What Kind of Loans Can You Use to Finance Your Dream Horse Property?

A critical step in preparing to buy a horse property is securing proper financing. However, finding the money for these types of properties can present a unique set of challenges.

Depending on your personal financial situation and how you intend to use the property, you may need to conduct research on different loan requirements before reaching out to a lender. The research process may take months, but once you secure a loan, you’ll move one step closer to becoming a horse property owner.

As you consider your options, here are four types of loans you may be able to use to pay for your equestrian estate:

Conventional Loan

If you plan to live on your equine estate, you may be better off opting for residential property financing, like a conventional loan. Should you qualify, you can expect to put anywhere between 3% and 20% down on your property. If you are able to pay at least 20%, you’ll also avoid private mortgage insurance (PMI), which can increase your monthly payments for several years.

On some occasions, properties that yield farm income, have multiple outbuildings (e.g. barns or stables), or are large in acreage may not meet the criteria for a conventional loan. In addition, many lenders will only finance standard residential properties, and since horse properties are nonconforming, it may be harder to secure this type of financing for your equine property.

FHA Loan

Loans secured through the Federal Housing Administration, or FHA loans, are also popular among prospective buyers who would like to reside on their property. The less demanding requirements for FHA loans make them an attractive option if you haven’t saved much for a down payment, have poor credit, or have experienced financial hardships like bankruptcy or foreclosure in the past. Requiring a down payment of only 3.5%, they are also typically more obtainable for lower-income and first-time home buyers.

FHA-insured loans can be used for rural properties and have no location restrictions, meaning you can apply regardless of where you live. However, it’s important to note that they do have acreage limits. The FHA will only back the value of the first 10 acres and your home must be within those 10 acres, so you should consult an expert if you have any questions regarding your chances of FHA loan approval.

USDA Loan

A USDA loan, or Rural Development loan, is a government-backed mortgage that requires no down payment, making them an attractive option for those with low-to-moderate income. These types of loans can only be used in qualifying rural communities, so you’ll want to verify whether or not you’re able to use this type of financing in your new locale prior to applying.

You should be aware that USDA loans can not be used to purchase income-producing properties. However, if you’re purchasing an equine property that won’t be used for commercial purposes, a USDA loan may be ideal for you. Additionally, there are income restrictions that are based on the average income in your area where you’re purchasing a property. If your family’s combined income does not exceed these limits, you’ll likely qualify for financing through the USDA.

Equine Facility Loan

You can also finance equestrian properties with equine or farm property loans. These loans are specifically designed for different types of horse properties, whether they’re used for boarding, training, or to house personal horses. You may be eligible for an equestrian facility loan if your property is at least 5 acres, and you don’t necessarily need to reside on the property in order to qualify.

Equestrian facility loans are available in all 50 states and have no acreage restrictions or loan limits. You may want to seek out a lender that’s an expert in nonconforming and equestrian financing though, as they’ll be able to guide you through the process of researching and securing these specialized loans.

Before applying for any type of financing, be sure to weigh the pros and cons of each with your equestrian real estate agent. Be sure to research your options carefully to determine your approval odds and decide on the best option for your borrowing needs.