Your Guide to Buying a House While You’re In the Military (And Is It a Good Idea?)

After enlisting in the military, you might hear some mixed messages about buying a house in the military and how to go about it. Service-members have different factors to consider than homebuyers who aren’t in the military — from affordability with a housing allowance to what would happen if their orders change.

According to the National Association of Realtors®, homeowners usually stay in their homes for 13 years, which is plenty of time to build equity before selling. But service-members often don’t have a choice about moving. What if you buy a house and then are deployed again in a year or two? If you had to sell, would you lose money, or could you rent your home (possibly to another enlisted household) instead?

Homebuyers in the military can have a better buying experience if they ask themselves some key questions before buying. We talked to experts, including some military lifers, to pull together a list of the top questions to answer to make the best decision for you.

Should you buy a house while on active duty?

Before deciding to buy a house while on active duty, sit down and look at your overall situation. While Sandee Payne’s team helps more than 100 military families a year buy homes, she says that sometimes it actually doesn’t make sense to buy. Before starting the homebuying process, ask yourself these questions.

How long will you be stationed at this base?

If you’re going to be at a base two or more years, buying may be a sound financial decision. It’s likely cheaper than renting, even if you’re not staying long enough to build much equity. And it will help your kids feel “at home.”

If you’re only going to be there a few years, ask yourself if you would want to move back after retirement or after leaving the military? If you do plan on returning — even if deployed elsewhere during the interim — you could rent the home until retirement.

How close are you to retirement from the military?

If you’re close to retirement, it’s easier to think about settling down. Once your military career ends, there will be less moving — but do you want to stay in the area where you’re currently looking at homes, or go elsewhere?

Maybe you plan on moving back to your home state. If so, you might not want to buy.

How much do homes cost where you want to buy?

The average cost of housing in your area will also influence the rent vs. buy discussion.

In an area with higher home prices, you may need a bigger down payment (though you could qualify for a zero-down Veterans Affairs loan), plus your closing costs will likely be higher. You might not have that cash on hand, or you might not want to take that much out of your savings. After reaching out to a local agent to learn about average home prices where you’re shopping, you may decide that a home purchase isn’t affordable or is too risky.

If it’s a hot housing market, many buyers face multiple-offer situations that drive home prices higher. Think twice before paying above the list price. You can’t count on the housing market remaining that hot for a one-to-two-year period, and you might have to move again before the amount you spent to buy the home “catches up” to the market.

At a minimum, you want to break even when you sell, so take the current market’s home prices and where it might be in a few years into account when deciding whether or not to buy.

How much would your mortgage be?

Ask yourself how much of the mortgage your housing allowance would realistically cover, and how much you’d have to take out of your paycheck — can you afford it? If you’re planning on using a VA loan, how does that impact affordability?

In Payne’s part of Texas, near Fort Hood, the median price of a house for sale was $273,130 in the fourth quarter of 2021. She says that, “Very often the BAH (Basic Allowance for Housing) is in line with what a mortgage looks like. But we also make sure that they know if it will also cover utilities and then some.”

She doesn’t want buyers to overstretch and not be able to afford dance classes or football for their kids, so she says it’s important to consider your overall financial situation. (Before becoming an agent, Payne’s husband served in the Army for 23 years, so she’s lived the lifestyle and knows what buyers should take into consideration.)

If you’re home shopping in a more expensive area, you might be able to lower your monthly mortgage payment by putting down a larger down payment. The less you owe on the principal loan, the smaller your monthly mortgage payment.

Do you have a plan for what to do with the house if/when you’re transferred?

If and when you’re transferred, you’ll have two options — rent the house and become a landlord, or sell it.

How much is rent where you’re living?

You first thought about average rents for the area to see how much you might be able to save if you rent off-base instead of buying a home. Now you’ll want to consider how much income a home would generate if you rented it after moving. Would it cover your mortgage and other homeownership costs?

Payne says that if a servicemember is going to be at Fort Hood for one to two years, and their intention is to purchase a home they use as a rental property when they leave, she makes sure they’re not maxing out their budget for a temporary home. Often, they’re planning on renting that home when they’re deployed elsewhere.

She looks at the rental market and asks, “Are rents going to cover the mortgage this buyer is about to take on?”

Her goal is to “make sure they can afford it while they’re here, and if it doesn’t rent immediately, can they afford the mortgage for multiple months of the year if it sits empty?”

Can you afford the closing costs when it’s time to sell?

When you’re buying, the seller pays the agent’s commission. But when it comes time to sell, you’ll be responsible for the commission — typically 6% of the home’s sales price — plus other non-commission closing fees. When they’re buying, buyers in the armed forces should think ahead to the day they’ll need to sell.

In two years, your home typically won’t gain 10% in equity, which you could use to cover closing costs. That’s about what it costs for commissions, title fees, and other fees in Payne’s area.

When she’s working with buyers in the armed forces who know they’ll have to move again, she makes sure they have that money available. She advises them to “keep putting money away; it could potentially be an expense if you decide to sell. If it’s not in your equity, the money has to come from your personal finances.”

If you’re unsure whether you could set aside this much money during the time you’ll live in the house, you might want to rent instead of buying.

How do you prepare to buy a house in the military?

If, after answering the above questions, you’ve decided that buying is a good move, here’s how to prepare to buy.

What’s your income, debt, and credit score?

Lenders look at these three factors when determining how much credit to extend.

Your debt-to-income ratio (DTI) is the amount of monthly debt you’re carrying relative to your income. If you have a higher ratio, a good portion of your income is already dedicated to debt servicing. Mortgages have set DTI limits, meaning you can only borrow so much relative to your income.

Your recurring debts are also one component of your credit score, which lenders also look at during the loan approval process. A higher credit score indicates that you pay your bills on time, have a history of repaying previous loans and mortgages, and are therefore more likely to keep up on payments with this loan.

If you have a lower credit score or high DTI ratio, you might want to wait a few months to start home shopping and work on paying down other debt. With a higher score, you’ll have more options when it comes to qualifying for a mortgage.

How much money do you have in savings?

Even if you intend to use a VA loan with a 0% down payment requirement, you’ll have to pay the VA funding fee, and if you use another type of mortgage, you’ll need to cover origination fees.

Payne cautions that, “The VA funding fee can increase every time you use your VA loan,” and you should include it in your home shopping budget. You want to make sure you have enough money saved to cover all closing fees.

Do you know what your funding fee will be if you go with a VA loan?

The funding fee for a first-time buyer using the VA loan is 2.3% of the home’s purchase price if they have no down payment. The median price of a home in the United States in December 2021 was $278,629, which would result in a VA fee of $6,408.47. That fee lowers to 1.65% with at least 5% down, and 1.4% with at least 10% down.

Brian served for three years in the Air Force and 17 years in the National Guard. When he used his VA benefit to buy a house, he said it was pretty simple: “You find a bank that you’d like to work with and let them know that you’re a vet and would like to use your VA benefit.”

He had to fill out some additional paperwork and provide his DD-214.

Be aware that, because of the additional paperwork involved, a VA loan can take a little longer. “The bank then works with the VA to ensure you’re eligible, so there is some additional time involved in the various back and forth,” says Brian. But in the three times he’s used his benefit, it’s never taken longer than two to three weeks to get final approval.

In a hot market, you might want to get prequalified before home shopping.That way, you can make a competitive offer and move more quickly toward closing.

If it’s your second time using a VA loan, the fees increase for buyers with no money down, jumping to 3.6% if you have less than 5% down. With a 5% or higher down payment, the fee drops to 1.65%, and at 10% and above, it’s 1.4%. You’ll need to have this cash to bring to the closing table on your mortgage loan.

While Brian has used his benefit several times, he closed on his previous home sale before buying the new one. To use his benefit, “I had to close on the current house prior to signing the closing on the new house, as I had to email the mortgage company the payoff document.  All done in the same day, so no issues with not having a place to live.”

Do you have any service-connected disabilities? Or were you awarded a Purple Heart?

If you have a service-related disability, or received the Purple Heart, the VA funding fee may be waived in your situation. After changes made to the program in 2020, the following service members can have the funding fee waived:

• Veterans who are receiving VA compensation for service-connected disabilities
• Veterans who receive retirement pay or active service pay instead of VA compensation for service-connected disabilities (that they’re entitled to)
• Surviving spouses of veterans who died in active service or from a service-connected disability, or who was totally disabled, if they’re also receiving Dependency and Indemnity Compensation (DIC)
• Service members on active duty who provide (on or before the date of loan closing) evidence of having been awarded the Purple Heart
• A service member with a proposed or memorandum rating, before the loan closing date, saying that they’re eligible to get compensation because of a pre-discharge claim

How do you get a VA loan?

A mortgage broker can match you with lenders who work with VA loans. An agent who has experience working with service members also likely has a list of great lenders.

The U.S. Department of Veterans Affairs website has a lot of resources, including instructions on how to apply for a VA home loan Certificate of Eligibility (COE). Lenders will require this as proof that you qualify for a VA loan. You can apply online or by mail.

Many lenders will work with VA-guaranteed loans, so you can still shop around (to some extent) for the best rate.

How do you find a veteran-friendly agent?

Get matched with one! The HomeLight Agent Match tool analyzes millions of home sales nationwide to find top local agents — agents who get the job done faster than other agents in their area and have expertise in helping buyers just like you. After answering a few questions, it gives you a list of potential agents to choose from.

You can also ask for referrals from homeowners on base, or search online to see if there are any military specialists in your area.

How do you find homes for sale?

Your agent is going to be your best help here. They know the local market — everything from average home prices to where you can find a big backyard. Since buyers in the military have additional considerations, they can also help you shop in areas where homes hold their value, and where resale or renting might be easier.

At your initial consultation, they’ll ask a lot of questions to help you make a list of your wants and needs. They’ll help you narrow down your list and then find homes in the closest proximity to where you want to be and that more closely fit your lifestyle. They could possibly alert you to areas and homes that you didn’t realize would be a good fit!

How do you write a strong VA offer?

A strong VA offer, like any other offer on a house, should offer attractive terms to the seller without putting you in a bad position.

In Payne’s market, it’s common for buyers to end up competing in multiple-offer situations. While she says that most people’s first inclination is to increase the offer price, that strategy could cause problems.

“The problem with that is that if they are accepted at a higher price than the comparable market sales, we’re going to run into a problem when it comes to the mortgage appraisal,” she says. If the home doesn’t appraise at the sales price, the lender won’t extend a mortgage for that amount. At that point, buyers have the option to negotiate a lower sales price, walk away from the house, or come up with the cash to make up the difference.

If the buyer has to come to the table with the difference of that money, she says that “there’s a big cash responsibility if a VA member doesn’t have that.”

Instead, she has buyers look at other areas where they could sweeten the offer — could they offer to pay part of the seller’s closing costs, termite inspections, or title costs? Instead of asking the seller to pay for the home warranty, the buyer could offer to cover it.

When making a strong offer, “it comes down to the net profit of the seller,” Payne points out. “They’re looking for the most profitability, and the more contributions the buyer can make on their own increases their net. All those little things can help sweeten the deal.”

If buying a home while in the military is the right choice for you and your family, you’ll need an experienced agent at your side. They can help you answer questions unique to the circumstances of active service members and guide you to a home purchase that works for your family now and in the future.

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