Home Buying for the Military
Home buying always requires careful consideration, and this is especially true for those in the military. Those serving in the armed forces can be ordered to relocate with little or unexpected notice. Renting out your home while on deployment may be an option, but then you’d have to deal with all the potential rental issues. Those rental issues may not be easy to rectify from long distances and/or while managing your leave. Still, there are many reasons why buying a home while in the military may be beneficial.
First and foremost, one of the absolute best loan programs available is exclusive for those that are actively serving or veterans. The VA loan has major advantages. Since the Department of Veteran Affairs (VA) acts as a guarantor of the loan, the bank takes on less risk and thus offers some of the most competitive interest rates possible. Generally, the VA will guarantee a no down payment loan. Additionally, there are no mortgage insurance premiums. The VA funding fee can be financed into the loan as well. All of these benefits make home-buying for those in the Military accessible and affordable.
Another reason to buy a home is that it can likely be cheaper than renting. The national average suggests that home buying is approximately 38% cheaper than renting. The added advantage for military is that you can allocate the Basic Allowance for Housing (BAH) towards your mortgage. The BAH is set up as a monetary allowance for service members to help cover their off-base living expenses. Although it’s not set up to buy homes, it’s frequently used this way. Additionally, all the mortgage interest you pay each year (typically) can be deducted from your taxes. Those tax deductions can equate to even more savings kicked back to you (in comparison to renting).
Military members looking to buy should consider where they are stationed: is it a good rental market? Purchasing a home in a desirable location may be a terrific long-term investment. Yes, you could be hit with a PCS (permanent change of station); however, if you bought a home wisely you can likely rent it out at a profitable rate. Every payment your tenants make will go towards paying down your principle balance. In a healthy market, the home will appreciate in value as the years go on. Whether you stay in the home for many years or you are re-stationed and need to rent the property out, buying in a good rental market could be a wonderful investment.
Finally, you may want to buy because you get stationed in an area that you see as your “forever” home. Perhaps you find the city/location that you know that you’ll always want to return. You can buy the home now, rent it out if need be, and have it tied up in your name awaiting your return. The largest worry about buying a home is the possibility of a PCS. Buying either in a location that’s a good rental area OR an area that you’d love to always live will help mitigate the risks associated of either a PCS or deployment.
The largest disadvantage for members of the Military seeking to purchase a home is the fact that they can’t control their foreseeable future; however, one of the largest advantages is the terrific loan program made available through the VA loan. Plus, there’s ability to pay less than renting, make use of BAH funds, and establish an investment that can last for years. Once you’ve decided that home buying is for you, be sure to establish a realistic home buying budget.
Are you a military member or spouse? Tell us about your home buying experience!