Loan FAQs

What size loan might we qualify for?
The Free Methodist Loan Fund has two general guidelines that will help you determine how much you may qualify for. First, the Free Methodist Loan Fund is only authorized to loan up to 75% of what the property is appraised at. Therefore, if the property is appraised for $100,000 the largest potential loan would be $75,000.
Second, a maximum of 30% of a ministries’ revenue (excluding capital funds) can be used to service debt. Below is a general guide showing how much a ministry can potentially qualify for based on revenue assumptions and amortization.

Please note that this is a general guideline and does not guarantee approval. This example is based on a rate of 5.45%. If your expected rate is higher or lower your qualification will be adjusted accordingly.


What fees are associated with receiving a new loan from the Free Methodist Loan Fund?
Different from most lenders, the Free Methodist Loan Fund does not charge any points or fees for new loans. The ministry normally incurs out of pocket expenses to cover the cost of an appraisal, mortgage preparation, and title insurance. Title insurance and appraisals will depend on the amount of the loan. Below are approximate rates for the state of Michigan. Please contact a local appraiser, attorney, and title company in your state to get a more accurate price.

 

The cost of appraisal will very greatly by appraiser and region. Please contact a local appraiser to get an accurate estimate for a limited summary appraisal. Since the price may vary greatly between appraisers, it may be beneficial to contact multiple appraisers.

What is the current interest rate?
The current loan rate can be determined by calling (800) 325-8975.

Who sets the current interest rates?
The Loan Fund committee at The Free Methodist Foundation and the Investment Committee of its board of directors review and set loan rates regularly.

How long does it take to get approved for a loan?
Loans under $250,000 can be processed in approximately four weeks. Loans for more than $250,000 may take closer to six weeks because they normally involve more steps including board approval. The amount of time to fully process a loan may be reduced through a high degree of responsiveness by the church.

How long does it take to get funding after approval?
After approval you will receive an approval letter with the remaining requirements. The time to complete these requirements varies based on the responsiveness of the church, Title Company, and appraiser. Normally we find that these take around four weeks.

What are the steps in the loan application process?
Step 1- Preparation and Submission of Application
   Complete Application with Signatures (Requires Conference Superintend Signature)
   Attached Year To Date and Previous Year Financial Statements and Budget

Step 2- Review, Analysis, and Decision by FMF

Step 3- If approved, the applicable documents from the list below are required:
   Articles of Incorporation
   Property Deed
   Minutes of the Local Society Authorizing the Loan
   Copy of Conference BOA Authorizing the Loan
   Release to Encumber
   Appraisal
   Copy of Purchase Agreement, if applicable
   Copy of Construction Agreement with General Contractor
   Promissory Note
   First Mortgage or Deed of Trust
   Title Insurance Policy
   Certificate of Fire and Extended Coverage Insurance

Step 4- FMF disburse funds by Electronic Transfer or check.

Are there pre-payment penalties?
There is no penalty for paying the loan off early with funds from operations or capital campaigns. We strongly encourage organizations to pay off their loan as soon as possible. However, if the organization refinances the loan with another institution within three years after the closing date, the following penalties will be assessed:
   3.00% of the full payoff amount at the time of the refinance if refinanced within the first year after the closing date.
   2.00% of the full payoff amount at the time of the refinance if refinanced within the second year after the closing date.
   1.00% of the full payoff amount at the time of the refinance if refinanced within the third year after the closing date.

Who should I contact at the Free Methodist Loan Fund?
Joshua Adams, Manager of Loan Fund Ops: 800-325-8975 (toll free) | 517-841-5826 (direct) | jadams@fmfoundation.org 
Mark Olson, Executive Vice President: 800-325-8975 (toll free) | 517-841-5803 (direct) | molson@fmfoundation.org 

How will we receive money from our loan?
In most cases, the Free Methodist Loan Fund can electronically transfer funds directly into your bank account. Checks can also be mailed.

During construction, is interest charged while the loan is in the draw phase?
Yes, interest accrues daily on the unpaid balance. The ministry is asked to make monthly interest payments while in the draw phase. These payments are applied to interest only. If a payment is received early and the payment is more than the amount of interest that has accrued, the excess will be carried forward and offset the amount of interest due the next month.

During construction, is interest charged while the loan is in the draw phase?
Yes, interest accrues daily on the unpaid balance. The ministry is asked to make monthly interest payments while in the draw phase. These payments are applied to interest only. If a payment is received early and the payment is more than the amount of interest that has accrued, the excess will be carried forward and offset the amount of interest due the next month.

How long are we guaranteed our current interest rate?
The church receives the current rate in effect at the time the entire application is received at The Free Methodist Foundation. If approved, the church will be guaranteed this rate for five years from the date the loan is approved. After five years the loan will be adjusted up or down to the current rate in effect at that time.

When the rate of the loan resets, how is the new rate determined?
The rate generally adjusts to the base rate in effect for new loans at that time. The base loan rate is determined by a wide variety of factors including loan demand, market conditions, and dollars available to loan.

Why do we need society minutes?
In order to receive a release to encumber, society minutes are required by the denomination. If the loan has been authorized by the church board, you will be asked to submit society minutes authorizing the church board to act.

What do the society minutes need to say for a new loan?
When the society of the church votes to approve the loan, the minutes need to specifically state the amount of the loan, the understanding that a lien will be placed on the property, and state the person who is authorized on the behalf of the church to sign any documents necessary. Please see the example below. 

“RESOLVED, that [Your Name Here], is authorized to obtain a loan from The Free Methodist Foundation and to grant to the Foundation a mortgage on the property of the ministry for up to [$the amount], and that the person authorized to sign and deliver the Promissory Note, the Mortgage and any other document(s) needed to consummate the transaction is ___________________________, who is the ministries’ ____________________________ (title).”

What do the conference minutes approving the loan need to say?
When the conference board of administration votes to approve the loan, the minutes need to specifically state the amount of the loan, the understanding that a lien will be placed on the property, understanding that the conference is signing the note as co-maker, and state the person who is authorized on the behalf of the conference to sign any documents necessary. Please see the example below.

“RESOLVED, that [Conference Name] approves of [Church Name Requesting Loan] obtaining a loan from The Free Methodist Foundation, and of the church granting to the Foundation a mortgage on the Church’s property for up to [Enter Amount]; that the Conference agrees to sign as co-maker the Promissory Note for the loan, recognizing that the Conference is thereby obligated to make the loan payments at any time if the Church does not; and that the person authorized to sign and deliver the Promissory Note and any other document(s) needed to consummate the transaction on behalf of the Conference is __________________________, who is the Conference’s ________________________ (title).