How to Buy Farmland Through Owner Financing: A Practical Guide

Malik Miller
Jul 17
3 min read

For many aspiring farmers, the biggest barrier to entry isn’t seed money or equipment—it’s land. Traditional loans can be hard to secure if you’re just starting out, especially without strong credit, years of tax returns, or existing assets. That’s where owner financing (also called seller financing) can provide a realistic path forward.

If structured correctly, buying land through owner financing can be a powerful tool to get you farming faster, without the red tape of banks. But it’s not risk-free, and it’s definitely not simple. Here’s what you need to know before diving in.

How to Buy Farmland Through Owner Financing

What Is Owner Financing?

In owner financing, the landowner sells the property directly to you and acts as the lender. You make monthly payments (plus interest) to them instead of a bank. A promissory note, loan agreement, and land contract (or deed of trust) spell out the terms.

Why Owner Financing Appeals to Beginning Farmers

Lower Barriers to Entry – No need to qualify with a commercial bank or the Farm Service Agency (FSA).
Faster Close – No long underwriting periods or appraisal delays.
Flexible Terms – You can negotiate down payment, interest, term length, and balloon payments directly with the seller.
Creative Structures – Can be combined with USDA programs, off-farm income, or even lease-to-own models.

What’s the Catch?

Owner financing isn’t a magic bullet. You’ll need to be ready for:

Higher Interest Rates – Owners take more risk and expect higher returns (typically 7–10%).
Balloon Payments – Many deals require a large final payment in 3–5 years. You must plan to refinance or pay off the balance.
No Title Until Paid – In some agreements, you don’t get full title until the final payment. This limits your ability to borrow against the land or make major improvements.

Red Flags to Watch Out For

Seller doesn’t want to use a title company or attorney.
Terms are vague or “handshake only.”
No clear agreement on what happens if you default.
Land has liens or legal issues.

Bottom line: Get everything in writing. Use an experienced agricultural attorney, even if it costs a few thousand upfront. That’s cheaper than losing the land or a lawsuit later.

How to Make Owner Financing Work for You

Know Your Budget – Calculate what you can afford based on realistic farm income projections, not best-case scenarios.
Negotiate Terms – Ask for:
- Fixed interest rate
- At least 10 years to pay (or more)
- Right to prepay without penalty
Combine with FSA Microloan – Use a small loan for the down payment or infrastructure.
Run a Title Search – Ensure the seller owns the land free and clear.

A Sample Scenario

Let’s say a seller agrees to a $150,000 purchase price:

$15,000 down (10%)
8% interest
15-year amortization
5-year balloon

That’s $1,288/month in principal and interest for 5 years, after which you’ll owe about $116,000 in a balloon payment. You’ll need a refinance or outside funding strategy to pay that off.

Final Thought: Owner Financing Is a Bridge, Not a Destination

Use it to get on the land, build equity, and prove your operation. Then work toward refinancing into an FSA Farm Ownership Loan, which offers lower rates and better terms once you’ve established credit and cash flow.

It’s not easy. But if you’re careful, smart, and transparent—it’s very doable.

If you’d like help drafting a contract, running financial projections, or integrating USDA funding options into your plan, reach out. This is one of the few creative paths left for first-generation farmers. Just make sure your foundation is solid.