Buying a Home While Transitioning Out of the Military

Making the transition from service member to civilian? Transitioning out of the military can be an overwhelming experience. It’s a huge decision that will have a significant impact on your friends, family, and most importantly, the rest of your life. There are several things to think about before leaving the military and entering the civilian world. However, one of the most important questions to ask is if you are interested in buying a home while transitioning out of the military. Buying a house is also a huge decision and doing so right out of the military can be difficult to manage. If you’re considering buying a home, here are five things to keep in mind.

 

5 Things To Consider When Making The Military Transition To Civilian Life

1. Your Lifestyle

The military transition to civilian life is less about transitioning out of the military and more about reintegrating back into society. A lot of people go through a major lifestyle change when they leave the military. It’s important to take some time to figure out what kind of lifestyle you want to have as a civilian before committing to buying a home. Here are a few questions to ask yourself to find out what type of lifestyle you want.

• Do you plan on moving to a new place?
• Are you looking to settle down?
• Do you have a spouse or children? How old?
• Are you going back to school?
• Where do you want to work?

Once you understand what your lifestyle will likely look like, the decision to buy a house or not will be a lot easier to make.

 

2. Finding a Job

As important as the decision to buy a house is, finding a job is the most important thing to do when transitioning out of the military. When it comes to getting out of the military, most veterans have cited finding a job as being the most difficult part of the transition. The job you are aiming to get is an important part of choosing where and how to live. Without a job, there’s no chance you will get a mortgage without another source of income from a spouse.

Start looking for a job as soon as you can. It can take over a year to find the right one. Each branch of the military has a Transition Assistance Program or TAP that assists service members in their transition to civilian life and this includes finding employment. Having a job lined up after separation will make the transition a lot smoother and makes it easier to get a loan.

It’s also important to consider the fact that the first job you get after separating from the military may not be your job long-term. According to a Syracuse study, 43% of veterans leave their first job after separation from the military within their first year. If you leave your first job, your options to find a job are a lot more limited if you have bought a house and selling may not be practical.

 

3. Use a VA Loan

VA loans are one of the best benefits offered to veterans buying a house. The VA loan is a government-backed loan from the Department of Veteran Affairs to assist veterans in their effort to buy a house. You can also use VA loans for condos in specific circumstances. The VA loan provides many unique benefits to veterans such as:

• No Down Payment Requirement
• No Private Mortgage Insurance Fee
• No Prepayment Penalties
• Lower Interest Rates
• Foreclosure assistance
• Can Be Used Multiple Times

The VA also looks at your debt to income ratio when deciding if you qualify for a VA loan, the amount you can borrow, and the income you need to qualify. Typically, the VA requires a debt to income ratio of 41% or lower in order to qualify, meaning you are spending 41% or less of your income on overall expenses. If you have a high debt to income ratio or DTI, then it may be better to rent for a while as you lower your expenses.

The first step to getting a VA Loan is to apply for a Certificate of Eligibility. A COE is a document created by the VA that tells mortgage lenders that you meet the VA’s requirements to get a loan and the likely amount that the VA will guarantee for the loan. You can apply for a COE directly on the eBenefits website or you can print out a form and mail it in. On average, it takes the VA 30 days to decide on an applicant’s eligibility. COEs don’t expire but you may need to reapply when you transition from being a military member to a civilian.

Read More: Step-by-Step Guide on Buying a House With a VA Loan

4. Renting May Be The Better Option

Going from being in the military to being a civilian is one of the most difficult transitions that most service members will have to go through. Many veterans run into many hardships with mental health, family life, and finding a job. In many cases, buying a house only adds to the stress that veterans feel when separating from the military. Not only do you have to be mentally ready to buy a house but also financially ready. Mortgage lenders look at the last one to two years of tax returns, pay stubs, bank statements, and credit scores to determine the risk of lending money to a borrower. Minimum credit scores required for VA loans vary but a score of 620 meets the standards of most VA loans.

Between having good financial health, figuring out where to live, and finding a good job, there are a lot of things that you’ll have to worry about when separating from the military. Renting a house can help alleviate some of the responsibilities that becoming a civilian brings.

Renting a house or apartment gives service members more time to figure out where they will get a job, where they want to live, and the best way for them to buy a house. Becoming a homeowner is a huge commitment and if there is any uncertainty in your financial situation, renting is the safer bet.

 

5. Use Your Benefits as a Veteran

VA loans may be the most popular type of benefit for veteran home buyers but they aren’t the only ones. Many veterans go through their lives without using all of the benefits that are available to them. Specifically for buying a house, there are a few different benefits that can help make the purchase more affordable. Here are a few programs that can help you when purchasing a house.

• Down Payment Assistance – The grants and different types of loans available per state to help buyers pay down payments.
• ​​Army Emergency Relief – Nonprofit created by the army to assist soldiers with financial burdens.
• Mortgage Credit Certificate – Program that helps low-income veterans buy a home.
• Specially Adapted Housing or SAH for disabled veterans – Offers grants to service members with disabilities.
• There are also plenty of nonprofit organizations that help veterans with housing as well.

Oftentimes, the help available to veterans goes unused because veterans either don’t know about them or don’t think that they qualify. Do your research and find out what benefits are available to you in your state as a veteran.

 

Ready To Buy a House? We can help!

The competitive seller’s market that the real estate industry is in is great news for sellers but not great for buyers. Houses on sale go fast and a lot of the time they go to buyers with cash or that pay the most over asking. Working with a good real estate agent means that you will have someone on your side working to make sure you win out your dream home against all other buyers. Despite what people think, the most important part of being a real estate agent isn’t finding a house for the buyer, it’s the negotiations that happen after to get the seller to choose your offer. When you’re buying a house in a competitive market, you don’t need just a real estate agent — you need a Negotiator.

Learn more about Negotiators here.

Updated on June 20th, 2022