Colorado Lenders and State Programs

Ranch and Equestrian Property Loans in Montrose: What Ag Lenders Look For

Buying a ranch or horse property on Colorado's Western Slope involves more than a mortgage. Here is what lenders tend to look at and how to prepare before you apply.

Ranch property or home with acreage?

Lenders sort rural property into categories. A working ranch with income from cattle or hay is treated differently from a rural home with pasture and a barn. Equestrian properties land in between, since income might come from boarding or lessons or might be purely personal.

Which category you fall into affects the type of loan, the paperwork and the terms. Tell the lender your actual plan at the start. Misstating how property will be used can create problems later. CFPB mortgage guidance explains the general rules for home loans.

Loan programs differ as well. A rural residential mortgage and an ag loan may have different down payments, different appraisal methods and different rules about income. Neither is better in the abstract. The right one depends on how you plan to use the property and what your finances look like.

The income question

For a working ranch, lenders like to see production history, tax returns and a believable cash flow. For an equestrian property, they might ask whether boarding, training or events produce income, and how stable it is.

If this is a first ranch purchase, expect more questions. A plan with realistic revenue, a reserve for repairs and some off-farm income can help. Ag lenders such as Farm Credit associations often work with part-time and small operations; ask what they require.

Part-time ranchers should keep tax records tidy. Lenders often want to see two or more years of returns, and a spotty history of farm income can lead to more scrutiny. The IRS farmer's tax guide is a good starting point for understanding how farm income and expenses are reported, though a tax professional is the best source for your situation.

Land, water and access

On the Western Slope, water is the core of value. Ask whether the property has irrigation rights, how they are documented, who maintains the ditch and what the assessments are. The Colorado Water Conservation Board has background on state water planning.

Check access too: legal road access, easements, and any shared drives or utilities. A beautiful property with unclear water or access can be hard to finance. Title review and a good attorney matter here.

• Water rights and ditch company shares
• Legal access and easements
• Mineral rights and encumbrances
• Zoning, grazing and use limits
• Condition of fencing, barns and wells

Appraisals and what the buildings add

Rural appraisals are trickier than city ones. Few comparable sales exist, and improvements like arenas, barns and corrals may not add value dollar for dollar. An appraiser who knows agricultural and rural property in the area is a plus.

Be ready for a lender to value the land and the buildings differently from how you do. Ask how they treat specialized improvements. CSU Extension has resources on land use and ranch planning.

One more thing about equestrian property: arenas, round pens and barns are expensive to build, but a lender may count only part of that cost in value. If you plan to board horses or give lessons, ask about zoning, liability insurance and any county rules that apply to commercial use of the land.

Down payment and loan options

Expect the lender to ask for meaningful equity. Options include conventional ag loans, community bank financing and, for qualified buyers, federal programs through FSA. Each has its own rules about down payment, term and eligible property.

Our rural property guide and farm money basics guide cover the basics. Get written quotes and compare rates, fees and flexibility, and check current terms with each lender.

Before you make an offer

Talk with a lender before you shop. Pre-qualification tells you what range is realistic. Hire a local professional to review water and title. Then, if you want a break from legal pads, farm.FM has a ranching section and a satire section, including a farm.FM story about buying a horse property.

This site is an education resource, not a lender, and none of this is financial, legal or tax advice. Talk to licensed professionals before you sign.

Ask the Colorado Department of Agriculture or your county extension office about programs and rules for rural land owners on the Western Slope.

Sources and further reading

• Farm Credit: cooperative agricultural lending network
• CFPB: consumer finance protection
• Colorado Water Conservation Board: water planning
• CSU Extension: Colorado State extension
• FSA Farm Loans: FSA direct, guaranteed, microloan and emergency loan information
• Colorado Department of Agriculture: state agriculture agency

Ask locally: Talk with a lender and a water attorney in the Montrose area before you make an offer on any ranch property.

General education only, not financial, legal or tax advice, and Colorado Rancher Loan Guide is not a lender. Rates, terms and deadlines change, so confirm current details with the lender or agency.