[toomuchtodo]

This is factually inaccurate. The land is the collateral. If you don’t service the debt, they take back the land. 75-85% loan to value, 2-4% interest over treasury rates. Underwriting guidelines for the loan will differ if this is for speculation, development into housing, or agriculture.

[potato3732842]

You're being pedantic.

Land not occupied by some money making asset also being financed or used as collateral in the deal cannot be financed at rates that are not the lending equivalent of a "we really don't want this job so we're bidding high".

[toomuchtodo]

This is simply not true based on the interest rates and underwriting guidelines, and I own raw ag land that has been financed with nothing else besides a down payment and the land as collateral. Words mean things my dude. These are not hard money rates, these are credit products specifically for land with no business, cash flow, or other income stream at time of transfer. Being ignorant or unsophisticated is a choice.

[potato3732842]

"Ag" is the keyword there and I suspect it roughtly translates to "somehow tax subsidized by the rest of us". Go try and get a loan on residential/industrial or otherwise non-ag land and get back to me. Everyone looks (i.e. does their due diligence) and nobody ever goes for it because the rates or terms are always laughable.

Since you're an expert link poster why don't you cherry pick us all up some of those underwriting guidelines you cite?

I look forward to learning about ag specific loan products.

[toomuchtodo]

I can have a wholesale originator (UWM) extend me credit for those use cases in ~15 minutes up to almost $1M at 7% (conforming, ready for sale into the ABS market), which is very reasonable imho. I can get up to $5M within a few days if it’s commercial through one of the commercial banks I work with (Wintrust). 80% LTV, most of the time.

Guidelines are openly available at Fannie Mae, Freddie Mac, and USDA websites (unless there are specific overlays a bank is using, which is typically proprietary).

[lotsofpulp]

This is news to me. Are you saying you can borrow money with the stated intention to speculate on future sale price, from the government no less?

I have no experience with farmland, but for other purposes such as building hotels/retail/etc, you can't just get a loan for the land, you buy the land with cash and then get a construction loan to start development. I assumed you would have to at least need to have a plan to operate a farm to get a loan.

[toomuchtodo]

One example:

https://www.fsa.usda.gov/resources/farm-loan-programs/farm-o...

100% financing government backed:

> Farm Ownership Loans offer up to 100 percent financing and are a valuable resource to help farmers and ranchers purchase or enlarge family farms, improve and expand current operations, increase agricultural productivity, and assist with land tenure to save farmland for future generations. With a maximum loan amount of $600,000 ($300,150 for Beginning Farmer Down Payment), all FSA Direct Farm Ownership Loans are financed and serviced by the Agency through local Farm Loan Officers and Farm Loan Managers. The funding comes from Congressional appropriations as part of the USDA budget.

As long as your intent was in good faith at time of origination, you’ve met the burden.

[potato3732842]

What does "conforming" mean here? Because I suspect there will be a reference in there that is a pointer to something involving government subsidy. Everything ag related is rife with that.

[toomuchtodo]

https://en.wikipedia.org/wiki/Conforming_loan

I love government subsidies through implicit and explicit loan guarantees. It’s the reason a 30 year mortgage exists. It’s the reason one can default on an FHA mortgage with almost no consequences (while being almost impossible to default on student loan debt).

To your point this is “subsidized by the rest of us,” the bottom 50% of American earners only pay 2.3% of total federal income tax collected, with the top 50% paying the rest. The poor folks are not on the hook for subsidies when they come out of general federal gov revenue (FHA loans charge an upfront and monthly mortgage insurance premium, and there are similar costs for USDA and VA loans but lesser so; we can consider those costs “cost recovery” for the purpose of evaluating self funded vs subsidies via transfer from the general fund).

https://taxfoundation.org/data/all/federal/latest-federal-in...