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Church Financing

Church Financing Lender

There are a few types of church financing options available from Direct Money Lenders’ capital partners. We do not service church loans. Depending on the program chosen, they are sold into the secondary market or kept within one of our portfolio lenders. All products are typically Non-Recourse! – Meaning NO personal guarantees!

Choosing the right loan for your church is an important decision. We have professional analysts in our office, who have several years of experience helping church congregations understand the various programs and options available. Direct Money Lenders will listen to your needs, ask necessary questions about your church, and make recommendations on which church financing product is the best fit.

Traditional Church Financing

Traditional church financing with long term amortization schedules ranging from 10 years to 30 years are available. Fixed mortgage rates ranging from 5 years to 20 years are offered. This program uses an underwriting method called Debt Service Coverage (DSCR ratio) to determine how much a church may be able to finance using the historical and current income minus expenses.

Small Down Payment Option

This program is perfect for new purchase money for congregations at least 3 years old. Most church lenders require your congregation to put down a lot of money when purchasing the property. This church mortgage allows a very small down payment (as little as 10%) by utilizing a first and second trust mortgage. The first trust mortgage note would be provided through a traditional loan while the second trust mortgage would come from the seller of the property or by other means. Very competitive rates and terms are offered.


Church Bond Program

This program provides the best rates available for your church. If you’re interested in a long-term fixed rate with no balloon, this may be the program for you. Church Bonds have great interest rates and, generally, no balloons. The costs associated with this type of transaction are generally higher, but they can be a good fit for congregations looking to quickly retire the debt.

Purchase – Refinance
– Cash out – Debt Consolidation
Minimum Loan Size $500,000 – $20,000,000+ – Loan
amount depends on
Pricing 4.99% – 7.99% Interest only –
1% – 4% Origination points (paid at closing)
Loan Terms 12 – 300 months from initial
Prepayment Penalty Typically None
Personal Guarantees NO
Loan-to-Value 90% AS-IS maximum LTV-
As completed LTV is not typically considered
New Equity (cash) Requirements
No new cash for Refinance or
cash out – Purchase minimum – 10% – 20% of total projected cost
Third Party
Appraisal – Collateral
value opinion
ALTA Title policy and land survey
Legal opinions
Submission Package For Church Loans:
1. Well written
summary OR our online application – Top of page
2. Representative color photographs
3. Historical & YTD operating statements
4. Completed application (DML rep can send to you)
5. Statement of faith
6. Pastor’s resume or bio
7. Sources and uses

Common myths about church financing

Locating financing for churches can be difficult, sometimes impossible, if you’re not looking in the correct locations. In fact, most lenders, banks and money sources look the other way when it comes to church loans. After all, if a church defaults in their loan obligations, who wants to foreclose on God?

One of the main reasons for the reluctance is simply because most churches meet in and own special use/purpose buildings and most of them are non-profit 501c3 organizations. For instance, most other commercial properties, can usually be renovated to accommodate almost any business use. Most of the time, churches are for church meetings and gatherings, only, and are designed as such. It’s hard to open a restaurant in one of these spaces. Vacant church buildings consequently tend to have much longer marketing times before they are resold, with fewer buyers, adding another layer of risk and uncertainty. As we all know, uncertainty often makes the financing process even more difficult than normal. However, there is light at the end of the tunnel if you can understand how to avoid the common pitfalls of originating church loans. Hopefully these items can help you better understand the process of church financing.

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Building VS Buying

Many congregations will spend hundreds and thousands of dollars on building and architectural plans and drawings, only to find that there is not an interested bank to adequately finance the property and plans. Please don’t let your congregation or clients find out the hard way that construction projects often require more upfront/out-of-pocket fees than those needed to construct a new facility. There are often very costly and time-consuming zoning issues, water and sewer capacity concerns, landscaping, parking lots, etc., to account for. Let’s face it – building is a much more involved process and, therefore, much more risky. Purchasing an existing church facility building, at a good price, is often the least expensive and painless option in today’s market.

“Churches must have huge down payments in order to buy a new facility.” – This is probably the most misunderstood fact about church financing and is not necessarily the case. Yes, there are some out-of-pocket expenses associated with any loan, but Direct Money Lenders does not charge an up-front fee to underwrite a church loan. At a minimum, the church must be prepared to pay soft costs, such as appraisals, surveys and other third party reports required by the lender. However, depending on the deal location, current and historical cash flow, age of the property, and numbers within the congregation, a normal figure is between 10 to 30 percent of the purchase price. In addition, if the seller is willing to carry a second mortgage to help reduce the LTV it may sweeten the deal to the lender.

Lenders don't fund small church loans

It is true that many lenders do not want to spend time on underwriting church loans under $500,000. This is because it takes just as long to underwrite a $3 million church loan as it does to fund a $250,000 mortgage. At Direct Money Lenders, we finance church loans down to $100,000.

Bottom line

If you are searching for a church loan you must have a good relationship with money sources that are flexible enough to close church loans through traditional institutions. Direct Money Lenders has been actively working with churches for over 10 years and we have the experience to close your challenging church mortgage.