How to Finance Farm Land
Farm land is an investment for both private and commercial use. Growing crops, running a poultry business and raising livestock are some common uses for farm land. Financing farm land requires following strict guidelines for borrowers, because lenders consider financing land more risky than financing dwellings. This is because the borrower often does not live on the property, which makes it easier for him to default and walk away. Financing farm land generally requires a down payment, and the loan carriers a higher interest rate. Finding a loan to finance farm land requires time and research.
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Instructions
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Gather your tax documents, income statements and employment verification when preparing to search for a loan for farm land. If you are self-employed, provide your last two years' tax statements.
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Compose a purchase contract with the seller of the farm land. Be sure to include the sales price, financing contingency, seller's name, buyer's name and any other terms agreed upon by both parties. Have each party sign and date the contract.
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Get a survey of the farm land you plan to buy. Make sure the survey is recent and completed within one year. If there is not a recent survey available, have one done.
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Contact a local bank that is familiar with property in your area. Local banks have the ability to lend money via an in-house loan, unlike mortgage companies. Farm loans are secured by the United States Department of Agriculture (USDA) through the Farmer Mac program in some areas. Contact them by calling 800-879-3276 to find a lender. Also, contact a land bank in your area that specializes in farm-land loans, such as the Federal Land Bank in Alabama.
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Complete an application for the loan to purchase farm land. Provide your personal information, such as name, address, Social Security number and income source. Also, supply the lender with a list of your assets and liabilities. If you plan to develop the land and use it for commercial purposes, tell the lender your business ideas.
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Sign the loan documents and supply the required down payment. Generally, the down payment for a farm-land loan is around 20 percent of the total loan amount. Provide the down payment in the form of a cashier's check.
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- Photo Credit farm image by Photoeyes from Fotolia.com
