yes. it goes against many of our instincts to borrow money.
Guiding thinking on this issue is borrow as little as you can. Pay it back as fast as you can.
But you can’t really can without a canner, or a kitchen, or a flame. Can you.
Got to build back the infrastructure of food production. Need the money to make it happen.
Beginning Farmer Rates Make Land Affordable
USDA is offering big benefits to beginning farmers: Who else can qualify for 1.5 percent, 20-year fixed interest rates on a big chunk of any farm mortgage? No, that’s not a typo. The Farm Service Agency’s Down Payment Program for beginning or limited resource farmers may be the best deal in decades for someone interested in buying land at the moment.
“That’s the best rate I’ve ever seen for a USDA loan program, and I’ve worked in farm credit for 27 years,” says Greg Beachy with Farm Credit Services of Mid-America in Louisville, serving Ohio, Indiana, Tennessee and Kentucky. Borrowers who’ve stumbled onto the offer are already backlogged, but he expects a surge of applicants as word spread. “USDA really is looking for ways to get young people into farming,” he tells me.
Thanks to the 2008 farm bill, minimum rates on USDA’s entry-level Down Payment Program loans were lowered from 4 percent to 1.5 percent, just in time to ride the wave of rock-bottom Treasury costs that collapsed last fall. The deal won’t last forever, though, as Treasury rates are beginning to climb again and the wait list for USDA’s matching funds is growing. So study up.
A beginner is defined as someone with less than 10 years of farming experience and who has a substantial interest in the operation. What they qualify for is pretty special:
The borrower must pay at least a 5 percent down payment on a property; FSA will fund up to 45 percent of a $500,000 purchase ($225,000 maximum) at its subsidized interest rates with a loan term of 20 years; commercial lenders who finance the balance of the mortgage must stretch amortization 30 years. Realistically, that means the borrower will pay a blend of 1.5 percent interest on 45 percent of a loan and possibly about 7.7 percent (a typical rate today for a high risk borrower) on the remainder.
FSA says 400 borrowers have been approved for the program so far this year, up from 30 this time a year ago. But funds have been depleted fast, and Congress will not authorize more money until the fiscal year begins next Oct. 1, at the earliest.
As a result, Phil Kimmel, Farm Credit Services of Mid-America senior vice president for credit, worries that some real estate purchases may fall through without some extra help from private lenders. “We are considering a position to offer bridge financing based on FSA’s commitment until funds are available, but we haven’t done that yet. We have provided bridge loans for FSA’s portion if we could get security or maybe a parent to cosign until the money is available,” Kimmel says.
All Farm Credit institutions are required by law to lend a certain percent of their funds to young, beginning and small farmers. In 2008, young farmers under 35 made up 26 percent of FCS of Mid-America’s new loans or leases, and beginning farmers about 40 percent of that portfolio.
Rates change periodically on FSA’s loan programs; for details see:http://www.fsa.usda.gov/