Farmer was born on September 19, 1913 in Seattle, Washington, the daughter of Lillian (nee Van Ornum 1873-1955), a boardinghouse operator and dietician and Ernest Melvin Farmer, a lawyer. Farmer was the youngest of four children; she had two older sisters, and one older brother. At age four, Farmer's parents separated, and her mother relocated with the children from their home in North Seattle to Los Angeles, where her sister lived. Two years later, Farmer and her siblings were sent back to Seattle to live with their father.

On October 19, 1942, Farmer was stopped by Santa Monica Police for driving with her headlights on bright in the wartime blackout zone that affected most of the West Coast. Some reports say she was unable to produce a driver's license and was verbally abusive. The police suspected her of being drunk and she was jailed overnight. Farmer was fined $500 and given a 180-day suspended sentence. She immediately paid $250 and was put on probation. By January 1943, she failed to pay the rest of the fine and a bench warrant was issued for her arrest. At almost the same time, a studio hairdresser filed an assault charge alleging that Farmer had dislocated her jaw on the set. The police traced Farmer to the Knickerbocker Hotel in Hollywood. Getting no answer, they entered her room with a pass key. They reportedly found her in bed (some stories include an episode involving the bathroom) and made her dress quickly. "By all accounts, she did not surrender peacefully." At her hearing the next morning, she behaved erratically. She claimed the police had violated her civil rights, demanded an attorney, and threw an inkwell at the judge. He immediately sentenced her to 180 days in jail. She knocked down a policeman and bruised another, along with a matron. She ran to a phone booth where she tried to call her attorney, but was subdued by the police. They physically carried her away as she shouted, "Have you ever had a broken heart?" Newspaper reports gave sensationalized accounts of her arrest. Through the efforts of her sister-in-law, a deputy sheriff in Los Angeles County, Farmer was transferred to the psychiatric ward of Los Angeles General Hospital. There she was diagnosed with "manic depressive psychosis".

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