Using your VA loan benefit after the military
The first step to buying a home is making sure you’re actually ready for that big of an investment. Consider these important factors to determine if this is the right time for you to buy a home.
Thanks to the GI Bill, nearly 20 million veterans and military members have used VA home loans to purchase homes since 1944.
If you’re eligible, a VA home loan can make home buying easier: it might offer lower interest rates than traditional mortgages and you might not be required to make a down payment up front either. Although, VA loans often require a funding fee which will be higher with no down payment.
There are specific eligibility requirements in order to qualify, like the length of your service, which we look at in an accompanying article: “Your VA home loan game plan.”
A VA home loan can make homeownership feel like the next logical step for you and your family, and it can be a great benefit. But you might also be wondering if buying a home is right for you right now.
There are several factors you might consider as you make your decision, like your location, your personal finances, and the state of your local real estate market.
Before you jump in, it’s important to consider when and where you buy. This may seem obvious, but you might find that you need to relocate for a job, to continue your education, or to be near family members.
When and where you buy is also worth considering because many military personnel use a VA loan to buy a home near their base while they’re still in the military, or they buy a home right after leaving the military. If you then decide to move, this can complicate your home buying process in your new location, because you can generally only use your VA loan entitlement for one home at a time. Not to say that it won’t work, but it can make the transition between homes a bit more complicated as you may need to sell your home, or pay off or refinance out of the VA loan on the first home before you can use your VA loan entitlement for another home. Plus, the home you get after the military may be larger and more expensive than your first home so making sure you have access to your VA loan entitlement when you’re ready to buy that home might be beneficial.
Also, if you’re not sure that you’ll live in an area for more than a few years, it might make more sense to rent rather than buy a home. This is because there are a lot of costs that go along with homeownership, from closing costs to property taxes, home maintenance and homeowners insurance, and potential real estate agent fees when you sell the home. Plus, if you plan to use a VA home loan, there’s also the funding fee to consider. All of these expenses could add up to thousands of dollars so it’s worth doing a bit of research and figuring out at least a rough estimate of what they might cost as you’re making your decision.
And, if you find you need to move quickly to start a new job, you would still be responsible for all the costs and upkeep on your home until you are able to sell it.
So, before you buy, consider how long you plan to be in the area and whether the location has what you and your family need, like job opportunities, good schools, and other resources you might want, like access to public transportation or parks.
It’s also important to think about how much you can afford. A VA home loan can make it easier to buy a place, with little money down up front, but you should also make sure you can truly afford the place before you buy it. Calculate what your monthly expenses will be in any home you’re looking to buy: things like the cost of your mortgage, property taxes, homeowners insurance, any possible homeowners’ association fees, utilities, and maintenance and upkeep expenses or other expenses you might have.
These costs will vary from home to home. You can use an online VA home loan calculator to help you figure out what you can afford.
It can help you calculate the minimum income you need in order to qualify for a certain loan amount.
If you’re just starting in an entry-level job, or if you have a lot of debt, you might consider waiting a few years before buying. That way you can have some time to build your savings and pay down your debt. Doing so might also give you time to improve your credit score, if needed, which can help you get a lower interest rate, saving you a lot of money in the long run.
You will also want to think about the real estate market in your area before you buy. In some areas home prices can be cheap, but it could be for a reason. There might be high crime, fewer job opportunities, or fewer good schools. In some areas, homes might be very expensive, especially if a lot of people want to live there. But you may also find that homes in a nearby town are more affordable.
There’s no rush to use your VA home loan benefit—it doesn’t expire if you don’t use it right away. So you can wait a few years to settle into civilian life before you buy if you want to. And if you are ready for homeownership, thinking about where you want to buy and how much you can afford can help you find a home that’s right for you.
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