Church Financing is not a viable program for many banks and financial institutions. Why?  Because in the end the lender looks at the worse case scenario and let's face it, who would want to foreclose on God's home?  I have managed to affiliate myself with the few ones that, with the proper documentation, will work with you in meeting  the church's financial needs.  I can help with the Purchasing, Refinancing, or Construction of a church. 

PURCHASE PROGRAM: In general when a church is applying for a loan to purchase a property they need to have between 20% and 25% of the purchase price as a down payment. What can a church do when they can not meet this requirement?

Cross Collateralization.  Using additional collateral as a substitute for cash can be an easy solution. If the church currently owns a piece of property and this property is owned free and clear or has a substantial amount of equity the church can offer this property as additional collateral to secure the church loan. If the property currently has a mortgage then it may be necessary to refinance the current church loan and include that debt in the new loan amount although this is not always necessary.

Seller-Carried Second Deed of Trust.  Using a seller held second can be another way for a church to make up for the short fall in cash.  In general a seller held second trust is a loan provided by the seller to reduce the LTV (loan to value) of the first mortgage to be within acceptable church underwriting guidelines. In general the purchaser will still need to bring in at least 10% of their own money towards the purchase price.

Lease Purchase.  Another method is to sign a lease purchase or land contract agreement with the seller. These contracts generally take the form of a lease with part of the monies being applied towards the purchase price at some point in time in the future. This can be a good way for a church to purchase a property without having to come up with a large down payment. The benefit to the seller is that if the tenant moves out they do not generally have to refund any of the monies that were applied towards the purchase price. The monies that were paid towards the purchase price reduce the amount of the down payment needed to qualify for the church loan.

Bottom line is that there are many ways to finance a church even when the purchaser does not have the customary amount of money needed for a down payment.

CONSTRUCTION LOAN PROGRAM: Pay interest only during the church construction and have your loan automatically turn into a permanent mortgage when the church construction is complete. Fixed rates are available and you can finance up to 100% of the construction cost depending on the ownership of the land. No personal guarantees needed on this church loan.

TRADITIONAL 5/25 AND 5/20: This is a traditional church loan program and offers some of the very best rates around for churches. Loan to values go up to 80% and rates are extremely good. This church loan program uses a traditional debt service coverage underwriting method to qualify a church. No personal guarantees needed on this loan.

CHURCH LOAN SAVER: This church loan program was specifically designed to help churches that are in trouble with their current lender. This church loan program is generally used to refinance their current loan and get back on their feet. We can even help churches that are in Bankruptcy and foreclosure. The interest rates are higher than our other church loan programs but the payments are interest only. The maximum loan to value is 65% of the quick sale value. No personal guarantees needed on this church loan.

Factors to consider: Borrowing money is something to research to determine whether or not payments are affordable and how long it will take to pay off the loan. There are many factors a church should consider before undertaking the process of obtaining a loan.

1. What is the size of the congregation? Lenders will look at the debt-to income or the multiple of income ratio to determine the amount of money the church may qualify to borrow. We work with the church committee and pastor to determine an amount that will fit within their budget.
   
2. Churches should also look at the stability of their income and the likelihood of current income continuing, increasing or even decreasing. For a few months prior to applying for a loan, it is a good idea to start saving on a monthly basis an amount equal to the proposed payment of the new loan. This will give the church the ability to "feel" what the new payment will be like. If the church is currently paying rent they will only need to save the difference between their current rental payment and the new mortgage payment.


3. It is a good idea for a church to begin saving money towards the purchase of a property long before they have identified the property or even formalized a plan to purchase a property. A church that has money saved is in a good position to come up with the down payment necessary for a purchase and this has the additional benefit of showing an underwriter that they have excess income..

When determining how much a church should borrow, the best way to get an idea is by calling me. 

I will work with my underwriters when reviewing the church's income and expense statements and let you know your options.  By staying within a realistic budget, the church can comfortably meet its obligations and have money to save or use to support the mission's work.