The USDA farm loan calculator is an invaluable online tool for farmers looking to secure financing. With agriculture being a capital-intensive industry, farmers must carefully evaluate financing options to acquire land, equipment, livestock, and operating expenses The USDA farm loan calculator allows farmers to estimate payments on various USDA direct and guaranteed loan programs. Read on to learn more about using this calculator to find the right USDA farm loan for your operation
An Overview of USDA Farm Loans
The USDA Farm Service Agency (FSA) offers several loan programs to help farmers start, expand, or maintain a family farm operation These loans are provided directly by the FSA or guaranteed by the FSA and issued by traditional lenders Here is a quick rundown of the main USDA farm loan programs
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Direct Farm Operating Loans – For purchasing livestock equipment feed, seed, fuel, farm chemicals, insurance, and other operating expenses.
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Guaranteed Farm Operating Loans – Operating loans from traditional lenders backed by an FSA guarantee. More flexibility than direct loans.
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Direct Farm Ownership Loans – For purchasing or expanding a farm, constructing new or improving existing farm buildings, soil and water conservation, and refinancing debt.
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Land Contract Guarantees – Guarantees up to 50% of the unpaid principal balance of a land contract.
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Direct Down Payment Loans – Help beginning and historically underserved farmers make a down payment on a farm.
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Direct Emergency Loans – Assist farmers recovering from natural disasters or quarantines.
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Direct Microloans – Simplified application and reduced paperwork for loans up to $50,000.
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Direct Beginning Farmer Loans – Down payment loans and operating capital for beginning farmers.
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Youth Loans – Help youth gain agriculture project experience.
Using the USDA Farm Loan Calculator
The USDA farm loan calculator allows you to estimate payments on direct or guaranteed farm ownership and farm operating loans. Here’s how to use it:
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Select the loan type: direct or guaranteed, farm ownership or operating.
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Enter the loan amount, down payment (if applicable), interest rate, and loan term in years.
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Choose the payment frequency: annual, semi-annual, quarterly, or monthly.
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Click “Calculate”.
The calculator will estimate the payment amount for each installment based on your inputs. It also shows the total interest paid over the loan term.
For guaranteed loans, enter your lender’s interest rate. For direct loans, rates are set periodically by the FSA – check the FSA website for current rates.
You can experiment with different loan amounts, terms, and rates to find an affordable payment schedule. It’s a good idea to calculate multiple scenarios to determine the optimal loan package.
Tips for Using the Farm Loan Calculator
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For direct operating loans, the max loan term is 7 years. Max term for direct ownership loans is 40 years. There are no term limits on guaranteed loans.
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The calculator allows quarterly and semi-annual repayment schedules, which offer more flexibility than annual payments.
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Microloans must be repaid in 7 years or less.
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For direct loans, a 5% down payment is required for farm ownership loans. No down payment is required for operating loans.
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Watch out for prepayment penalties on guaranteed loans. These are not allowed for direct FSA loans.
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Compare direct and guaranteed loan options. Guaranteed loans typically have higher limits and more flexibility.
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Discuss cash flow and goals with your loan officer when selecting repayment terms. Don’t overextend yourself.
Applying for a USDA Farm Loan
Once you have an idea of potential payment amounts, you can apply for pre-approval on the Farmers.gov website. The FSA loan officer will help you put together the full application package. Key steps include:
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Providing 3 years of financial history for the farm business
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Developing a projected farm budget and cash flow
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Providing appraisals and collateral to secure the loan
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Meeting eligibility requirements such as farm training and experience
The FSA advertises specific eligibility requirements, loan uses, rates, terms, and more for each loan program on their website. Be sure to discuss program rules with your loan officer.
Use the Farm Loan Calculator to Support Your Operation
The USDA farm loan calculator is a quick and easy way for farmers to estimate payments on various FSA loan programs. Use it to find the right loan type, amount, terms, and rates for your particular situation. The calculator can help you manage cash flow, purchase needed items, and expand your operation. But it is just the first step – be sure to follow through with a full loan application and work with your FSA loan officer to finalize a loan that improves the sustainability of your farm business.
Comparing USDA Loans & Conventional Mortgages
On regular conventional conforming mortgages, private banks offer funding and typically prefer borrowers that pay 20% down payment of the home’s value. This minimizes the risk of loss to the lender in case a foreclosure takes place. If the borrower pays less than 20% down, they are required to pay private mortgage insurance (PMI). Once the loan balance to home value (LTV) falls below 80%, PMI is automatically cancelled.
On the other hand, USDA loans do not require a down payment, but they are associated with mortgage insurance premium (MIP), which come in two important fees. One is an upfront USDA guarantee fee, and the other is an annual fee which functions similarly to PMI. The upfront fee can be rolled into the loan.
Periodically the fees associated with a USDA loan change to reflect the costs of running the program. The last major change was announced on September 1, 2016, when the upfront guarantee fee dropped from 2.75% to 1%, and the annual fee was lowered from 0.5% to 0.35%. Both the upfront funding fee and the annual insurance premium are far cheaper on USDA loans than the equivalent FHA loan fees.
The following table highlights the cost of these fees on a $250,000 home:
| Fee Type | Upfront Fee | Annual Fee |
|---|---|---|
| Rate | 1.0% | 0.35% |
| Upfront Amount | $2,500 rolled into loan | $0 |
| Annual Amount | $0 | $875.00 |
| Equivalent Monthly Amount | $0 | $72.92 |
As the principal balance is reduced, the associated monthly amount declines.
For example, for a $250,000 loan, your upfront guarantee fee will cost $2,500. If your principal decreases to $230,000, your annual guarantee fee will cost $805, which is $67.84 per month. As your principal balance is reduced, your annual guarantee fee also decreases. The annual guarantee fee is required for the entire life of the loan.
To summarize the difference between USDA loans and conventional loans, we made the table below:
| Qualifications | USDA Loans | Conventional Loans |
|---|---|---|
| Required Area | Must be a USDA rural area | Choose a home location anywhere |
| Income Limit | Your household income cannot exceed 115% of the median income in your area | Does not impose income limits |
| Credit Score | Should be at least 640 Some accept as low as 620 | 680 & up is usually approved 700 & up is ideal |
| Rates | Comes with lower rates because of federal funding | You can obtain a lower rate with a higher credit score Making a high down payment helps decrease your rate |
| Down Payment | Not required Offers 100% financing | 20% eliminates PMI 10% is the average down payment 3% required minimum for a 97-3 loan |
| Front-end DTI | Should not go over 29% | Should not go over 28% |
| Back-end DTI | Should not go over 41% | Usually does not go over 43% With compensating factors, can be up to 50% |
| Cost | 1% upfront guarantee fee 0.35% annual guarantee fee Does not require prepayment penalty | PMI costs in 0.5%-1% of the loan amount annually PMI is cancelled when mortgage balance is below 80% May require prepayment penalty |
Choose Property in a USDA Rural Area
As a main requirement, you can only select homes in qualified USDA rural areas. The USDA generally defines rural areas as towns, communities, or small cities occupied by less than 20,000 people. But in other instances, they may approve locations with up to 35,000 residents. These places should not be located in a metropolitan statistical area (MSA) and must lack mortgage credit for low to average income households. Urban areas, meanwhile, are usually defined as places with a population of 50,000 or more.
In 2015, the USDA announced updated guidelines for what they consider as rural areas. This update made it more challenging to get approved for a USDA loan, especially since populations have grown substantially since the prior categorization. Prior to 2015, over 90% of property in the U.S. qualified for USDA financing.
Though these guidelines may seem too restrictive, extended parts of metro areas in small cities and towns may be eligible. To verify if your area qualifies for a USDA loan, you can check interactive maps on the USDA website. You simply type in the address and it will indicate if the location is eligible or not.
To obtain a USDA loan, you must fall under the required income limit for moderate income. Moderate income is defined as the greater of
- 115% of the U.S median family income,
- 115% of the state-wide and state non-metro median family incomes, or
- 115/80ths of the area low-income limit.
Limits are based on both the local market conditions and the size of a family. Household income is calculated by adding the loan applicant’s income plus the income of other family members in a home. This rule applies even if the household member does not share the same family name.
The moderate income guarantee loan limit is the same in any given area for households of 1 to 4 people, and is set to another level for homes of 5 to 8 people. The following table lists examples of limits from a few select areas in the country:
| Location | 1 to 4 Person Limit | 5 to 8 Person Limit |
|---|---|---|
| Fort Smith, AR-OK MSA | $110,650 | $146,050 |
| Northwest Arctic Borough, AK – with a road system (115%) | $124,300 | $164,100 |
| Northwest Arctic Borough, AK – without a road system (150%) | $192,850 | $254,550 |
| Oakland-Fremont, CA HUD Metro | $161,200 | $212,800 |
| San Francisco, CA HUD Metro | $238,200 | $314,400 |
The floor values on the above limits are $110,650 and $146,050, respectively. Homes with more than 8 people in them can add 8% for each additional member. You can verify income limits in your local area by checking the USDA income limits page, or you can use the eligibility checker to enter your personal details.
For example, let’s say the income limit in your area for a 1-4 person household is $110,650 per year. That means you can qualify for a USDA loan with an annual income of $110,650 or less. 15% of $96,200 is equivalent to $14,450, which we added to $96,200 to obtain the $110,650 income limit.
What if I can pay 20% down? Generally, if you can afford to make a 20% down payment on top of your mortgage, you won’t qualify for a USDA loan. If you have assets that exceed the imposed income limits, you likely won’t be approved. But in some cases, a USDA-sponsored lender may approve your loan and require you to make a down payment.
Loan Amount Limits
Loans can be used for regular, manufactured, or modular homes which are no more than 2,000 square feet in size. As of 2023 the effective loan limit starts at $377,600 in low-cost areas and goes as high as $871,400 in expensive (or high-cost areas) in states like California. You can view loan amount limits in your local area here.
As for credit requirements, USDA lenders prefer a FICO credit score of 640. This is the minimum credit score required to qualify for the USDA’s automated writing system. Homebuyers who satisfy this requirement receive streamlined processing of their application. Meanwhile, borrowers with credit scores below 640 (some lend as low as 620) must submit to a manual underwriting process. If you have further credit issues on your record, your application will take longer to approve.
Conventional loan lenders, on the other hand, usually prefer borrowers with a credit score of 680 and above. If you have limited income and an average credit score, consider taking a USDA loan. Again, homebuyers who cannot qualify for a traditional conventional mortgage may be eligible for a USDA home financing.
Improve Your Credit Score
Before applying for any loan, make sure to check your credit report. Borrowers can request for a free copy at AnnualCreditReport.com. Avoiding late payments and reducing your outstanding debts helps improve your credit score. In the long run, having a good credit profile will help you obtain more favorable loan deals in the future.
Like other types of mortgages, borrowers must also meet the required debt-to-income ratio (DTI) to obtain a USDA loan. DTI is a risk indicator which measures the sum of your total monthly debts compared to your gross monthly income.
- Front-end DTI ratio – The front-end DTI limit for USDA loans should not exceed 29%. This is the percentage of your income that pays for all housing-related expenses. It includes monthly mortgage payments, property taxes, homeowners insurance, etc.
- Back-end DTI ratio – The back-end DTI limit for USDA loans should not exceed 41%. This is the percentage of your earnings that pay for your housing-related costs together with your other debts. It includes your car loan, credits cards, student loans, etc.
A low DTI ratio shows you have a good balance of income and debt. This lowers default risk for lenders, which increases your chances of loan approval. On the other hand, a high DTI ratio indicates you cannot take on further debt. DTI requirements for USDA loans are quite similar to conventional mortgages. For conventional loans, the front end-DTI limit is 28%, while the back-end DTI is 43%, but this can be as high as 50% if you have compensating factors.
Getting Started with an FSA Loan – Kaitlyn Niemeyer
FAQ
Are USDA loan payments cheaper?
Which bank is best for an agriculture land loan?
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Name of the Bank
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Interest Rate
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Central Bank of India (Cent Kisan Tatkal Scheme)
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10.1% p.a. onwards
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IndusInd Bank (Crop Loan)
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7% – 14.75% p.a.
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HDFC Bank (Retail Agri Loans)
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9.10% – 24.55% p.a.
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Federal Bank (Federal Green Plus Loan Scheme)
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At the discretion of the bank
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How much would a $90,000 loan cost?
What is the longest land loan you can get?
What is a farm loan payment calculator?
Our custom-built farm loan payment calculator estimates your payments and separates term & amortization rates for a more accurate estimate.
What is a USDA payment calculator?
A **USDA payment calculator** is a tool that helps you estimate your monthly payments for a USDA mortgage.It takes into account factors such as your estimated home price, down payment, loan term, and interest
What loans does the Farm Service Agency offer?
The Farm Service Agency offers loans to help farmers and ranchers get the financing they need to start, expand or maintain a family farm. Use the Loan Assistance Tool to check your eligibility for FSA Loans, discover FSA loan types, learn about FSA Loan requirements, and walk through the easy-to-understand instructions when completing the forms.
What are FSA’s direct farm operating loans?
FSA’s Direct Farm Operating Loans are a valuable resource to start, maintain and strengthen a farm or ranch. For new agricultural producers, FSA’s Direct Farm Operating Loans provide an essential gateway into agricultural production by financing the cost of operating a farm.