Title 7, AgricultureRelease 119-110
§1935 Down Payment Loan Program
Title 7 › CHAPTER 50 — AGRICULTURAL CREDIT › SUBCHAPTER I — REAL ESTATE LOANS › § 1935
Summary
Sets up a down payment loan program inside the farm ownership loan program. The Agriculture Secretary must run the program and work with the lender and any credit counseling service. Loans can cover up to 45% of the smallest of the purchase price, the appraised value, or $667,000. The interest rate is the higher of (the farm ownership loan rate minus 4 percentage points) or 1.5%. Borrowers may pick a term of up to 20 years and must repay in equal yearly payments. The Secretary keeps a secured interest in the farm that is junior only to the loan used to buy the property and requires the Secretary’s permission before the borrower gives any new lien on the farm. The Secretary will not make a loan unless the borrower provides at least 5% of the purchase price. Loans are also barred if other financing amortizes in under 30 years or has a balloon payment due during the 20-year period after the Secretary’s loan starts. The Secretary must help transfer farms from retiring owners, advertise the program, encourage seller financing, coordinate with state programs for beginning, socially disadvantaged, and veteran farmers, and set yearly goals to promote these down payment and joint financing options. Eligible farmers are beginning farmers, socially disadvantaged farmers, and veteran farmers (as defined in the law).
Full Legal Text
Title 7, §1935
Agriculture, Source: USLM XML via OLRC
(a)In general
(1)Establishment
Notwithstanding any other section of this subchapter, the Secretary shall establish, within the farm ownership loan program established under this subchapter, a program under which loans shall be made under this section to eligible farmers or ranchers for down payments on farm ownership loans.
(2)Administration
The Secretary shall be the primary coordinator of credit supervision for the down payment loan program established under this section, in consultation with the commercial or cooperative lender and, if applicable, the contracting credit counseling service selected under section 2006b(c) of this title.
(b)Loan terms
(1)Principal
Each loan made under this section shall be in an amount that does not exceed 45 percent of the least of— (A)
(B)the appraised value of the farm or ranch to be acquired; or
(C)$667,000.
(2)Interest rate
The interest rate on any loan made by the Secretary under this section shall be a rate equal to the greater of— (A)
(B)1.5 percent.
(3)Duration
Each loan under this section shall be made for a period of 20 years or less, at the option of the borrower.
(4)Repayment
Each borrower of a loan under this section shall repay the loan to the Secretary in equal annual installments.
(5)Nature of retained security interest
The Secretary shall retain an interest in each farm or ranch acquired with a loan made under this section that shall—
(A)be secured by the farm or ranch;
(B)be junior only to such interests in the farm or ranch as may be conveyed at the time of acquisition to the person (including a lender) from whom the borrower obtained a loan used to acquire the farm or ranch; and
(C)require the borrower to obtain the permission of the Secretary before the borrower may grant an additional security interest in the farm or ranch.
(c)Limitations
(1)Borrowers required to make minimum down payment
The Secretary shall not make a loan under this section to any borrower with respect to a farm or ranch if the contribution of the borrower to the down payment on the farm or ranch will be less than 5 percent of the purchase price of the farm or ranch.
(2)Prohibited types of financing
The Secretary shall not make a loan under this section with respect to a farm or ranch if the farm or ranch is to be acquired with other financing that contains any of the following conditions:
(A)The financing is to be amortized over a period of less than 30 years.
(B)A balloon payment will be due on the financing during the 20-year period beginning on the date the loan is to be made by the Secretary.
(d)Administration
In carrying out this section, the Secretary shall, to the maximum extent practicable—
(1)facilitate the transfer of farms and ranches from retiring farmers and ranchers to persons eligible for insured loans under this subchapter;
(2)make efforts to widely publicize the availability of loans under this section among—
(A)potentially eligible farmers or ranchers;
(B)retiring farmers and ranchers; and
(C)applicants for farm ownership loans under this subchapter;
(3)encourage retiring farmers and ranchers to assist in the sale of their farms and ranches to eligible farmers or ranchers by providing seller financing;
(4)coordinate the loan program established by this section with State programs that provide farm ownership or operating loans for—
(A)beginning farmers or ranchers;
(B)socially disadvantaged farmers or ranchers, as defined in section 2003(e) of this title; or
(C)veteran farmers or ranchers, as defined in section 2279(a) of this title; and; and
(5)establish annual performance goals to promote the use of the down payment loan program and other joint financing arrangements as the preferred choice for direct real estate loans made by any lender to an eligible farmer or rancher.
(e)Definition of eligible farmer or rancher
In this section, the term “eligible farmer or rancher” means—
(1)a qualified beginning farmer or rancher;
(2)a socially disadvantaged farmer or rancher, as defined in section 2003(e) of this title; and
(3)a veteran farmer or rancher, as defined in section 2279(a) of this title.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Codification Pub. L. 110–234 and Pub. L. 110–246 made identical
Amendments
to this section. The
Amendments
by Pub. L. 110–234 were repealed by section 4(a) of Pub. L. 110–246.
Amendments
2018—Subsec. (a)(1). Pub. L. 115–334, § 12306(c)(1), substituted “eligible farmers or ranchers” for “qualified beginning farmers or ranchers and socially disadvantaged farmers or ranchers”. Subsec. (d)(2)(A). Pub. L. 115–334, § 12306(c)(2)(A), substituted “farmers or ranchers” for “recipients of the loans”. Subsec. (d)(3). Pub. L. 115–334, § 12306(c)(2)(B), added par. (3) and struck out former par. (3) which read as follows: “encourage retiring farmers and ranchers to assist in the sale of their farms and ranches to qualified beginning farmers and ranchers and socially disadvantaged farmers or ranchers by providing seller financing;”. Subsec. (d)(4). Pub. L. 115–334, § 12306(c)(2)(C), substituted “for—” for “for beginning farmers or ranchers or socially disadvantaged farmers or ranchers”, added subpars. (A) and (B) and subpar. (C) designation, and inserted “veteran farmers or ranchers, as defined in section 2279(a) of this title; and” before “; and” in subpar. (C). Subsec. (d)(5). Pub. L. 115–334, § 12306(c)(2)(D), substituted “an eligible farmer or rancher” for “a qualified beginning farmer or rancher or socially disadvantaged farmer or rancher”. Subsec. (e). Pub. L. 115–334, § 12306(c)(3), added subsec. (e) and struck out former subsec. (e). Prior to amendment, text read as follows: “In this section, the term ‘socially disadvantaged farmer or rancher’ has the meaning given that term in section 2003(e)(2) of this title.” 2014—Subsec. (b)(1)(C). Pub. L. 113–79, § 5005(a), substituted “$667,000” for “$500,000”. Subsec. (b)(2). Pub. L. 113–79, § 5005(b), struck out second par. (2) which read as follows: “The interest rate on any loan made by the Secretary under this section shall be 4 percent.” 2008—Subsec. (a)(1). Pub. L. 110–246, § 5004(1), substituted “or ranchers and socially disadvantaged farmers or ranchers” for “and ranchers”. Subsec. (b)(1), (2). Pub. L. 110–246, § 5004(2)(A), added par. (1) and par. (2) consisting of subpars. (A) and (B) and struck out former par. (1). Prior to amendment, text of par. (1) read as follows: “Each loan made under this section shall be in an amount equal to 40 percent of the purchase price or appraisal value, whichever is lower, of the farm or ranch to be acquired, unless the borrower requests a lesser amount.” Subsec. (b)(3). Pub. L. 110–246, § 5004(2)(B), substituted “20” for “15”. Subsec. (c)(1). Pub. L. 110–246, § 5004(3)(A), substituted “5” for “10”. Subsec. (c)(2), (3). Pub. L. 110–246, § 5004(3)(B), (C), redesignated par. (3) as (2), in subpar. (B), substituted “20-year” for “15-year”, and struck out former par. (2). Prior to amendment, text read as follows: “The Secretary shall not make a loan under this section with respect to a farm or ranch for which the purchase price or appraisal value, whichever is lower, exceeds $250,000.” Subsec. (d)(3). Pub. L. 110–246, § 5004(4)(A)(ii), struck out “and” at end. Pub. L. 110–246, § 5004(4)(A)(i), which directed the insertion of “and socially disadvantaged farmers or ranchers” after “ranchers”, was executed by making the insertion after “ranchers” the second place it appeared to reflect the probable intent of Congress. Subsec. (d)(4). Pub. L. 110–246, § 5004(4)(B), substituted “or ranchers or socially disadvantaged farmers or ranchers; and” for “and ranchers.” Subsec. (d)(5). Pub. L. 110–246, § 5004(4)(C), added par. (5). Subsec. (e). Pub. L. 110–246, § 5004(5), added subsec. (e). 2002—Subsec. (b)(1). Pub. L. 107–171, § 5005(1)(A), substituted “40 percent” for “30 percent”. Subsec. (b)(3). Pub. L. 107–171, § 5005(1)(B), substituted “15 years” for “10 years”. Subsec. (c)(3)(B). Pub. L. 107–171, § 5005(2), substituted “15-year” for “10-year”.
Statutory Notes and Related Subsidiaries
Effective Date
of 2008 AmendmentAmendment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, see section 4 of Pub. L. 110–246, set out as an
Effective Date
note under section 8701 of this title.
Reference
Citations & Metadata
Citation
7 U.S.C. § 1935
Title 7, Agriculture
Last Updated
Sep 23, 2026
Release point: 119-110