Making any large purchase is exciting and stressful, no matter what the investment is. Buying a farm is no exception. However, there are some tips you can follow to help make your farm application process go much smoother.
Application Process
As with any loan, you must fill out a loan application. This is going to be similar to filling out an application for a mortgage. You will need to provide documentation and proof of everything you allege on the application. This includes a verification of assets and earnings. In addition, there will be an appraisal of the property in which you are interested. Farm mortgage loans require a confirmation of the property value as well as making sure there are no liens against the property.
Earnings Requirements
Farm mortgage loans do have earning requirements. You also need to determine if you plan to maintain your current employment and earnings. If you plan to earn money from farming, you may need to have some other type of income. According to the USDA, half of all farms earn less than $10,000 from sales, 80% have less than $100,000 from sales, and only 8% have more than $500,000 in sales. If you are just getting started in farming and you are planning to earn a living from it, you may want to consider maintaining additional income in the short term. When you have wages from an employer, you must provide documentation about your earnings, as well as the amount of debt you carry. You will need to provide two years’ worth of documents and paystubs to a potential lender.
Down Payment and Credit
Farm mortgage loans do require a down payment, just as a mortgage does. One of the significant differences between a farm mortgage and a house mortgage is that a farm mortgage does not qualify for a low down payment. This means you need a down payment of at least 20%. If your primary residence is not on the farm, you need an even larger down payment, about 25% to 30%.
A farm is a significant commitment, not only for your time but also money. The application process may seem daunting, but if you understand these specifics about what you need when applying for farm mortgage loans, you can make the process feel much les stressful.