Military Home Buying: What You Need to Know in 2024

For active-duty military families, the unique demands of being in the service – including frequent PCS moves and deployments – make the decision about whether to buy a home a difficult one. For some, though, the advantages of homeownership – potential tax benefits, building equity and monthly rental income for those who choose to become a landlord – can outweigh its drawbacks. If you’ve decided to buy a home, whether you’re a millennial first-time home buyer or have previous experience, these four tips can guide you toward a satisfying military home buying experience.

1. Be prepared to boost your credit score.

Credit scores of 700 or better receive the most competitive home loan interest rates. If your credit score is lower than the mid-600s, you will want to consider improving it before applying for a home loan. There are a few steps you can take that may help your credit rating. For more tips to improve your credit score, read Seven Credit Score Hacks to Increase Your Rating.

2. Calculate and stick to your home-buying budget.

Before you start house hunting, you’ll need to determine your budget. This depends on several factors, including your income, monthly debt, down payment amount, and location. One factor to consider when setting your budget is that the Basic Allowance for Housing (BAH) is intended to cover 95 percent of the rental costs of suitable housing for military families. Reach out to an experienced real estate professional and consult with your Financial Advisor to determine an appropriate home-buying budget. Then, stick to it, considering only homes that fall within your established price range. Remember that your annual taxes will be a percentage of the purchase price, so a pricier home will mean higher property taxes for as long as you own it. With a conventional home loan, your down payment will also be a percentage of your total purchase price, so a more expensive home will mean a bigger down payment.

3. Take advantage of VA mortgage loans.

Since the government provides many benefits to military families, it’s natural to wonder, “How does the military help with buying a house?” The answer is the VA Home Loan program.  Created in 1944, the program provides military families with the opportunity to secure financing via approved lenders. VA mortgage loans offer several advantages over conventional home loans:

• No down payment is required for qualified borrowers, and 90 percent of VA-backed loans are made without one. This means you can finance 100 percent of your new home, an option that is not available with FHA or conventional loans. Reasons a borrower may not qualify for no down payment are if the loan being applied for exceeds defined loan limits, if one of the homebuyers isn’t VA-eligible, or if a borrower has another VA loan that hasn’t been paid off. Of course, some buyers choose to make a down payment, even when they don’t have to do so.
• No private mortgage insurance (PMI) is required of qualified borrowers regardless of the amount of their down payment, which will save you money on your monthly payment.
• Interest rates are typically lower.
• Typically, VA loans offer military borrowers greater flexibility because having a lower credit score or carrying more debt doesn’t mean you won’t qualify.
• Eligibility for a VA loan requires an honorable discharge and minimum active-duty service requirements, which vary depending upon when you served.
• VA loans are assumable. As a homebuyer, if you find another servicemember with a VA loan who is looking to sell their home, you can assume their current home loan rate. This is particularly helpful when the seller’s interest rate is lower than current market rates.

Home loan rates fluctuate frequently. Staying up to date with current VA home loan rates will allow you to more accurately estimate your future payment.

4. Remember closing costs and other fees.

Closing costs typically range from three to five percent of the sales price of your new home.: Here’s a short list of fees you can expect.

• Lender costs like application and underwriting fees associated with calculating your insurance policy premium
• Third party costs including title work, home appraisal and home inspection
• Prepaid costs such as homeowners’ insurance, real estate taxes and prepaid interest
• The VA funding fee is a one-time fee that you may be required to pay on a VA-backed home loan. However, this fee is included in your mortgage balance and not expected to be paid out of pocket by the borrower. In most cases, you will be required to pay it unless you meet a few exceptions. The 2024 VA funding fee rates are shown in the table below.
• If you are looking to take a second VA loan, review all of your home loan options. The VA funding fee increases after its first use, so you may find better options elsewhere.

A lawsuit in 2024 against the National Association of Realtors (NAR) has changed the way agents receive sales commissions, which means possible savings for home sellers and buyers. Although the long-term effects have yet to be realized, as a buyer, research all agents to find one who meets your needs and offers a competitive commission.   

Get Help for your Military Homebuying

As you can see, when purchasing a home as a military family, there are lots of things to consider, including your credit score, budget, the type of loan that will best meet your needs, and closing costs. For more information about buying your first home in a competitive real estate market, read Home Buying Tips for Millennials.  And if you’d like more personalized guidance, make an appointment to talk to your Financial Advisor about planning for homeownership.