There are many moving parts when it comes to buying or selling a home, and active duty personnel have additional factors to consider. You might believe you can’t become a homeowner until you’ve left the military, but you can begin to build wealth while serving. Likewise, you may think your job will make selling your home a huge hassle. Neither of these need to be the case for you and your family. Read these tips for buying and selling a home in the military.
If you’ve determined buying will benefit you more than renting and your orders are in place, start researching your home financing options. In preparation for applying for loans, you should be actively trying to improve your credit score. Though there are several government-backed loans with flexible credit requirements, you should put yourself in the best financial position possible during the loan process.
One of the first questions you’ll be asking yourself is how you’ll pay for your future home. The VA loan is an excellent way for veterans and active duty military members to become homeowners, since there’s no down payment and credit requirements are more lenient. If you chose to apply for a VA loan, make sure you have enough saved for closing costs. Though this loan program is especially for service members, it’s wise to look into other programs to find the one that’s best for your needs.
Now that you have a plan for financing the home purchase, the next logical question is how you will pay the mortgage. As a military member, you can apply for a Basic Allowance for Housing (BAH). BAH is available for service members who don’t live in government housing, and it can be put towards your mortgage payments. The amount of BAH you’re eligible to receive is dependent on local housing costs, your rank, and whether you have dependents.
At this point, it will be important to find a reliable real estate agent and lender to help you with your home purchase. Your lender should have experience working with military borrowers, so they can understand your needs and ensure all loan requirements are met. You’ll need to show your lender your Certificate of Eligibility (COE) when applying for a VA loan and Leave and Earnings Statement (LES) if you intend to use your BAH to pay your mortgage. It’s always a good idea to borrow less than what you’re qualified for to leave breathing room in your finances.
When selling your home, get started on the process as soon as you get your orders to move. Since your move will be on a deadline, everything will likely be at a faster pace than a civilian relocation. A good first step is to find a trustworthy real estate agent to help you with the sale. If the agent has strong experience working with military families, even better. During this time, do the prep work needed to make your home sellable including deep cleaning, decluttering, yard work, and repairs. You can even start packing some of your things for when the house sells. Once preliminary work is done, stage your home to make it appealing to buyers. After the home has sold, you can start increasing your moving efforts.
As an active duty service member, the military provides certain moving services to you to facilitate everything. Depending on the nature of your move, you may be able to transport your belongings using a Personally Procured Move (PPM) or Household Goods Move (HHG). Keep in mind your rank, length of assignment, and new station location will affect how much of your belongings you can take and whether your family can come or not. Always refer to your orders for specific information and use your local personal property office as a resource for your move. If you need to relocate but don’t want to sell your home, consider renting your property while you’re away. If your home’s location is in a lucrative area for rentals, you could rent it out to pay the mortgage. While this option may not be feasible for everyone, it could pay off for some people.
Your military career and lifestyle don’t have to prevent you from becoming a homeowner and building wealth. You can sell your home and relocate without feeling lost—there are many resources to make things easier for you. When you know what to expect when homebuying or selling while in the military, you can navigate the process with fewer hiccups.
If you’re interested in how to become a homeowner while you complete your service, contact one of our Licensed Mortgage Loan Originators. If you are ready to begin the process, click here to get started!
There are many types of mortgages out there, but if you are Veteran looking to buy a home, you should consider a VA loan. The features of this loan make it a great option for many Veterans and their families. Before we discuss those features and benefits, let us first answer: what is a VA Loan?
Through the original Servicemen’s Readjustment Act, also known as the GI Bill of Rights, the Veterans Affairs loan began in 1944. VA loans are guaranteed by the United States Department of Veterans Affairs (VA). The loan was specifically designed to provide eligible American Veterans and their families with a federally guaranteed home so they could take part in the American dream.
VA loans offer no down payment requirement (for qualifying consumers) and often do not require Private Mortgage Insurance (PMI). Additionally, if refinancing an existing VA loan, the qualified borrower can take cash out of their home up to take out up to 95% of the appraised value as determined by VA. Some states also offer additional resources to Veteran homeowners, such as property tax reductions.
A Veteran, active duty, or honorably discharged may be eligible for a VA loan if he/she meets the following requirements:
More information about eligibility for VA loans can be found on the VA website.
Our nation’s heroes deserve to achieve the American dream of homeownership. VA loans are there to help make it happen. If you would like to see if you qualify for this loan, contact one of our Licensed Mortgage Loan Originators. If you are ready to begin the process, click here to get started!
If you are in the market for a new home, one of the first things you should consider financially is how much of a down payment you can make. Most home buyers know that the most common mortgage loan (a Conventional loan) requires 20% down payment. This means that if you purchase a home worth $200,000, you must have $40,000 cash available, on top of the closing costs needed to purchase the home. This may deter many potential home buyers from purchasing because they only have a small amount of money saved. However, Conventional loans are only one of the many loan options available. Here are five of the most widely used mortgage loans and their down payment requirements.
FHA Loan – 3.5% Down Payment*
A Federal Housing Administration (FHA) loan is a mortgage loan that is insured by the government’s Housing and Urban Development (HUD) agency. FHA loans require a 3.5% down payment for purchases and it typically offers very competitive rates compared to rates from a conventional loan. Due to the low down payment, FHA Mortgage Insurance Premiums (MIP) are required in order to protect lenders against losses as a result from defaulted mortgages. There is an up-front premium paid at closing, and a monthly premium that is paid along with the monthly mortgage payment. FHA has several guidelines that all loans must meet, such as loan limits, allowable closing costs, and debt ratios.
VA Loan – 100% Financing**
A VA loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs (VA). VA loans help service members, veterans, and eligible surviving spouses purchase a home with a competitive interest rate, limited closing costs, no Private Mortgage Insurance (PMI) requirement, and often without a down payment (as long as the sales price doesn’t exceed the appraised value). This is because VA guarantees a portion of the loan, which allows the lender to provide favorable terms. VA loans have several guidelines that all loans must meet, such as eligibility and loan limits.
USDA Loan – No Money Down†
A USDA loan is a mortgage loan guaranteed by the United States Department of Agriculture (USDA). With a USDA loan, home buyers can purchase a home in eligible rural locations with no down payment, and can finance up to 100% of a home’s appraised value, plus closing costs. For eligible borrowers, USDA loans often come with the lowest interest rates and program insurance premiums of all government-backed loans. USDA loans have several guidelines that all loans must meet, including property eligibility and income eligibility.
80-10-10 Loan – 10% Down Payment
Also known as a Piggyback loan, an 80-10-10 loan is a great option for home buyers who have great credit but lack capital, and wish to avoid paying PMI. The mortgage loan works by having 80% of the property value covered by a first loan, 10% of the property value covered by a second mortgage which carries higher interest rates than the first conventional mortgage, and 10% will be covered by the home buyer’s down payment. Loans that are 80% or less of the home value do not require PMI.
State Bond Programs – Specific Assistance
Several U.S. states offer state bond loan assistance programs. These bond programs aim to help first-time home buyers or buyers with low capital by providing below-market interest rates, down payment assistance, long term affordability, and/or other benefits specific to the programs. These loans have program-specific income and occupancy requirements, and limitations.
There are many more mortgage loan options available not mentioned but these are the most commonly used. If you are looking to purchase a home soon, make sure you speak with a licensed mortgage loan originator. Choosing a down payment option is a big decision and a licensed mortgage loan originator can help you find options that best fit your needs. They can also walk you through the loan process and explain to you all of the eligibility requirements for the loan you choose.
*LTV’s of up to 96.5% for FHA loans. **Veterans Affairs loans require a funding fee, which is based on various loan characteristics. †100% financing, no down payment is required. The loan amount may not exceed 100% of the appraised value, plus the guarantee fee may be included. Loan is limited to the appraised value without the pool, if applicable.
A Veterans Affairs (VA) loan allows you to buy your home with 100% financing or no down payment. However, there still will be other costs associated with the loan. You most likely still will need an earnest money deposit and closing costs to cover. You may be able to get the seller to cover some of the closing costs during settlement, up to 4% for a VA loan. When buying a home using VA financing, closing costs cannot be rolled into the loan. There are some costs that can be financed such as the VA funding fee.
For first-time home buyers, the VA funding fee ranges from 2.15% to 2.4% of the purchase price. If you are receiving any form of disability from Veterans Affairs, then the funding fee may be waived. The funding fee is based on various loan characteristics. On an Interest Rate Reduction Refinance Loan, an appraisal is not required, but the lender may require a drive-by-appraisal. Income documentation is not required, but source of income must be verified. On a purchase loan, the sales price cannot exceed the appraised value.
In general, when buying a home using 100% VA financing, the closing costs can range from 3.5% to 5.5% of the purchase price of the home. Closing cost can range from loan origination fees from the lender, credit report cost, appraisal, recordation cost, title fees, and transfer taxes, to name a few. If the 4% in closing cost assistance from the seller doesn’t cover these costs, then the remaining difference is the responsibility of the buyer. Also note, as a new home owner you will want to have some savings available after settlement in case of an emergency, and to pay for any added expenses once you move in, such as moving and purchasing curtains, lawnmowers, appliances, etc.
If you are ready to purchase a home with your VA benefits, keep in mind that there is a difference between down payment and closing cost.
Enjoy your home search and good luck!
Bruce Dorsey is employed by NFM, Inc. as a Mortgage Loan Originator, NMLS #174898. NFM, Inc. is a Veterans Affairs Automatic Lender (659985-00-00) under the trade name NFM Lending. NFM, Inc. is licensed as: Maryland Mortgage Lender (5330) under the trade name NFM Lending. For NFM lending’s complete licensing information, please go to www.nfmlending.com/licensing. NFM, Inc.’s Nationwide Mortgage Licensing System (NMLS) Company Identifier Number is 2893. NFM, Inc. is not affiliated with, or an agent or division of, a governmental agency or a depository institution. NFM, Inc. is an equal housing lender.