Whether you are newly enlisted or have years of service under your belt, owning a home can be a great investment but it also can cause financial stress and difficulty if you have to move at a moment’s notice.

Tips

  • Keep your budget in mind when shopping for a property and a home loan. A few rules of thumb can help you get started.
    • You may want to limit the cost of your home to 2 to 2.5 times your annual income. 
    • For your mortgage, you should aim to borrow 50% to 80% of the value of your home at most, and your monthly payments should not exceed 35% of your income. 
    • You may be eligible for the VA Home Loans program.  The Department of Veterans Affairs guarantees part of these loans, which allows the private lender to give you a better deal.
    • These are guidelines – the details of your situation might differ and affect your choices.
  • Owning appears to cost less than renting but weigh the pros and cons of each.
    • With renting, you:
      • can apply your BAH to rent
      • aren’t on the hook for major maintenance issues
      • are paying lower up-front costs
      • might have lower monthly payments
      • might be able to move more easily at a moment’s notice. As a member of the military, you will get new orders and might have to leave quickly. If you own your home, a PCS could leave your house vacant and on the market for months or years, while you keep making payments. Renting out your home is an option, but being a landlord, while in the military, can be time consuming, costly, and challenging.
    • With home buying, you:
      • can apply your BAH to mortgage payments
      • are responsible for maintenance.
      • are tied to your mortgage payment, unless you can sell
      • can personalize your home as you like
      • may get tax advantages
  • Military OneSource has several financial planning calculators that can help you assess your decision, including which types of mortgages may fit your situation.
  • Under the Servicemembers Civil Relief Act (SCRA), If you purchased a home prior to beginning active duty, you can have your mortgage interest rate lowered to 6%; all excess interest payments under a higher interest rate will be forgiven.
  • Having trouble keeping up your payments? See your PFM for guidance and options. Scammers may offer help to avoid foreclosure but they’ll make your situation worse. Never pay any company up front if they promise to lower your payments or stop foreclosure.  

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