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Military Home Purchases and Financial Factors to Consider

By Carla Blair

There is always a great debate among active duty service members who live off base regarding whether they should rent or buy a home near their current duty station. This discussion rages from the fact that military members are often burdened with frequent moves or calls for deployment – leaving their homes and family while overseas.

The decision to rent or buy stems from many factors including financial and practical concerns, and if you, or someone close to you, is considering purchasing a home and is currently enlisted in the U.S. Armed Forces, take the following into account before accepting the responsibility involved with a mortgage.

The Financials of Financing

Jed Kolko, Trulia’s Chief Economist, revealed that in today’s economic climate those who buy a home can save hundreds of dollars each month, and in some cases, their mortgage ended up being 45 percent cheaper than renting for their situation.

For most military members the obvious consideration of being able save extra money is a primary factor when buying; however, an inexpensive mortgage by itself isn’t a good enough reason to buy a home. Potential homeowners must ask themselves:

  • Can I qualify for a good enough interest rate?
  • How long do I plan to live in this home?
  • Will someone be able to take care of my home if I am deployed?
  • Can I cover the additional expenses that come with a mortgage?

Specifically, the addition expenses that come with a mortgage, including taxes, insurance, and general maintenance, can all quickly make that lower mortgage payment equal to or higher than a regular rent payment when not accounted for.

However, the majority of active military members and veterans are eligible for the VA Home Loan which is a program that allows them to avoid down payments, private mortgage insurance, and high closing costs. Although, after brushing these costs out the door, don’t forget that owning a home will include the cost of yearly taxes, maintenance, HOA fees, and homeowners insurance, all of which increase the monthly cost of your home.

The Housing Market and Ability to Rent or Sell

If you have any affiliation with the military then you know military families are not typically stationed in a single location for their entire service. Because of this one would need the ability to move quickly without sustaining a substantial loss, or any loss for that matter.

With this in mind you would want to do your due diligence. Find out the most popular types of homes in the area, what types of homes are being rented, the price that these homes are rented for, and you would also need to know if you would be willing to rent your home out in the future.

It is also wise to search MLS listings, and determine the average time it takes to sell a home for a specific neighborhood to give yourself an idea of what to expect.

No homeowner wants to sit on their home and wait for it to sell while they continue to pay for the mortgage. And while many have the option or time to do this, a newly stationed military member doesn’t, which means if you buy, you may have no other choice than to rent out your property until it can be sold.

At the very least, ensure that the home you purchase is near a military base of operations. By doing so, there is a high probability you’ll be able to rent or sell the property to other military personnel moving in.

Expected Time in Current Duty Station

If you know beforehand that you won’t spend much time at your current duty station then renting is by far the best option; however, if you are further along in your military career you may find that your most recent relocation is to be your last, and therefore using your VA home loan benefits to purchase a home would be a worthwhile investment.

Purchasing a home is an involved decision for anyone, but it is even more complex for active military members. For service members a home purchase should be looked on as an investment, especially in the current market, and whatever you do examine your options thoroughly, and use the aforementioned considerations to make an informed decision that is right for you and your family.

Carla Blair is a credit expert and featured author for Smart Military Money, a personal finance blog dedicated to the military lifestyle. Carla comes from a military family, and helps veterans and active service members develop plans to rein in their debt, repair their credit, and get on the path to loan prequalification. Follow Carla on Google+.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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