When Can You Use a USDA Loan to Buy a Horse Farm?
Buying a farm can be a very large and intimidating purchase. With such large land sizes, getting a mortgage loan seems unavoidable. Unfortunately, getting a mortgage is expensive and difficult. Luckily, you can get a United States Department of Agriculture (USDA) sponsored loan with many benefits that make getting a mortgage much easier. As part of the Rural Development Guaranteed Housing Program, individuals in rural areas can use USDA loans for any property type.
What Does the USDA Do?
The USDA oversees many different programs including programs specifically meant for horse farm loans. Specifically, the USDA’s Farm Service Agency (FSA) provides many types of farm loans. For example, you can use a horse farm ownership loan to purchase or expand a horse farm or ranch, a microloan to help small and beginning horse property owners, or a youth loan, which helps people aged 10-20 with their educational agricultural projects. There are many more types of loans, but what you’re looking for is how to buy a farm using one of these loans, specifically the horse farm ownership loan. You can get this loan by going to a USDA-approved lender and it will cover up to 100% of your financing needs. At a maximum loan amount of $600,000, you can afford a sizable property.
But before you contact a loan officer, you should first make sure that you fulfill the USDA eligibility requirements. There are many requirements that you may not fulfill, so it’s important to check beforehand. The most important qualification is that you meet your county’s income requirements. Your household income must be less than 115% of your county’s median income. Luckily, the other eligibility criteria for a USDA loan are very easy to fulfill. You must classify the property as your primary residence, your county’s population must be less than 20,000, you must be a US citizen or permanent resident, and your debt-to-income ratio must be less than 41%. There is no credit score requirement, but the loan application process and your mortgage terms may vary depending on your credit history.
With a direct or guaranteed horse farm ownership loan, the maximum mortgage term is 40 years and there is an additional managerial experience requirement. To ensure horse farms are being properly managed, congress wrote that you must have at least 3 years of horse farm management experience that was acquired within the 10 years preceding the loan. Managerial experience can include many different things, but generally, this can be split up into business management experience, military experience, farming experience, and farming education. You can also reduce the managerial experience requirement to 2 years if you studied agriculture in a post-secondary institution, have significant business management experience, or leadership experience in the military.
Applying for a USDA Loan
Once you verify that you fulfill the minimum requirements, you’ll have to go through the pre-approval process where your lender will check all your financial information including tax returns, debt, income and bank statements, social security, and your government-issued ID. Once you are approved for a farm ownership loan, you can do many things with the money, but most of the time, you would use it to purchase a farm or ranch. With a USDA loan, you’ll be able to purchase more acres of property than a conventional or FHA loan. Generally, you’ll be limited to 10 acres or less, but there is no official maximum for the number of acres you can purchase. However, the value of the land cannot exceed 30% of the total value of the property.
Once you are ready to get your loan, contact your nearest farm loan officer or farm loan manager. They can help you complete the FSA loan application process and give any other assistance required. You can then submit an FSA loan application form and any other required documentation to the USDA Service Center or FSA County Office. These programs are specifically designed to help individuals own residential property and make the purchase barrier much easier to overcome. If you are eligible for a USDA loan, then choosing it is probably your best option, so take the time to learn about what’s available to you.