The Money Talk Nobody Wants to Have Before Buying Land (But Should)

There's a particular kind of regret that shows up about four months after closing on a piece of ground, and it has nothing to do with the land itself. It's the regret of realizing you structured the loan wrong, or missed a program that would've saved you two points of interest, or learned the hard way that "pre-qualified" and "pre-approved" aren't the same thing. I've watched friends make this mistake. I've almost made it myself. So when TrophyCast sat down with Daniel Steininger from Bank of Springfield to talk through the actual mechanics of financing recreational and farm ground, I paid closer attention than I expected to.

Steininger is a Mizzou grad who's spent his entire career at the bank, spending his days underwriting the exact loans that put people onto the land they've dreamed about since sitting in a tree stand their uncle built. He's not a hype guy. He's the guy who tells you what the numbers actually are, which turns out to be far more useful than almost anything else in this business.

Here's the first thing, and it's the piece that will save you the most grief: talk to a banker before signing a contract, not after. I know—the agent has things moving, deadlines are looming, and someone else might swoop in. But knowing your true numbers before becoming emotionally attached to a property is the difference between negotiating from strength and negotiating from desperation. Also, brace yourself, because recreational ground isn't financed like a home. You're looking at 20 to 25 percent down, not the 5 or 10 percent first-time buyers expect from residential deals. Raw land doesn't carry the same collateral cushion a house does—a bank won't lend 95 cents on the dollar for a piece of dirt with no structure, and honestly, they shouldn't. That's just reality.

Once you're actually securing the loan, there are basically two avenues. Bank of Springfield keeps plenty of recreational paper in-house—think a five-year balloon sitting on a 20-year amortization schedule. That works great if you're not chasing a set fixed rate for three decades. But if you want long-haul certainty, you're looking at Farmer Mac, which is essentially the ag-and-rec-land counterpart to Fannie Mae and Freddie Mac. At the time of recording, a 30-year fixed through Farmer Mac was running around 7 percent with 40 percent equity or better, while a 5-year fixed-variable option sat closer to 6.25. The bank doesn't hold that paper long-term—they service it, meaning you still call the same contact for the life of the loan even though the capital originated elsewhere. That detail matters more than it sounds, because the alternative is getting passed around between strangers every time your loan changes hands.

If you're on a tight timeline, keep in mind that Farmer Mac closings typically require about 40 days, primarily due to the appraisal. You're looking at an 80-to-100-page formal report rather than the brief five or six pages from an in-house appraisal. On top of that, boundary surveys in many rural counties are currently backed up five to six weeks. Put those together, and a 30-day close—the kind sellers love—gets tight quickly. Not impossible, just tight.

If you're new to the game, there's a program worth knowing about that a surprising number of eligible buyers miss entirely: the FSA's Beginning Farmer loan. Don't let the name fool you—"beginning" doesn't mean you're 23 years old in your first pair of Carhartts. It applies to anyone in their first ten years of filing a Schedule F, meaning you could be 61 and just getting into farming after retiring from another career entirely. The program allows entry with as little as 5 percent down, with the FSA financing roughly $500,000 to $600,000 directly and a local bank covering the rest behind them. If you qualify and nobody mentioned it, that's real money left on the table.

There's also a smart workaround for a situation many recreational buyers face without realizing it: handling a property with an existing house. Farmer Mac now allows a dwelling valued up to roughly $750,000 without disqualifying the deal, provided the land itself retains most of the collateral value. Say you're eyeing 100 acres with a nice farmhouse—often the best play is splitting the house off onto a smaller parcel (up to 20 acres, depending on county rural classifications) and financing it separately through conventional residential options like Fannie Mae, while the remaining acreage rides a long-term fixed land loan. It costs an extra survey, but it can save significant money over the life of the note.

As for the current market state—which I trust more than general market chatter since it comes straight from an underwriter calculating what buyers can actually afford—things around St. Charles County and surrounding areas remain steady. Strong, even. Loan volume has pulled back from the 2020-2021 peak, but that's not a red flag; it's simply the market taking a breather after being, as Steininger put it, "stupid" for a while. Buyers are thinking carefully before committing, which is the healthy response as conditions normalize. Ground an hour or two outside the metro remains the sweet spot—far enough to truly escape, close enough to be back at your desk Monday morning.

Don't count on those 3 percent 30-year rates returning. That ship has sailed and won't be circling back anytime soon. Short-term movements are unpredictable—dependent on the Fed and employment reports—but long-term, plan around current market rates rather than what a neighbor locked in four years ago.

The toughest part of the conversation, and one more landowners need to hear, touched on farm bankruptcies—which are climbing, particularly in Illinois. Steininger made clear that bankruptcy rarely stems from a single bad year. It's a series of difficult years piling up, compounded by relentless input costs and debt structures that get rolled forward instead of addressed. The classic trap occurs when an operating note isn't fully paid down and grows year after year; as rates rise, a note that began at 3 percent can wind up refinanced at 8.5—on land that previously carried much lower overhead. It's a hard conversation for a banker to have with a client of twenty years, but avoiding it only makes the eventual outcome worse.

Finally, an issue that comes up whenever auctions are mentioned to first-time buyers: the buyer's premium. People hear the term and assume they're taking on an extra burden compared to traditional sales with seller-paid commissions. They aren't. The math works out the same in the end—whatever final contract figure you reach gets financed, premium included. The real advantage of the buyer's premium is transparency: the number you watch rise on the screen during the auction is the exact amount that goes to the seller. No mental math needed when the gavel drops.

None of this is overly complicated once it's explained clearly. It's simply the kind of insight usually gained the hard way—after the fact, over a drink, wishing you'd known earlier. Might as well learn it now instead