Blog > How To Finance A Farm Or Land Purchase
How to finance a land or farm purchase:
Buying vacant land or a farm is a big investment, and it's important to have a plan in place for how you're going to finance the purchase. There are a number of different loan products available for farm purchases, so it's important to shop around and compare rates and terms to find the best option for your needs.
Here are some things to consider:
- Down payment: Most lenders will require a down payment of at least 20% for a land or farm purchase. However, some banks may have special financing options for beginning farmers, borrowers with excellent credit, etc.
- Interest rate: The interest rate on your loan will have a big impact on your monthly payments and the overall cost of the loan. Be sure to compare interest rates from different lenders before you choose a loan.
- Repayment term: The repayment term is the amount of time you have to repay your loan. Longer repayment terms will result in lower monthly payments, but you'll pay more in interest over the life of the loan.
Types of loans available for farm purchases
There are a number of different types of loans available for farm purchases, including:
- Farm Service Agency (FSA) loans: FSA loans are government-backed loans that are available to farmers and ranchers who are unable or choose not to obtain financing from traditional lenders. FSA loans offer competitive interest rates and flexible repayment terms.
- Farm Credit System (FCS) loans: FCS loans are provided by a network of cooperative lenders that specialize in agricultural financing. FCS loans offer a variety of loan products for farm purchases, including operating loans, farm ownership loans, and land development loans.
- Local Community Banks: Community banks also offer loans for farm purchases. However, smaller community bank loans may have higher interest rates and shorter repayment terms than FSA or FCS loans. Community banks often do not have as many loan approval requirements and can work with borrowers with lower credit.
- Seller financing: In some cases, the seller of the land or farm may be willing to finance a portion of the purchase price. Seller financing can be a good option if you have difficulty qualifying for a traditional loan.
How to apply for a farm loan
To apply for a farm loan, you'll need to provide the lender with a variety of information, including your financial statements, business plan, and collateral information. The lender will also need to appraise the land or farm to determine its value.
Once you've submitted all of the required information, the lender will review your application and make a decision. It is a good idea for most borrowers to go ahead and get pre-approved with their bank before they get to serious about trying to buy.
Tips for financing a land or farm purchase
Here are a few tips for financing a farm or land purchase:
- Shop around and compare rates and terms from different lenders. Not all lenders are equal, find one that provides you with the things that are important to you as a borrower.
- Be prepared to provide the lender with a variety of information, including your financial statements, business plan, and collateral information. Have these things somewhat lined out ahead of time to help streamline the process.
- Get pre-approved for a loan before you start shopping for land or a farm. This will give you an idea of how much you can afford to borrow and make the buying process go more smoothly. When the right farm hits the market, you will be ready to write up an offer.
- Consider working with a farm real estate agent who specializes in financing farm purchases. A farm real estate agent can help you find the right lender and get the best possible loan for your needs.
Over the years I have had the pleasure of working with hundreds of lenders from every size of lending institution. Please reach out to me and we can discuss what type of loan product will fit you the best, and I can point you in the direction of several lenders that can help. Having a realtor, lender, and borrower all working together ensures a smooth process and helps you secure the property. Finding the right financial institution is just as important as finding the right farm. I can help you with both!
Toby Prussman- President | Land Specialist
Premier Land & Auction Group LLC
816-385-7802
https://premierlandsales.com/tobyprussman
Brokered By: Real Broker LLC