VA Pamphlet 26-7, Revised
Chapter 7-Loans Requiring Special Underwriting,
Guaranty and Other Considerations
7-39
10. Farm Residence Loans, Continued
b.
Underwriting
If some or all of the income necessary to support the loan payments comes
from farming operations, the veteran’s ability and experience as a farm
operator must be established. The procedures and analysis provided under
“Self-Employment Income” in section 2 of chapter 4 apply generally. In
addition, apply the following:
New farmer or new farm operation:
Obtain the following:
• The veteran’s proposed plan of operation of the farm, showing the
number of acres for each crop, amount of livestock, etc., upon which an
estimate of income and expenses may be made.
• The veteran’s statement that he or she owns or proposes purchasing the
farm equipment required to operate the farm. If additional indebtedness is
to be incurred in the purchase of this equipment, the statement should
contain full details as to repayment terms, etc.
• An estimate of farm income and expenses by a local farm appraiser
designated by VA or another qualified person, or the estimate used by a
lender that has agreed to carry an operating line of credit for the veteran.
The estimate should be based on the veteran’s proposed plan of operation,
his or her ability and experience, and the nature and condition of the farm
to be sold, including livestock and livestock products. The expense
estimate must detail labor, seed, fertilizer, taxes and insurance, repairs,
machinery, fuel, etc.
• A copy of a commitment from a lender for an operating line of credit or
evidence of the resources to be used to cover operating expenses.
Experienced farmer continuing same farm operation:
If the veteran finances operations out of an operating line of credit, obtain
records of advances from, payments to, and carryover balances on the
operating line of credit for the last 3 years (or additional periods if needed
to demonstrate stability of veteran’s operation). Analyze the reasons for
any build-up of operating debt.