The Down Payment

Back in the day, I’m talking like 1990s, early 2000s, 20% down was the standard. You wanted to avoid private mortgage insurance as a result.

So that was always the thing growing up. When I bought my first house, my old man told me, “Hey, make sure you put 20% down.” But he grew up in a world where you had to put 50% down.

Today there are a number of promotions and a lot of incentives that are built in to allow somebody to buy a home with less than 20% down. Obviously, part of that is just the product offering.

There’s conventional loans, FHA loans, and VA loans. Each one of those has a unique set of properties that fits a certain type of customer.

Let’s start with the VA loans. Obviously, that’s for Veterans Active Duty and that is probably going to be, to this day, your best deal in town. If you’re a veteran, you have VA eligibility. Most veterans know how to obtain their certificate of eligibility. If not, we can help them with that. We can also answer questions such as “How long is a VA pre-approval good for?”

VA loans are true, no money down transactions because you can buy a home with no money down. You can even refinance your home through the VA. And that’s without having to pay monthly mortgage insurance for not having that 20% down.

VA loans do have a funding fee, but that funding fee is based on time on the service. It’s also based on whether or not you have any kind of VA disability.

A VA loan is a very unique product. When it comes to police mortgages we like to do VA loans for those who also served in the military. First responders also many times have spouses that work in the Air Force, Army Reserves, and other military branches.

For FHA loans you have to put 3.5% down. FHA loans have very competitive interest rates. In some cases those rates are below market.

FHA does have a mortgage insurance premium that you have to pay monthly plus the other premium that gets financed similarly to VA. The monthly premium for FHA is a little high but FHA loans fit a specific set of needs. FHA loans allow for a higher ratio, which means that somebody can buy more home for their income.

FHA is also much more lenient on credit issues. At the National Police Credit Union, another subsidiary like Police Mortgage of Chicago Patrolmen’s Federal Credit Union, we have a policy of wanting the buyer to have a least a 620 credit score or higher. Some people can be below 600 and still get a FHA loan, but we have a higher standard since even a 620 credit score is not ideal. You still can qualify for a loan through FHA that you otherwise wouldn’t be able to qualify for through conventional.

That brings us to the conventional loan. This is where things can get confusing because conventional loans used to require 20% down. Conventional loans are Fannie Mae or Freddie Mac.

However, recently what has happened is things are going back to the 2008 financial crisis when Fannie Mae and Freddie Mac were doing 100% loan-to-value deals. Now they’re going up to 99%. So 1% down payment.

And there’s this thing called median income, which is based on the county you live in in the country or the state that you live in.

They can take a certain percentage of the median income, which is based upon the county or state you live in, and if you are within that annual income range then you qualify for a 1% down deal with reduced mortgage insurance.

My thought on that is if you’re trying to buy a home and you’re not a veteran you may want to think twice. If you are looking at loans for law enforcement and you have as little as 1% down, you really have to have everything else in line.

You have to have perfect credit. You have to have some assets. And you still have to prove that the 1% you have was saved on your own.

While you can go as low as 1% down for conventional, I don’t recommend it. But through conventional if you do 5% down, or even if you do at least 3% down on conventional loan, you can get a reasonable rate and a reasonable cost of mortgage insurance per month. Also there’s no collection of mortgage insurance annually through a premium.

So, those are the mortgage programs. You can go as low as 1% down but not without a lot of hoops to jump through. At Police Mortgage, we enjoy sitting down with people and learning about their situation. Each person has a certain niche that they may fall into based on a need and we pride ourselves on finding their niche based upon the down payment they can afford.

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.