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Everything you need to know about the Police & Firemen’s Retirement System Mortgage Program

As an active police officer, I understand the unique stresses and financial burdens which our everyday heroes go through.. With the increased medical coverage and pension contributions, a lot of our paychecks have been decreasing instead of increasing over the past few years even with percentage raises. A way to keep the burden off your shoulders is to create a cash flow plan with your mortgage. A lot of police officers and firefighters have been using the benefits of this mortgage program provided to us.

What is the Police & Fire Mortgage?

  • The Police & Fire Mortgage is eligible to any currently employed police officer or firefighter, who is a member of the Police and Firemen’s Retirement System with a minimum of 1 year of creditable service who is looking to purchase a home. This mortgage is currently for purchase only, no refinances. It is also only available for active members. Unfortunately, retired members do not qualify for this mortgage program.


What are the terms?

  • Twice a year the rates will change. The updated rates are released on February 15th & August 15th of each calendar year. The mortgage rates are based on the Treasury bill 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. (example 15- & 30-year loans)


Are all properties eligible for this mortgage?

  • 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 residence 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 police and fire mortgages are not eligible for jumbo loans. The current maximum mortgage amount is $647,200. This allows you to purchase a home which is a high-priced loan as long as your loan amount is $647,200 or below.


What are the fees involved for the police and fire mortgage?

  • Over the years, I have seen applicants be hesitant 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. There is also a monthly servicing fee. The charge is $30.00 per month for the first 36 months and then drops down to $18.00 per month for the remainder of the loan. This payment is charged directly onto the mortgage payment.

 

Current PFRS Interest Rate

  • 2.830% (APR2.955%)
    • Not all borrowers will qualify, terms and conditions apply. Available only to currently employed members of Police and Firemen Retirement System with at least one year of creditable service.All program eligibility requirements apply. This rate is available for a limited time. APR is based upon a $300,000 Loan Amount APR and a loan to value of 80%.


I have heard this mortgage is not a taxable distribution.

  • As per the NJ Housing & Finance Agency (HMFA), they have advised the following:
    • “The State Treasurer has obtained and is relying on an opinion from 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.” www.njhousing.gov


Will anything else be required during the process?

  • The police and fire mortgage have a few additional guidelines in order to secure a mortgage loan.
    • The home must pass a termite inspection (if fails, needs to be treated)
    • A survey of the property is required.
    • If the lot is more than 1 acre, a letter from the town advising the land cannot be subdivided without a variance is required.
    • Print out of the member benefit statement from MBOS. (State of NJ Pension Benefits)


In conclusion, as a Certified Mortgage Planning Specialist, the police and fire loan is a huge benefit to members that are eligible. In a volatile market where interest rates rise or continue to shift back and forth, a long-term lock is an added bonus. In the past few months, we have seen the Treasury Bill rise, the police and fire rates stay the same during these periods of transition until the adjustment dates of February 15th and August 15th. It should be known with your 6-month rate lock, if an adjustment period happens and interest rates rise, your interest rate will remain until your lock expires. If the rates drop at the adjustment period, there is a minor fee to pay to have the rate lowered. From my experience, the police and fire mortgage program can have a substantially lower monthly payment than other programs and is definitely a mortgage program to acquire. Please feel free to reach out to me with any questions you may have.


Your Brother in the Mortgage Business,

Anthony Marone
Cell: (732) 289-5600
amarone@advisorsmortgage.com