What are the main ways to finance farmland?
There are four broad routes: a commercial bank or Farm Credit association loan, an FSA direct or guaranteed loan, seller financing, and shared or leased arrangements. Many farmers combine two of them.
FSA's farm loan overview describes direct farm ownership loans, guaranteed loans made by commercial lenders, and a down payment style program for beginning farmers. Check the current fact sheet for limits and terms, since they change.
Leasing is a legitimate first step, not a failure. Many successful farmers rented for several years, built a record of yields and repayment, and then bought. A solid lease record gives a lender something concrete to review, and it lets you learn the soils and the market before taking on a mortgage. Ask whether a landowner would consider a lease with an option to buy.
How do FSA direct and guaranteed loans differ?
With a direct loan, FSA is the lender and the borrower deals with the county office. With a guaranteed loan, a bank or other lender makes and services the loan and FSA backs part of the risk, which can make a lender more willing to approve an applicant it might otherwise decline.
Which fits depends on your credit, your down payment and whether a local lender will take the file. Ask both.
What is the land contract guarantee?
FSA has described a land contract guarantee program that supports sales where a seller finances the buyer directly. The idea is to give a retiring or willing seller more confidence in the buyer's ability to pay.
Details such as who qualifies and how the guarantee works are on FSA's land contract page. Read it with your attorney, because a land contract affects who holds title and what happens on default.
Think about the whole cost of ownership, not just the payment. Property taxes, insurance, fencing, drainage, road maintenance and the cost of bringing run-down ground back into production all affect cash flow. A budget that includes them gives you a more honest view of what you can afford and helps a lender see that you have looked past the purchase price.
How much of the cost do I have to cover myself?
Most programs expect some borrower contribution, but the amount varies by program and by the lender. Some beginning farmer programs reduce the down payment requirement. Check the current figures on FSA's beginning farmer fact sheet rather than trusting numbers from articles or social media.
Be honest about your cash. A lender will ask where the down payment came from, and borrowed or gifted funds are treated differently.
- Savings and sale of other assets
- Gift letters from family, if allowed by the lender
- Seller financing for part of the price
What will a lender ask about the land itself?
Expect an appraisal, a title search, a survey if boundaries are unclear, and questions about water rights, access, easements and environmental conditions. Lenders want collateral worth enough to cover the loan if things go wrong.
Test whether the land can pay for itself. A budget showing expected crop or livestock income against the payment is usually more persuasive than a hope that prices will rise.
Look beyond lenders for help finding land. Land trusts, farm link programs, extension offices and young farmer groups sometimes connect buyers with retiring owners who care about who takes over. A seller who wants the land to stay in farming may be willing to offer better terms than the open market, which can make the numbers work.
What should I bring to the meeting?
Bring a business plan, a balance sheet, tax returns, a projected cash flow with the land payment, a resume of farm experience and the purchase agreement or listing. If you will lease first, bring the lease.
Ask each lender about the application timeline, what happens if the appraisal is low, whether prepayment is allowed and what happens if you need to restructure.
What mistakes should I avoid?
Buying more acres than your equipment, labor and cash flow can handle is common. So is paying a price that assumes record yields. Skipping an attorney review of a seller-financed deal can leave you without clear title.
Be wary of anyone who charges a fee to guarantee a government land loan or grant. USDA does not sell approvals.
Questions worth asking every lender include how long approval typically takes, whether they will finance the land and buildings together, what appraisal method they use, what repayment term they would offer for the type of land, and how they treat income from leased ground. Write down each answer and compare lenders side by side before you choose, rather than relying on memory.
Key takeaways
- Compare FSA direct, FSA guaranteed, commercial and seller financing before you commit.
- A land contract guarantee exists to support seller financing, but read the current terms.
- Down payment rules vary, so use FSA's current fact sheets.
- Show the land can pay for itself with a written budget.
- Use an attorney for any seller-financed purchase.
Sources and official links
Last reviewed: November 12, 2026. Written by the Farm Money & Grants Editorial Team. Educational only, not tax, legal or financial advice. See our editorial policy.