National Sustainable Agriculture Coalition

Supporting the economic and environmental sustainability of agriculture, natural resources, and rural communities.

Down Payment Loan Program

Down Payment Loan Program

A joint financing option to help beginning, veteran, and socially disadvantaged farmers purchase farmland

Access to affordable farmland is one of the most significant challenges faced by new and aspiring farmers. From California’s Central Valley to New York’s Hudson Valley and everywhere in between, farmers continue to struggle to find suitable land to start or grow their businesses. For beginning, women, veteran, and farmers of color, the Farm Service Agency (FSA) offers a special joint-financing loan option for farmland purchases. The Down Payment Loan Program (DPLP) assists underserved farmers in accessing capital for farmland by creating a partnership between the farmer, FSA, and a private lender.

Learn More About Down Payment Loans!

Program Basics

DPLP is a special joint-financing loan program that creates a partnership between a private lender and USDA in order to help beginning, veteran, and socially disadvantaged farmers and ranchers purchase farm or ranchland. To qualify, an applicant must make a cash down payment equal to five percent of the purchase price of the land to be acquired, and must be able to secure a commercial loan for at least 45 percent of the purchase price.

FSA can provide up to a 95 percent guarantee on the private loan, and the participating lender does not have to pay a guarantee loan fee. FSA can also provide two types of federal guarantees to private landowners who sell to a beginning or socially disadvantaged farmer using a private land contract (see Land Contract Sales Guarantee section of this guide).

Combined, the five percent down payment and the private loan for 45 percent of the land value brings the maximum loan amount that can be financed by FSA to the least of 45 percent of the purchase price of the land to be acquired. The total financed by FSA should not exceed the land’s appraised value and not exceed $667,000. With this cap, the maximum loan amount that can be financed by FSA is $300,000. If unable to secure a loan with a private lender, farmers can apply for FSA’s farm ownership loan, which is financed 100 percent through FSA and has roughly the same cap on the total loan and purchase price.

The interest rate on the FSA portion of the down payment loan is a fixed rate that is four percent below the direct farm ownership rate, but not lower than one and a half percent. Hence, if the regular (and already subsidized) FSA direct farm ownership interest rate is seven percent, the Down Payment Loan interest rate will be three percent. Or, for example, if the regular rate is three and a half percent, the down payment rate will be one and a half percent. Current interest rates can be found on the FSA website.

The repayment period for the FSA portion of the loan is scheduled in equal, annual installments for a term not to exceed 20 years.

“First time farmer” or “aggie bond” programs provided by individual states can also provide assistance, which has the effect of lowering the interest rate on the commercial portion of a down payment loan or a participation loan. Click here for an explanation of the “aggie bond” option and a listing of 16 states that have state programs.

Eligibility

To be eligible for an FSA down payment loan, a farmer must be considered either a qualified beginning or veteran producer, or a socially disadvantaged applicant. USDA’s definitions of these three classifications are as follows:

  • Beginning farmer: an individual or entity that has not operated a farm or ranch for more than 10 years, substantially participates in the operation of the farm, and does not own a farm bigger than 30 percent of the average acreage of the farms in the county.
  • Veteran farmer: has served in the Armed Forces, not operated a farm or ranch for more than 10 years, and someone first obtained status as a veteran within the past 10 years.
  • Socially disadvantaged applicants: American Indians, Alaskan Natives, Asian Americans, African Americans, Native Hawaiians or other Pacific Islanders, Hispanics, and women.

Additionally, all applicants must have at least three years of farm management experience, or other comparable experience. Loan applicants may substitute one of the three required farming years if they have adequate education in an agriculture related field, significant business management experience, and/or leadership or management experience from serving in any branch of the military.

If the applicant is a business entity, all members must be related by blood or marriage, and all must be beginning farmers. Socially disadvantaged individuals applying as part of an entity must hold a majority interest. All entity members must substantially participate in the operation of the farm or ranch.

The Program in Action

Since 1994, DPLP has helped over 16,000 new and socially disadvantaged farmers purchase farms in almost every state across the country, totaling over $2.4 billion in federal financing. Examples of how DPLP has helped farmers and ranchers across the country to achieve their dreams and launch their operations are included below:

  • In Minnesota, two young farmers who wanted to start their own diversified CSA farm used DPLP to obtain the loan capital needed to purchase the land for their first farm. Like many young farmers today, these farmers didn’t grow up on a farm, which meant they lacked the familial and community resources that have historically helped many farmers to get their start. Because they did not have a history of farming, accessing credit through a traditional lender posed a major obstacle. DPLP lowered the barrier to accessing credit by only requiring a modest down payment, and allowing these applicants to work with FSA and a commercial lender to secure their loan and turn their farm dream into a reality.
  • In Nebraska, another young couple used DPLP to purchase several acres of their family’s farmland to start their own farm operation. They currently operate a 400-acre diversified crop and livestock farm and sell their pastured hogs, pastured chickens, free-range eggs and chemical-free produce to direct markets in the area. This loan program helped the young couple successfully transition a portion of the family farm from one generation to the next. Going forward, the couple plans to transition additional acres, and hope to again take advantage of this valuable program.

To read a more in-depth analysis of how this program has increased access to credit in different regions, see our analysis of the program’s 20-year history.

How to Apply and Program Resources

Down payment loans are administered by FSA, and information about the program is posted on the FSA website under Farm Loan Programs. For information and loan applications, go to your FSA regional Service Center or state FSA office. You can locate all of the necessary contact information by clicking on your state via the FSA Service Center Locator.

Read more about down payment loans on the National Sustainable Agriculture Coalition blog:

Program History, Funding, and Farm Bill Changes

This innovative loan program was first established by the 1992 Agricultural Credit Act and implemented by USDA starting in 1994. The program has gone through several changes over its 25 year history, including significant changes in recent farm bills.

For example, the 2008 Farm Bill reduced the interest rate (which previously was four percent, regardless of what the regular rate was) and down payment requirements (previously 10 percent). It also added socially disadvantaged farmers to the program; originally DPLP was solely for beginning farmers. The 2014 Farm Bill maintained the lower interest rate and down payment requirements, and also increased the value of land that can be financed by FSA from $500,000 to $667,000. It also lowered the interest rate on all other joint-financing loans, so that these loans are more attractive to both lenders and borrowers than the traditional direct farm ownership loan that is 100 percent financed by FSA.

The 2018 Farm Bill expanded DPLP to also serve military veterans who have been farming for less than 10 years. It also reauthorized appropriations for each year between 2018 and 2023. Funding levels are established in the annual appropriations process, with the amount of money available for DPLP equal to 50 percent of whatever Congress appropriates for direct farm ownership loans in a given year. After April 1 of each year, if there are loan funds remaining that have not been used for Down Payment Loans, they may be made available for other types farm ownership loans for beginning farmers.

Down Payment Loan Historical Funding Levels

Fiscal Year Total Funding (in millions)
2013 $83
2014 $360
2015 $374
2016 $396
2017 $410

For the most current information on program funding levels, please see NSAC’s Annual Appropriations Chart.

Authorizing Language

The program has been amended in successive farm bills after that, including by Section 5005 of the Agricultural Act of 2014 which amends Section 310E(b)(1)(C) of the Consolidated Farm and Rural Development Act, to be codified at 7 U.S.C. Section 1935(b)(1)(C), to increase the loan limit on down payment loans.  

Section 5003 of the Agricultural Act of 2014 amends Section 307(a)(3) of the Consolidated Farm and Rural Development Act, to be codified at a note to 7 U.S.C. Section 1927(a)(3), to modify the interest rate on joint-financing loans.

Section 12306 of the Agricultural Act of 2018 amends Section 310E of the Consolidated Farm and Rural Development Act, to be codified at 7 U.S.C. Section 1935, to expand the program to veterans.

Last updated in September 2019.