As an active police officer, I understand the potential stresses and financial burdens our everyday heroes go through on a daily basis. With the increased medical coverage and pension contributions over the past few years, many of our paychecks are potentially decreasing instead of increasing, despite the yearly percentage raises we receive.
One way to alleviate this financial stress would be to get a cash flow plan with your mortgage, allowing you to have more financial freedom. A lot of police officers and firefighters have been using the benefits of this exclusive mortgage program available only to police officers and firefighters in New Jersey.
What is the NJ Police and Firefighter Mortgage Program?
The Police and Firefighter Mortgage Program is available for any currently employed police officer or firefighter who is a member of the Police and Firemen’s Retirement System, with a minimum of one year of creditable service, who is looking to purchase a home.
What are the loan terms?
The rates will change twice a year. The updated rates are released on February 15 and August 15 of each calendar year. The mortgage rates are based on the Treasury, plus 1%. As a client, when you locate a home and want to move forward with a rate lock, you will receive a 6-month rate lock from the lock date. Once you close on the home, this rate will not change for the term of the mortgage. The same rate applies to different loan terms.
Are all properties in New Jersey eligible for the Police and Firefighter Mortgage Program?
Properties that are eligible must be a one or two family residence or condominium located in the state of New Jersey and you must occupy the residences within 120 days of closing and remain in the residence for the life of the loan.
What is the maximum mortgage amount I can borrow?
The maximum mortgage amount is determined by Fannie Mae. The current maximum mortgage amount is $484,350. Because the Police and Firefighter Mortgages are not eligible for Jumbo loans, this program still allows you to purchase a potentially higher-priced home, as long as your loan amount is $484,350 or below.
What are the fees involved for the Police & Firefighter Mortgage Program?
Over the years, as a mortgage specialist, I have seen applicants hesitate based upon the higher fees. If I am able to show them savings in their monthly payments, they begin to see the benefits of this mortgage. The origination fee of the mortgage is currently $1,825 which is set by the NJ Housing and Mortgage Finance Agency (NJHMFA). There is also a monthly servicing fee. The charge is $30 per month for the first 36 months and then drops to $18 per month for the remainder of the loan. This payment is charged directly into the mortgage payment.
Is this mortgage a taxable distribution?
As per the NJHMFA, they have advised the following:
“The State Treasurer has obtained and is relying on an opinion from the tax counsel that there is an adequate basis, in accordance with prevailing guidelines, to conclude that it is reasonable for the Police and Firemen’s Retirement System to take the position that mortgages issued under this program should not be treated as taxable distributions. If it is ultimately determined that these mortgages are taxable distributions, you could be required to pay tax on the mortgage proceeds as well as penalties. We suggest you consider consulting your own tax advisor before submitting your application.”
Will anything else be required during the process?
The Police and Firefighter Mortgage has a few additional guidelines in order to secure a mortgage loan.
- The home must pass a termite inspection. If it fails, the home needs to be treated.
- A survey of the property is required.
- If the lot is more than one acre, a letter from the town advising the land cannot be sub-divided without a variance is required.
- Print-out of the member benefit statement from MBOS (NJ Division of Pensions & Benefits).
Depending on your situation, there may be other requirements.
Contact New Jersey Mortgage Specialist Anthony Marone to Learn More
The Police and Firefighter Mortgage is a huge benefit to members that are eligible. In the past few months, we have seen the Treasury bill rise, but the police and fire rates stay the same during these periods of transition until the adjustment dates of February 15 and August 15.
It should be known that with your six-month rate lock, if an adjustment period happens and interest rates rise, your interest rate will remain the same until your six-month lock expires. If the rate drops at the adjustment period, there is a minor fee to pay to have the rate lowered.
From my experience as a loan officer, my past clients in New Jersey have had their monthly payments reduced significantly using this mortgage. It’s worth our time reviewing this program to see how you may benefit. Please feel free to reach out to me with any questions you may have.