Church Loan Purchase Article

Church Loan for Purchasing a Property:

One of the most exciting events a church can go through together is the purchase of a new building. Often, a church will find itself in a situation where they have found the right property, they can afford the mortgage payment but they just do not have the down payment required to qualify for the church loan.

There are a number of ways a church can overcome this problem by being creative and understanding what is acceptable to an underwriter and what concessions the seller is willing to make.

If a church owns additional property that has equity it is possible to offer this property as additional collateral for the church loan in lieu of bringing cash to the transaction. If the property has a loan against it, then it may be required to refinance this debt and include it with the new loan amount. This may not be advantageous if the current church loan on the property is at better terms than are being offered with the new loan. However, if there are no other options and the church wants the new property then this may be the only option.

When purchasing a property from a motivated seller it is often times possible to get the seller of the property to provide a second trust. The second trust is beneficial to the underwriter because it lowers the overall risk exposure of the first trust. In general you want a second trust that has reasonable rates and is for a period of time at least as long as the first trust. In other words, it will do very little good to have a 5 year first trust church loan and a second trust that balloons after 3 years. The underwriter will be less likely to approve this scenario than if the second trust was for 5 years or longer. The reasoning is that the church will have to figure out something to do with the second trust in 3 years. If the church has an exit plan for the second trust such as selling a piece of property or raising enough cash to pay off the second trust then this may be less of an issue. In this type of situation a church is still going to need to bring in some of their own money towards the purchase of the property. In general, a minimum of 10% is needed.

It is also possible for a church to borrow money from another person or company to make up the difference between the cash the church has and the required down payment on the church loan. If your church has a member that is able to provide a loan to the church at reasonable terms that will supplement the down payment then this could be a good option. The same general guidelines apply as for a seller held second trust.

This last method is one that is often overlooked; a lease purchase agreement gives the church the ability to utilize the property and count part or all of their lease payments towards the purchase price. The benefit of this is that the church is reducing the down payment requirements each time they make a lease payment. It is advantageous to have a long term lease purchase agreement so that the church is not in a situation where they have to quickly find financing or risk loosing the money they have paid towards the property.

If your looking for a church loan to purchase, refinance, renovate, or construct a building we would love the opportunity to provide a free, no obligation quote. We can generally provide a quote in as little as 24 hours from the time we receive our 1 page application and the last 3 years financial statements for the church.