Salute to Spouses Blog

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Ready to leave military housing behind and buy your very own house? Not so fast

Buying a home is one of the biggest decisions many of us will ever make, not only financially, but emotionally as well.

It’s also one of the things many soon-to-be military retiree families look forward to the most. We want to buy curtains and rugs that actually fit and match, paint the walls and replace the flooring and install whatever countertops we like best.

We want a place of our own. Or, as many call it, a “forever home.”

But is buying a house a wise choice when in the midst of leaving the military?

The answer varies widely depending on who you ask. Even retirement planners and financial experts have different opinions. Some say you should wait to see exactly what your financial situation will be post-retirement, and that it doesn’t make sense to make such a huge decision in the midst of an even bigger life change like retirement.

Others say you should always buy rather than rent, because real estate is a long-term investment. The keyword there is long-term, though – most military retirees relocate to another city at least twice, if not more, during the first five years after leaving the service.

The forever home we’ve all dreamed of is, apparently, a myth.

In our case, we did buy a home, about nine months after retirement (we lived in our RV in the meantime, while we decided where to settle). We didn’t plan to buy – we were going to do the “smart” thing and make sure we really like the area. However, we ended up moving to a resort/tourist town, where long-term rentals are expensive and in short supply. It was much cheaper, on a monthly basis at least, for us to buy.

Everyone should consult their own financial expert and determine the best course of action for their particular situation. But here are seven things to consider when choosing whether to buy or rent a home during or immediately after the retirement process, based solely on my family’s own experience over the past year:

  • Income. This one catches a lot of people by surprise. When you apply for a mortgage, the lender will ask for proof of how much money you make, and how much you have in savings (they will often require an amount equal to three months’ mortgage or more). They’ll also look at your debt – car payments, other real estate, credit cards, basically any bills that you pay or money owed. The lender has to make sure that you can afford the mortgage, not just now but in the future. The surprise part is this: You could be turned down for a loan if you can’t prove post-retirement income. Some lenders will take a memo from a future employer, if you have one. Others will take an online printout of a retirement calculator showing the service member’s retirement amount. But many lenders will require actual pay stubs or proof that retirement income is already being paid, in some cases for as long as 12 months prior to the home purchase. The bottom line? If you plan to buy a house during retirement, make sure you have plenty of cash saved up, and that you have adequate proof of income to cover the mortgage, no matter if that income is from a job, retirement, disability or winning the lottery.


  • Finances. See above. But also consider this: Just because a bank will give you a loan, it doesn’t mean you can afford the house. Conversely, just because you think you can afford the mortgage, the bank might not. We qualified for a slighter lower loan amount than we hoped for. In the end, it worked to our advantage because it helped keep us from spending beyond our means.


  • Cost. This is where we looked especially closely when considering whether to rent or buy. Buying a house comes with a lot more expenses than many first-time home buyers realize. Besides the mortgage, there are taxes and insurance, and of course maintenance. You also should have money set aside for emergency repairs. The last thing you want to do is go into debt because your “new” house needs a major roof repair or HVAC replacement six months after you move in.


  • Mortgage. We had only ever bought one house before, and that was almost 12 years ago. We had no idea you could “shop” for mortgages. We bounced offers back and forth between three different lenders, and ended up getting our interest rated dropped .5 percent, as well some closing costs covered.


  • Loan type. Lots of retirees use a VA loan. The biggest benefit is, unlike a conventional loan, a VA loan doesn’t require any down payment. This allows you to get a loan while preserving your cash in the bank, but it also means your monthly mortgage payment will be higher. Other than that, VA loans have the same qualification as any other home loan. One other thing to note: The VA has maximum loan limits by region. You can go over the maximum, but in that case you will have to provide a 25 percent down payment for the amount above the loan limit.


  • VA funding fee. Generally, anyone who has a service-connected VA disability rating is eligible to have the loan funding fee waived. Depending on your home purchase price, this can equal several thousand dollars. But the requirements are tricky. According to the VA, the veteran must have already applied for disability at the time of closing in order to be eligible for the waiver. Like many things, there is a lot of confusing information about this topic online, so be sure to consult the VA directly to ask about a funding fee waiver.


  • Property taxes. As mentioned above, this is a cost to consider when calculating your monthly payments. Some states waive a portion of your property taxes, or even all of it, based on VA disability. Once you do buy a house, be sure to check with your local tax office to see if this benefit is available.
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