Should You Buy A Home While On Active Duty?

Deciding whether to buy a home is not an easy task, even for civilians. Can they afford it? Is it what they really want? Are they ready for the gigantic financial commitment?

With the ever-present chance of a PCS and all the uncertainties of military life, the decision to buy a home can be even more challenging for active-duty military personnel. Wondering if it's the right time to buy a home? Keep reading to find six factors to consider before buying a home while on active duty.

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.

How to Budget for a Home While on Active Duty

When interest rates are low, and prices are rising, there's a temptation to jump in and avoid missing out. However, it's important to think realistically about the costs of military homeownership and whether they fit the budget.

There are rules of thumb that everyone, military or civilian, should heed. For example, keeping the debt-to-income ratio (DTI) below 36 percent. DTI compares the monthly payment on all loans – mortgage, car loans, personal loans – to monthly income. Another guideline is to buy a home that costs equal to or less than two and a half times your annual income. Fortunately, VA loans have better terms than conventional loans.

In many markets, mortgage payments are lower than rent, but those numbers can be deceiving. Homeowners have to pay property tax, insurance, and home upkeep. If something breaks, they have to fix it. And there are move-in costs. Many military folks don't own any furniture and will have to buy a houseful.

While renting out houses in the military is a great strategy, active-duty personnel should consider buying fewer homes than they qualify for. This gives them a financial cushion for surprises, which leads to the next factor.

What to Do With a Home When Orders Change

Military assignments typically last four or five years. Sometimes they're shorter, and sometimes they change unexpectedly. There could be an international event next month that results in new orders coming down.

Every military homeowner needs a plan for this contingency. If the market is strong, they might be able to sell. If the market has dropped, the sale may be at a loss.

Renting out the property is a possibility. Most people will hire a property manager to be on-site when they can't.

Either selling or renting may take time, resulting in months without BAH or with two payments. It's a good idea to buy conservatively and have a contingency fund.

How Are the Local Market Conditions?

Is the local economy strong? Are housing prices likely to rise or at least remain stable? It's good to take some time and learn about the local neighborhoods. Talk to real estate agents or other military homeowners.

The home will be easier to sell or rent in a vibrant neighborhood with amenities and convenient proximity to schools.

Is It Possible to Be a Landlord While on Active Duty?

Anyone who's thinking about renters should know that managing a property while in the military isn't for everybody. Local landlords field calls from tenants and deals with emergencies and building repairs. Those who are far away will have to employ a local manager. There's the risk of damage by renters who don't respect the property. There are maintenance costs even if the house is sound. Figure about two percent of the home's value per year.

Also, when the home is sold, rental income may add to the taxable capital gains.

Will the Area Be Desirable When Active Duty Ends?

Some who are close to retirement or expect to leave the service soon may want to buy their future residence. However, living in a region as military and as a civilian can be different.

For those who plan to work, what's the job market like? What are the long-term prospects of the community? Liking an area for a few years as a serviceperson doesn't always mean you'll continue to enjoy it for many years as a civilian.

The Benefits of Homeownership

When you own the house, you can do pretty much what you want: get a dog, knock down walls, paint it any color, add a patio. Some need to have a place where no one can give orders about how to live. In addition, owning rather than renting allows the homeowner to build equity.

Consider the Big Picture Before Buying a Home on Active Duty

Buying a home while on active duty is a risky but potentially rewarding proposition. It requires flexibility, extra work, and a willingness to confront the unknown. People who doubt this is for them would be well-advised to seek military housing or rent.

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.