What military members need to know about homebuying

Buying a home is one of the best investments you can make, but it’s becoming increasingly difficult for people to buy their first homes. For active military members, it can be even more challenging given the potential for deployment and the inconveniences of rotating to different stations.

That said, there are homebuying assistance programs for both active duty service members and veterans. If you’re weighing the benefits of living in military housing vs. buying a home off-base, this is your guide.

What are the benefits of homeownership for military members?

The benefits of homeownership are the same for military members as they are for everyone. But there are also a few key benefits that only service members receive. These are some of the core benefits of homeownership:

• A valuable asset: As long as you pay your mortgage on time and keep your home in good repair, your home should increase in value. Since 2000, home values in the US have risen by 160% nationwide, and even more than that in many popular areas. That’s despite a major housing crisis obliterating the market in 2008.
• Tax benefits: There are a number of tax benefits to owning a home, including the ability to write off mortgage interest. Certain states also offer first-time homebuyer tax credits and, when you sell your home, you may not have to pay any capital gains tax thanks to the Home Sale Tax Exclusion.
• A steady base: While buying a house won’t keep leadership from stationing you somewhere else or deploying you overseas, it will give your family a consistent, stable place to call home. It’s somewhere you can always go back to.
• Greater mortgage accessibility: Active and veteran service members are eligible for conventional loans, but they’re also eligible for VA Loans that offer even more attractive rates. They also usually don’t require a down payment or private mortgage insurance (PMI).
• Potential savings: Because of VA Loans’ lower interest rates, it’s possible to lock in a rate on a home that allows you to pay less than you would in rent on comparable properties in the area.

How do military members afford a home?

Real estate is expensive. Given that the average military salary is $51,854, many markets simply will not be affordable enough for most service members to buy a home. Nonetheless, there are a number of financial considerations working in favor of military members.

VA Loans

First and foremost, let’s dive a bit deeper into VA loans. These loans are guaranteed by the VA and offered by most lenders nationwide. Due to this guarantee, they offer more attractive interest rates, may have a minimum required credit score of just 500 (compared to 620 for conventional loans), and, as we mentioned, require no down payment or PMI.

Another valuable wrinkle: There’s no fee for paying off the loan early, so if you inherit some money, you can pay off the loan without any penalties. If you can afford to put some money down, you can drastically lower your monthly payment. Most active duty and veteran service members are eligible for VA Loan, but check out the complete eligibility requirements here.

Applying for VA loans isn’t materially different than applying for a conventional loan. You’ll just have to offer proof of service and answer some military-specific questions about finances and living situation.

Learn more about how much VA loan you can get

Financial protections

Active duty military members may face additional financial challenges after buying a home, but there are additional protections in place.

The Servicemembers Civil Relief Act (SCRA) gives active duty military members and their families financial protections on interest rates, income tax payments, evictions, foreclosure, and more.

The SCRA allows military personnel to ask creditors (including mortgage lenders) to cap interest rates at 6% for any pre-service debt obligations while they’re serving. Likewise, it protects military members against foreclosure by forcing lenders and servicers to seek a court order to foreclose on a servicemember’s home during their term and up to nine months afterward.

The VA provides additional foreclosure avoidance protection assistance for servicemember homeowners by working with lenders and servicers to find alternatives to foreclosure.

Basic allowance for housing

Active duty military members who receive a Basic Allowance for Housing (BAH) can count this as income to help qualify for a home loan. This could be an important income stream to support homebuying for military members.

BAH is determined by several factors, including the location of duty station, pay grade, and family size, and can change on an annual basis. If you need to calculate your BAH, the Department of Defense offers an online BAH calculator.

Other homebuying considerations for military members

Homebuying for military members comes with a few considerations that traditional homebuyers don’t have to think about. Some of the most significant include:

• Deployment: The possibility of deployment or being stationed to a new base always looms over active duty servicemembers. It’s not financially (or practically) prudent to sell a house shortly after buying. It usually takes at least five years of ownership for market appreciation and equity to make a home sale—and the closing costs that come with it—worthwhile.
• Distance: Even if you and your family both love the house, you may have to spend considerable time away from them if you’re ever stationed elsewhere. Without the roots of a home, your family may be more willing or able to move with you. With a house, it may not make sense for them to do so.
• Landlord responsibilities: If you do keep your house and bring your family with you when you’re stationed in another part of the world, renting the house out may be the only viable financial option. As such, you’ll be a long-distance landlord, which comes with a whole new set of challenges.

There are plenty of potential benefits of homebuying for military members, especially considering the financial options available. That said, buying a home is a huge responsibility and one that may not make practical or financial sense, especially if you expect to be deployed or stationed elsewhere.

It’s a life-changing decision that you shouldn’t make without consulting your family and having a firm understanding of the potential futures of your service. Not to mention, it’s always smarter for military members to buy homes with greater potential resale value given the possibility that you may have to sell in a short amount of time.