Should you buy a house during your time in the military or after you’ve retired from service?
That’s a common question around here and, considering San Antonio’s high number of military bases and its thousands upon thousands of local military families, it’s one we get quite often.
Still, no matter how many times we get this query, we’re always happy to be asked. And the reason is simple: Because one option far outweighs the other.
Hands-down, absolutely and unequivocally, buying a home while still serving in the military is the most beneficial option. It can save you serious cash, both now and in the long run, and it could even help you cover your mortgage entirely (without spending a single penny of your own money.)
Let’s break it down.
Whether you buy a home during or after your service, you still enjoy one serious benefit: eligibility for a VA loan, or Veterans Affairs loan. Reserved just for military members and their loved ones, VA loans come with many time-, energy- and money-saving advantages that other loan options just can’t touch.
For one, most VA loans don’t require a down payment. Traditional home loans require at least a 3.5 to 5 percent down payment, while some take as much as 20 percent. On an affordable $200,000 home purchase, that’s $40,000 up front! Using a no-down-payment VA loan can equate to tens of thousands in savings right there.
Another huge benefit is that VA loans don’t require mortgage insurance—something that adds about $100 to the average buyer’s monthly mortgage bill (or $1,200 a year). VA loans also limit what closing costs you can be forced to pay, even considering some fees “unallowable.” As closing costs can clock in at $10,000 or more for many buyers, it’s just another huge way VA loans save you cash.
Finally, VA loans come with much lower interest rates than other loan types—and that includes FHA, USDA and conventional loans. There are also no prepayment penalties, and you get access to foreclosure avoidance programs if you find yourself in a bind later on down the line.
The ability to use a VA loan is a benefit enjoyed whether you buy now or later on after your service has ended. But that doesn’t mean the two options are on equal footing—not by far.
It all comes down to two words: Your BAH.
When you’re on active military duty and not living on base, you’re entitled to BAH or Basic Allowance for Housing. This is a monthly payment intended to cover housing costs for you and your dependents while you live off-site.
The exact amount of a military member’s BAH varies, as it takes into account your duty station, your pay grade, your number of dependents and a number of other factors. But the end result is simple: You get cash to put toward your housing costs every single month during your service.
What this means is that when you buy a home during your military service, your BAH can go directly toward paying off your mortgage. You never have to dip into savings or use your paychecks to cover your mortgage costs. In fact, if you choose your home properly, you might end up with extra BAH funds every month that can go toward utilities, groceries or other household bills.
Another possibility is that your BAH could pay off your home entirely (as long as you’re in service long enough.)
Still, if you do decide to retire, you can rest assured your BAH has served you well. Not only will it lower your loan’s principal balance significantly (meaning fewer years of repayment are ahead of you), but it will cost you less in interest in the long run, too.
It’s a win-win situation no matter how you look at it.
Military members are only entitled to BAHs while in service, so if buying a home is anywhere on your radar, you may want to pull the trigger before your housing costs are no longer covered by your branch.
Want help finding a home in the San Antonio, Schertz or surrounding areas while you’re still in military service? Need to locate a property that will come in under your BAH payment and deliver the most long-term financial benefits? Contact the Claus Team today. Our local military housing experts are here to guide the way.
Featured property credited (c) from talkproperty.ae