Farm Ownership Loans
Here are the numbers
USDA / FSA Farm Loans
Effective My 1 2025
| Program | Current interest rate | Notes |
|---|---|---|
| Direct Farm Ownership | 5.625 % | Standard 40-year term cap |
| Microloan – Farm Ownership | 5.625 % | Same rate, streamlined paperwork |
| Direct, Joint-Financing (50 / 50 with a commercial lender) | 3.625 % | FSA takes a junior lien position |
| Down-Payment (Beginning / SDA farmers) | 1.625 % | Fixed 20-year term on FSA portion |
| Guaranteed Farm Ownership | Set by lender, but may not exceed: • SOFR + 6.75 % (variable or < 5-yr fixed) • 5-yr Treasury + 5.5 % (≥ 5-yr fixed) | FSA only guarantees; it does not set the actual rate |
(Rates are reviewed and reset at the start of every month; check the FSA “Current Loan Interest Rates” page or your county office for updates.) Farm Service Agency
JHow the Direct Farm Ownership – Joint Financing (a.k.a. “Participation”) loan works
| Feature | What it means | Key take-aways |
|---|---|---|
| Basic structure | FSA funds up to 50 % of the purchase price or appraised value (max $600 k). A commercial lender, State program, Farm Credit, or even the seller provides the other ≥ 50 %. FSA’s lien is junior; the outside lender holds first position. | Lets you pair low-rate, 40-year federal money with a market-rate bank loan, reducing the blended payment. |
| Interest rate on FSA half | Automatically 2 percentage points below the regular Direct Farm Ownership (FO) rate, but never lower than 2.50 %. With May 2025 FO = 5.625 %, the joint-financing rate is 3.625 %. | Rate resets only once—at approval/closing it’s fixed for the life of the loan. Farm Service Agencyagcredit.net |
| Term & amortization | Up to 40 years on the FSA note (fully amortized). The commercial piece can use whatever term the lender is comfortable with (commonly 20–30 years). | Long amortization on the FSA side keeps payments down; the bank may choose a shorter schedule or a balloon. |
| Down-payment / equity | No statutory down-payment. In practice, many banks still want 5–15 % cash equity or additional collateral, but the FSA portion itself does not require cash down. | Makes large purchases possible when you have sweat equity but limited cash. |
| Eligibility | Same as other Direct FO loans: family-size farm, U.S. citizen/LRA, unable to get all needed credit elsewhere, acceptable credit history, and three years of farm-management experience (within the past 10 years) or approved substitutes. | Not limited to beginning farmers (unlike the Down-Payment program). Farm Service Agency |
| Use of funds | Buy or enlarge a farm, construct/improve dwellings or structures, soil- and water-conservation work, cover closing costs, purchase easements, etc. | Essentially any capital improvement tied to real estate. |
| Process | 1. Line up a tentative commitment from a bank/credit union/Farm Credit. 2. Submit FSA package (Form FSA-2001 + financials and business plan). 3. FSA underwrites and issues a conditional commitment. 4. All parties close simultaneously; bank’s mortgage records first, FSA second. | Expect 6–12 weeks from application to closing if your paperwork is complete. |
| Advantages | Lower blended rate, longer amortization on half the debt, bank in first position (so they’re more willing), no guarantee fee on FSA portion. | |
| Limitations | $600 k cap on the FSA share, full‐scope underwriting (cash-flow projections, collateral appraisal), junior lien means FSA can’t take first position if you later refinance. |
A quick payment illustration (for context)
| Component | Principal | Rate | Term | Monthly P&I |
|---|---|---|---|---|
| FSA share (50 %) | $400,000 | 3.625 % | 40 yrs | ≈ $1,580 |
| Bank share (50 %) | $400,000 | 6.5 %* | 30 yrs | ≈ $2,528 |
| Blended total | $800,000 | mix | — | ≈ $4,108 |
*Example bank rate; yours will depend on credit, collateral and market conditions.
That $1,580 portion stays fixed for four decades, cushioning you if commercial rates rise later.
Tips for lining one up
Shop the 50 % lender first. A written term sheet from a bank/Farm Credit speeds FSA approval.
Bring a solid business plan. FSA wants 1.1 × debt-service coverage; detailed projections carry weight.
Consider a guarantee on the bank’s half. If the commercial lender is skittish, they can request an FSA Guaranteed FO on their portion (separate program, separate fee).
Plan for closing costs. Title, appraisal, surveys, and attorney fees can run 1–2 % of purchase price; they can be financed if they fit within the 50 %/50 % split.
With those pieces in place, the Joint-Financing option can make an $800 k farm purchase feasible without the heavy cash down that conventional lenders usually require.