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 three years (or additional periods if needed to demonstrate stability of veteran’s operation).  Analyze the reasons for any build-up of operating debt.