10 essentials to land ownership

ESSENTIAL #1: Be Prepared

Ask the loan officer what information they need when you call to schedule your appointment.

Providing the information needed when you meet with a loan officer makes a great first impression. It also allows you more time to discuss the loan and your goals rather than making a list of information for you to bring back.

By having all of the information, your lender will better understand your operation and determine the financial risks involved with the request.

ESSENTIAL #2: Visit the Lender’s Website

Do they provide information on agricultural financing? 

Agriculture is a different industry than most lenders work with on a day-to-day basis. It takes a different knowledge base than most conventional home or car financing.

Understanding the industry is just the start. A lender that understands agriculture can be a great resource for you not only when you purchase land, but down the road as well.

There are many benefits to working with a lender who has agricultural expertise. They understand everything from government programs to land rental arrangements. This knowledge can be invaluable if this is your first farm purchase. FCS Financial is one of the few if not the only lending institution that focuses solely on agriculture. It makes a difference.

ESSENTIAL #3: Have a Plan

"With today's farmland prices, buying land or a farm should not be a quick decision."

It doesn’t matter if you are purchasing a few acres or hundreds of acres, you should have a plan that includes what you want to do with the farm now and in the future. Questions to think about:

1. ​Is this your first farm?
2. Do you plan to buy more acreage?
3. Is this a site for a future cabin or shed? Having a plan helps the loan officer consider the debt and payment structure for the initial purchase.

This video explains the Connect program for young, beginning producers.

Essential #4: The Process

Most lenders have a standard process they use when looking at a loan application.

Watch our Application Process video for an outline of the steps or read about them below.

Step 1: Apply

The lender gathers all of the important data to review. This includes financial information like a balance sheet, tax documents, pay stubs and any additional earnings information.

Step 2: Review

The loan officer looks at a post-close cash flow and balance sheet. They will add the asset (farm/land) and the new debt (loan) and remove the cash down payment from your cash accounts. They want to make sure it does not heavily impact your liquidity. This safeguards any future adversity. Any new farm income is added to your historical income stream and the new payment subtracted. This provides an idea of the amount of earnings remaining after this loan, family living, vehicle allowance, taxes and all other debt payments including credit cards.

Step 3: Approval Subject To…..

If the numbers look good the lender may issue an intent letter. This letter may list additional items needed including:

• Employment verification – pay stubs

• Account verification – bank, 401K, investment statements

• Appraisal of the purchase

• Title insurance requirements

Step 4: Appraisal and Title Work

Most lenders will want a certified appraisal of the farm or land.

ESSENTIAL #5: Referrals

Ask friends, neighbors, relatives or even the real estate agent for lender referrals. They can tell you about their personal experiences including advantages, pitfalls, setbacks, surprises, concerns, all of it.

Jordan & Callie Lewallen talk about the process they went through in the video. It can provide a big relief if you know what to expect.

ESSENTIAL #6: The Right Order

It may make sense for you to visit with a lender before looking at land to get an idea what size property you can afford. Some will even pre-approve you for a purchase. This allows you to look for farms and land in the price range you can afford.

Talking with a lender in advance also helps to build your relationship with your lender.

Lance Mitchell, FCS Financial customer, explains why he financed his recreational propery with FCS Financial.

ESSENTIAL #7: Believe It or Not

Lenders want to loan money. The only way for their company to make money is by loaning it out. However, they can’t make risky loans for the sake of making loans.

No lender wants to make a bad loan. It hurts the institution and the individual. Most lenders have guidelines they use based on years of experience and training. If a lender tells you no, it is usually in your best interest.

Analyzing a loan is all about determining the risk. Just because a lender says no, doesn’t mean you cannot get a loan for this purchase. It just means the risk they are willing to assume in a loan doesn’t fit this situation. Work with the lender and discuss the reasons why you can or can’t afford the farm you are considering.

Speak to a Lending Specialist

Request an Application

ESSENTIAL #8: Work with Your Lender

A good agricultural lender is more than a source of money. They should be as concerned about you as they are about making the loan. If they ask for certain information, there is a reason.

Essential #7 discussed risk. There is risk in every loan. It doesn’t matter how wealthy you are or how much money you make.

By providing all the necessary information, the better financial picture the loan officer can make, the stronger the loan, the less risk there is for you and the lender.

This will also help when it comes to determining your interest rate. The more risk in a loan, the higher the interest rate. By providing good financial information, you are not only helping the process flow, you are helping yourself.

ESSENTIAL #9: Interest Rates Explained

A good loan officer will explain the differences between variable, adjustable and fixed rates. Some institutions will not offer all options and you will be forced to accept what they have. It is important to look around and see what is available.

The last few years, no one was worried about interest rates because they were historically low. That is changing. If you want the cheapest rate, which is usually an adjustable rate, you may end up paying more in the end and worrying about how high rates will go. This could have a drastic effect on your payment amount. This was one of the primary reasons for the housing debacle a few years ago. People purchased homes based on low payments because short term and variable rates were low. When rates went up, they couldn’t afford the new payment and lost everything.

ESSENTIAL #10: Closing – Be Ready

Surprises are best suited for birthdays and anniversaries. The last thing you want is to show up for closing and be surprised by what you have to sign and how much money you need to bring to the table. If your lender does not provide a copy of the closing statement prior to closing, ask for one.

A couple days before closing ask your lender:
• what will happen
• what will you need to sign
• how much money you need to bring

It is also important to note that the down payment money will need to be in certified funds, like a cashier’s check or money order. The days of a personal check are long gone.

If you have any buildings on your new farm, the lender will probably want proof of insurance listing them as the loss payee available at the closing. These are the types of items you need to discuss with your lender before your closing versus at the closing.

Getting the right loan for a farm or land is important. You need to be comfortable with both the loan and lending institution. Owning land is a long-term investment. You need a lender who understands agriculture and rural living and will be there with you for the long-term.

If you are interested in learning more about financing rural property, contact one of FCS Financial’s lending specialists by clicking the button below or visit myfcsfinancial.com.

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