If somebody walks into a Chicago police credit union, and we all know that almost certainly is going to be us, and wants to buy investment property we want to know if it will be a secondary residence or something like a rental or VRBO.
An example of a secondary residence would be if I own a home in the suburbs and I want to buy a condominium unit on the lakefront of Chicago. That condo unit, if I’m using it for personal use and it’s enough miles away from where I presently live, that’s going to be considered a secondary residence. Thus, I’m going to be able to get the same interest rate I would if that were my own primary residence because I’m not using it for rental income.
All of the qualifications are the same as a primary residence. That’s a very rare transaction because not many people have the disposable income to buy a second home and use it as a vacation home for their own personal pleasure. That’s rarely an example of a police home loan.
When it comes to investment properties, we’re usually dealing with one to four-unit single family homes. Anything above four units is considered a commercial transaction.
If a client wants to buy a single-family home in another town in another state, and they want to use that for VRBO or for Airbnb that’s fine but he or she is going to have to show assets. They’re going to have to show a greater threshold to demonstrate the ability to withstand an economic event that would cause an inability to rent the property. In commercial business lingo that’s called vacancy rate, which usually is 75% of the total amount that you would be taking in for monthly rents for investment property.
If it’s a single-family home, you can go as low as 10% down but we’re going to recommend that you put 20% or 25% down because the rate adjustments are astronomical. In today’s day and age with rates going up, it’s going to be even harder to justify buying one of those properties.
When it comes to mortgages for police officers, we’re going to be looking for six months of your qualifying monthly payment on deposit, whether it be in a liquid account or a brokerage account that can be liquidated. That’s going to be a requirement to show that you have what they call the reserves to be able to make the payment.
Today is a difficult market for investment properties but if somebody has 20% to put down and they have a 800 credit score along with more than six months’ worth of qualifying payments in reserves, absolutely, we can handle that transaction.
I cannot stress enough that you must have really good credit and you have to have the assets. This isn’t one of those deals where somebody thinks that they like the idea of buying an investment property and they’re going to save a down payment as they go along.
Again, this is not for the inexperienced. This is not for the meek. This is for somebody understands that the burden of proof is going to be on the client to be able to qualify.
Police Mortgage specializes in conventional mortgages, purchase money transactions, FHA loans, and VA loans. Led by founder and CEO John Aretos, Police Mortgage is known and respected for providing clients with exceptional service, customized terms, quick and easy closings, and low money down options. To learn more about Police Mortgage, call 312-499-8878.
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