Direct Ownership FSA Loans: Benefits

FSA loans may either be guaranteed by the Farm Service Agency or directly extended through the agency. When a loan is guaranteed, it comes through a private lender, but the FSA promises to purchase it in case of default. When a loan is given directly by the FSA, the loan is government funded. One type of loan extended in this fashion is the Direct Ownership FSA Loan.

What is the Direct Ownership FSA Loan?

The FSA aims to encourage more producers to build sustainable personal and commercial farms through agricultural loans. This loan is specifically aimed at helping beginning farmers and ranchers purchase and own land. The loan is given to those individuals who do not otherwise qualify for private loans. This means the FSA requires a person attempts to secure a private loan first. If the person is denied funding from a private source for the rural loan, then the FSA will consider making a direct loan through the direct ownership FSA loan program.

Who Qualifies?

All government loans will come with some additional qualifications over private loans. As already mention, you must not be able to find funding through a private source. Additionally, this must be your first land purchase. If you own other farms or ranches, you will not be eligible for direct funding through this program. Even though you must not be a land owner, you must have at least 3 to 10 years of farming experience. This does not need to be on a commercial property; family-farming experience will qualify you for the loan program.

What are the Main Benefits of the Program?

Qualifying for a federal loan program will save you money over going strictly through a private lender. Even if the government guarantees your loan, your interest rates will be lower. If you can qualify for a direct loan, however, you will have the lowest rates available. While the government loan program has a number of restrictions, your financial stability is not as big of a factor in the application process as it would be for a private loan. The FSA is willing to assist you in getting funding you cannot get anywhere else; this means you do not have to meet the same down payment and asset requirements a bank will look for. You will need to have good credit, but it is okay if you do not have the liquidity to purchase a lot of the land outright.

How Do I Apply?

Most applications are available on the FSA website. You may also contact your local FSA or USDA office to ask more about the program in your area. Visit this link to the USDA area map to find a USDA office near you. Whenever you apply for a loan, treat the process with the highest degree of professionalism. You will be judged on the appearance of your application just as much as its contents. Pay attention to details, be honest, and make sure you do not leave any necessary items out of the application.