Tips for Financing Farm Property
Obtaining a mortgage from a bank for a house or condo is fairly straightforward in today's market. Financing a farm property can be more difficult and may take a few extra steps. Keeping the details of the transaction in mind will help facilitate an easy transaction should you require financing assistance with the purchase of farm land.
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Credit
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Your credit score will be a determining factor in whether you attain financing. Regardless of the type of land you wish to finance or what type of institution you will seek financing from, your credit will likely be an important factor in the financing decision. Any lender will need to know they will be paid back for the loan, and they will begin to make that determination by first examining your credit score and history of previously paid or unpaid credit accounts. Always protect your credit score by paying bills on time, and spend some time improving your credit score before applying for financing if possible.
Classification
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Be sure to verify the type of farm land classification before applying for financing. In searching for a lender, you will need to match up the type of financing provided by the lender to the type of property you seek to finance. The land may be classified as a ranch, private farm land, commercial farm land or agricultural farm land. Check the official documentation for your property and be sure you seek a lender who deals with that specific type. Some lenders may only deal with agricultural farm land and not ranch farms, while others may provide assistance with all types of properties.
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Banks and Private Lenders
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Many banks offer funding for farms and rural lands. Many banks, credit unions and private lenders specialize in financing farm properties, but the qualifications for approval may differ according to each individual lender. Once you make an inquiry with a financial institution, a loan specialist will notify you of the specifications required for a borrower's credit scores in addition to the minimum and maximum number of acres and any other specific details for loan approval. Sometimes a local bank or credit union has greater flexibility in lending requirements for a farm property located in the community served by that institution than a national bank. Private financing through hard money lenders and individual investors often comes with higher interest rates but might also offer more flexible approval terms.
Farm Credit System
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The farm credit system was established to support U.S. agriculture. Congress established the Farm Credit System in 1916 to provide credit for United States' farmers and ranchers. The Farm Credit System is a network of nationwide credit unions and other financial organizations that work together to provide over $160 billion in loans and leases to farmers, ranchers, rural homeowners, aquatic producers, timber harvesters, agribusinesses, and agricultural and rural utility cooperatives. You may be able to obtain financing for a working farm by contacting the Farm Credit System and requesting details.
USDA
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USDA loans can be used to purchase farm land, equipment, livestock and supplies. The United States Department of Agriculture regularly provides funding for family-size farmers and ranchers who have difficulty securing commercial credit from a bank or from the Farm Credit System. USDA loans are geared toward supporting American industry through family farming, and the loans can be used to purchase land, livestock and equipment.
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References
- Photo Credit farm image by Richard McGuirk from Fotolia.com credit 3d sign image by onlinebewerbung.de from Fotolia.com The Farm image by bonjo from Fotolia.com bank image by Pefkos from Fotolia.com Agriculture image by Waring D from Fotolia.com farm in the fall image by Diane Stamatelatos from Fotolia.com
