For active duty military families, home ownership can sometimes feel unthinkable unless retirement is on the horizon and you’re able to finally set down roots. And even then, it might be wise to continue to rent. For civilians, the decision to buy a home is already wrought with tough decisions and brings with it a huge financial commitment – doubly so for military families when you factor in variables like PCS schedule and endless unknowns. But, buying a house while on active duty can be a great investment, it really just comes down to your motivations: You might be ready for a huge yard for your dogs to run wild in, or maybe you see an opportunity to make some extra cash when you eventually move and have to sell, or perhaps you feel that moving in and out of apartments is the equivalent of throwing money away with nothing to show for it.
There is no simple answer for whether or not this will be a good financial decision for you and your family. But, if you’re weighing the pros and cons of home ownership, here are a few things to consider:
VA Home Loan Program Changes
The VA home loan program changed starting on Jan. 1, 2020. VA loan limits were eliminated, and the VA changed its VA loan funding fee structure. Funding fees for active duty, Guard, and Reserve are now the same for first time use. The VA loan funding fee structure is as follows:
- First-time use with no money down – 2.3%
- 5 percent down – 1.65%
- 10 percent down – 1.4%
Second-time use VA loan funding fees are as follows:
- First-time use with no money down – 3.6%
- 5 percent down – 1.65%
- 10 percent down – 1.4%
VA loan rules for funding fee waivers have also changed. As of 1 January 2020, the following people may be exempt from having to pay the VA loan funding fee:
- Veterans receiving VA compensation for service-connected disabilities.
- Veterans entitled to receive VA compensation for service-connected disabilities, but receive retirement pay or active service pay instead.
- Surviving spouses of veterans who died in active service or from a service-connected disability.
- Service members on active duty who provide (on or before the date of loan closing) evidence of having been awarded the Purple Heart.
VA Home Loan Eligibility
The U.S. Department of Veterans Affairs offers affordable home loans for military. Once approved by the VA, these loans are provided by private lenders (banks and mortgage companies) and typically do not require a down payment or mortgage insurance because the VA guarantees a portion of the loan against loss, allowing the lender to provide more favorable terms. However, if you’re purchasing your home using the VA Home Loan, keep in mind that the home must be your primary residence and there are conditions on the types of properties buyers can purchase. To learn more about what you can (and can’t) buy using a VA Home Loan, click here.
Rent vs. Mortgage Payment
In most markets, a mortgage is cheaper outright than renting. Additionally, your basic housing allowance can cover some or all of your mortgage. But, when calculating the monthly costs, keep in mind that maintaining a home can bring with it expenditures that renters don’t have including appliance repairs, home maintenance like broken faucets, lawn care, homeownership association fees, insurance, and more. When something breaks, you can’t simply call your landlord. Is that a responsibility you’re prepared to take on?
However, homeowners do receive tax benefits that renters do not like being able to deduct the interest you pay on your loan from your taxes, which can help offset the monthly costs.
Assess the Local Market
Unless your job is highly specialized, chances are there’s another PCS move in your future. And, unlike renting, you can’t simply tell your landlord you’re leaving and show your orders to break a lease. Think of the property as an investment and ensure that your home is marketable in the long-term. Take stock of the local real estate market and consider what types of homes people are buying – and the average cost of those homes – to assess your ability to move on without substantial investment loss. Additionally, being open to renting the property gives you more options when it is time to move, but again, assess how much you would need to rent the property for and compare that with the average costs in your local market. Renting can also bring the added benefit of earning you additional monthly income.
Many active duty homeowners recommend purchasing a home within a reasonable commute from the nearest military base to increase the probability of being able to rent or sell the property – and fast.
Determine Your Long-Term Priorities
Would you be buying a house in an area you’d want to live in after retirement? Do you enjoy home maintenance? Is being close to family and friends important to you, and how close would you be to them? Does the home have plenty of space for your family to grow? Buying a home is just as much an emotional decision as a financial one, if you can financially afford to buy and the decision checks all of your long-term goals, then it might be the right fit for you.
Homebuying is a complex and carefully-planned process for any family. Leverage your network and talk to other military families you know who purchased a home on active duty to find out what they did right and what they would do differently. Though there is no right answer and no cookie-cutter approach, buying a home can bring independence, pride, and a stability that you wouldn’t expect to have while on active duty.
Kristen Baker-Geczy is a communications specialist, active duty military spouse, and former MWR marketing coordinator. She was also deployed to Southwest Asia as an Air Force contractor.
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|What Can You Buy With a VA Home Loan?||VA Home Loans for First Time Buyers|