Summary. usda farm loans are made by private lenders to smallholders who usually grow the majority of the nation’s crops. The USDA supplies more funding to rural than urban areas because of the special needs, the country faces as a result of its history. Most traditional lenders do not specialize in helping farmers finance their agricultural activities. The USDA farm loans programs help improve the financial status of the nation’s farmers and the rural community at large.
A farmer’s credit score plays a vital role in the approval process of a USDA loan. The agency evaluates a borrower’s credit rating on three factors: payment history, current income, and ability to repay the loan. A good score allows borrowers to secure low interest rates and flexible repayment plans. While many of today’s loan brokers can provide general information regarding USDA farm loans, the actual credit score of the borrower must be obtained from one of the agencies authorized to collect and report that data. There are several authorized agencies that offer the USDA a complete credit score history, including Equifax, Experian and Trans Union.
Most private lenders require borrowers to have a substantial amount of collateral to obtain a loan. However, there are many approved lenders that consider collateral a matter of preclusion. Agencies that approve loans regardless of collateral report that the security was not used by any borrower within sixty days of the date of application. In addition, most lenders require borrowers to own at least one acre of property to qualify. Those who do not own property but have a contract with the government on a specific number of acres needed to qualify can apply for a direct loan from the U.S. Department of Agriculture.
Another option available to borrowers is the possibility of going through a broker. However, brokers do not typically specialize in USDA loans. Many lenders, including private lenders, have farm brokers programs. In order to find a lender who specializes in USDA loans, borrowers should contact the U.S. Department of Agriculture’s Rural Housing Service. The service has a listing of all current lenders who provide USDA mortgage refinancing as well as those who are authorized to qualify. For borrowers interested in applying for rural mortgages, it is important to note that each lender has its own specific loan requirements.
Regardless of the type of financing used or the amount applied for, USDA loans are an excellent option for securing loans for rural or small farms. Since these loans do not require collateral, many borrowers do not need to have good credit to qualify. Although most conventional loans are more expensive than a direct loan from the federal government, they carry much less risk. For those who are concerned about cash liquidity, a USDA loan may be a better option due to its lower interest rates and longer repayment terms.