A Military Decision – Buy or Rent
The decision to purchase a home for military veterans, active duty military and civilians is an important one. It’s probably the most important financial decision you’ll ever make. But for active duty military personnel, this decision is even more complex. Based on your MOS and current duty station, you could be called upon to immediately deploy or PCS with little to no time for preparation. So, invest the necessary time now to evaluate your unique situation and determine your best option between purchasing a home vs. renting a home or an apartment. Unless you are 100% sure you’re at your last PCS, consider these factors before making your decision:
1. Monthly rental expense vs. monthly mortgage and home maintenance costs
Rents have been steadily on the rise over the years, but so have home prices. Consider average prices within an acceptable driving distance of base, the number of foreclosures in the area, and overall condition of the community. When calculating monthly mortgage expense, remember to include property taxes, HOA fees, CDD fees, homeowners insurance and lawn maintenance. You won’t build equity by renting, but if you not sure how long you’ll be at your current PCS, renting may be your best option.
2. Tax Benefits
Property tax and mortgage interest may no longer be as big a factor in evaluating your overall decision to purchase or rent. The 2018 standard tax deduction may be more than what most will receive by itemizing expenses. Check with your accountant to determine your projected tax advantages. For long-term financial gains, owning will most always be your best option.
3. Think about your contingency plan should you be required to relocate in a short period of time
If you have decided to purchase and currently own your home, you will basically have two options in this situation; rent out the home or sell it. VA backed home loans are strictly for primary residences. If you rent out your home while on deployment or at a new PCS, you will not be able to use your VA benefits to purchase another home until your first mortgage is paid in full. If you have owned the home less than 3 years, your best financial outcome in selling may be to break even. Although the decision is ultimately yours, owning investment/rental properties can be financially rewarding in the long term.
If Purchasing a Home
Follow these steps:
Step 1 – Obtain your Certificate of Eligibility and Lender Pre-Approval Letter
You can apply for your Certificate of Eligibility online through your ebenefits portal, through your lender, or by mail. For more information and access to your ebenefits portal, visit:
Once you and your lender verify and obtain your Certificate of Eligibility, you can now request a Pre-Approval Letter that will identify your maximum purchase price. Your lender will evaluate your credit score, income, expenses, cash on hand, assets, etc. to determine your purchasing power. Be 100% accurate with your answers to the lender’s questions. You don’t want to look at homes that you may be ultimately denied financing for. It’s important that your pre-approval amount is accurate. Certain other expenses like monthly HOA fees, CDD fees and property taxes may also influence your pre-approved loan amount. Get a clear understanding of these acceptable amounts as well.
Step 2 – Start a home search and view some homes
As your Realtor, I’ll set up a home search through the Multiple Listing Service(MLS). The MLS is the originating source of all home listings distributed to the internet for search engines like Realtor.com and Zillow. The MLS is the fastest and most accurate source of home listing information! This website is a direct link to the MLS. The MLS includes foreclosed home listings and short sale listings.
Once we have a list of homes that meet your search criteria and look like potential purchase candidates, I’ll set the viewing appointments. Some important search criteria that many military home buyers consider are:
· Highly rated, quality schools – Here are a couple sites to help evaluate the best schools:
· Commute from home to base – Sometimes distance is not the primary concern. Traffic and tolls may also be important considerations.
· Market Value and Resale potential –
Let’s look at homes that are affordable and that have an excellent chance of being resold quickly. Should you deploy or PCS without notice, and you decide not to rent out the home to a tenant, you want a home that will appeal to the largest buyer pool available.
Note: If we find a great home that is being sold by the owner, I assist with the viewing and purchase of these homes as well.
Step 3 – Submit the Purchase Contract, Addenda and Disclosures
When you’ve found the perfect home, I’ll provide comparative sales data and assist with determining a reasonable offer price and terms including contingencies. We’ll then submit an offer to the seller’s real estate agent using a Florida approved real estate purchase contract. This step initiates the negotiation process. Hopefully the seller will accept the offer and sign the contract and supporting documents. However, it’s not uncommon to receive a counter-offer. At some point our goal will be to agree on terms and have all parties sign the contract documents. When all documents are in place, you’ll submit them to your lender and fund escrow by providing a deposit to the title company.
Step 4 – Get to know the rest of your Real Estate Team
After obtaining the executed contract, I’ll also provide a list of home inspectors and home insurance companies that my clients have successfully used in the past. You can then interview and compare services and prices before deciding on who to use. You can also shop with other service providers not on my recommended list. You are free to use anyone you want because obtaining the best price and service is a priority.
Additional team members will include the title company, appraiser and surveyor.
Selecting a title company will actually be done when we write a purchase contract to present to the seller. You will have the option to use the seller’s preferred title company or select your own. As long as the seller’s title company is reputable, you may be able to save money by agreeing to use them. The title company will eventually order a new survey if the seller does not have a current one to provide. If needed, you can select the survey company or let the title company order from one of their preferred service providers. We will have no control over the appraiser selection as they are assigned by the lender.
Step 5 – Complete inspections and loan processing
While your loan is in process, we’ll have a certain amount of time to complete the home inspection and WDO (wood destroying organism) inspection. This inspection includes termite. If the inspection reveals anything of concern, we’ll ask the seller to repair those items, or lower the purchase price. This is potentially the time for another round of negotiations. As we continue toward the closing date, your lender will request a good amount of supporting documentation relating to your loan. Provide these documents as quickly as possible to ensure the loan can be completed by the contract close date.
Step 6 – Prepare for closing
At this point you will have completed inspections including the final walk-through, obtained homeowners insurance, arranged for utilities and other services to be activated for the day of closing, and you are packed and ready to go!