farm equipment and making decisions on purchasing, replacing or leasing equipment;  planning and making financial decisions about such items as energy use or environmental and health issues associated with urban farming; allocating resources such as labor and machinery; marketing and marketing strategies; short, intermediate and long-range goal planning, irrigation planning and implementation; and the list goes on.

FSA does not use credit scores. Loan applicants are expected to have acceptable repayment history with other creditors, including the Federal Government. Loan applicants are not automatically disqualified if there are isolated incidents of slow payments; no credit history; or if it can be shown that any recent undesirable credit problems were temporary and beyond a loan applicant’s control.  "No history" of credit transaction by a loan applicant does not automatically indicate an unacceptable credit history.

Many answers are found in our booklet, “Your Guide to FSA Farm Loans" (pdf, 3.47MB). It is also recommended that you call and make an appointment with your nearest Farm Loan Officer or Farm Loan Manager. Agency officials are required to:

• help loan applicants complete FSA forms and gather information necessary for a complete application;
• explain the application procedure, process, and the requirements for a complete application;
• assist loan applicants in completing FSA forms and identifying sources of information needed for a complete application, if assistance is requested;
• inform loan applicants of other technical assistance providers who may be of assistance at minimal or no charge. Some examples include, and are not limited to, the Cooperative Extension Service, non-profit organizations and institutions, the Intertribal Agriculture Council, and other similar organizations; and
• advise applicants of alternatives that will help overcome any possible barriers to being determined eligible for an FSA loan.

Advice for First Meeting with a Farm Loan Officer

1. Have a general idea of what it is you want to do and be able to identify your goals. What type of operation do you have or want to have? What do you need to operate that farm or ranch? How will you market your product(s)? What type of loan(s) will you need? How much do you need? What are your projections?
2. Good recordkeeping is very important. If you do not have your records organized, it is a good idea to try and put all your income and expenses into an understandable format. It does not have to be fancy. Also, what is happening inside the household is just as important as your business needs. Expenses such as food, clothing, mortgage or rent, insurance, taxes, medical costs, credit card payments, education expenses, and other consumer debt are part of the farm plan calculations. Know your costs. Bring your records with you.
3. If you do not have complete financial or production records, it is best to present your farm business plan as realistically as possible. If your expected prices or yields exceed normal industry standards, it will be difficult for you to support your data.
4. Remember to bring your tax returns for the last 3 years; your last few pay stubs if you have off-farm income; and your most recent credit card statements.
5. If you want a farm ownership loan, you will need to bring a signed purchase option, contract to buy, or other similar form.
6. Bring copies of any written leases to the office with you if you are leasing land or equipment.

We encourage you to contact your local office or USDA Service Center to learn more about our programs and the information you will need for a complete application. You should find a listing in the telephone directory in the section set aside for governmental/public organizations under the U.S. Department of Agriculture, Farm Service Agency.