When I bought my farm 10 years ago, I learned the hard way that financing can be tricky.
I talked to many different banks to get pre-approved for financing and to find the best rate and term. At the time, conventional mortgages were in the 5.5 to 6 percent range, and I naturally assumed I could get a mortgage with a similar low rate. How wrong I was! Most of the small local banks I spoke with said they would only write loans in their county or adjacent county, which limited my chances for shopping around for a good loan. Because I was trying to purchase more than 20 acres, they said I couldn’t have a conventional mortgage--I would have to get an agricultural loan.
The banks required at least 30 percent down payment on a five or “maybe” seven year balloon loan with a 7 to 7.5 percent interest rate. It didn"t matter which bank I spoke with, the story was the same. When I pointed out that conventional mortgages were a full 2 points lower with a longer term than what these banks were quoting me for an agricultural loan, the banks said that agricultural loans weren"t open to the other funding sources that are available to the convention mortgage market, thus the shorter term and higher interest rates.
In addition, all of the banks expected the farm to earn enough money through farming to pay the mortgage! The banks really didn"t want to consider my off-farm income for servicing the debt. The banks set the limit at what I could borrow based primarily on the farm"s ability to generate income. In the end, only Farm Credit Services of America made it possible for me to buy a farm. Only they were able to offer rates and long terms comparable to a conventional mortgage.
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Today's Featured Article - Oil Bath Air Filters - by Chris Pratt. Some of us grew up thinking that an air filter was a paper thing that allowed air to pass while trapping dirt particles of a particles of a certain size. What a surprise to open up your first old tractor's air filter case and find a can that appears to be filled with the scrap metal swept from around a machine shop metal lathe. To top that off, you have a cup with oil in it ("why would you want to lubricate your carburetor?"). On closer examination (and some reading in a AC D-14 service manual), I found out that this is a pretty ingenious method of cleaning the air in the tractor's intake tract.
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