The Pros Of Buying A Home While Serving
There are plenty of benefits to buying a home while you’re serving your country.
You Have Control Over The Property
When you rent, you can’t make permanent changes to your property without first consulting with your landlord. But when you own a home and, say, want to take out that wall between the kitchen and dining room, you can. If you want to add a Jacuzzi tub to your master bathroom, you’re free to do so.
Owning a home gives you the control that you lack when renting. Transforming a property to fit their needs is a perk that many homeowners enjoy.
You May Qualify For Tax Incentives
When you own a home, you’ll qualify for tax breaks when you file your income taxes.
One of the biggest of these is the mortgage interest deduction. You can deduct from your income taxes the interest you pay each year on up to $750,000 of combined mortgage debt if you’re filing your taxes as an individual or married couple filing jointly. If you’re a married couple filing separately, you can each deduct the interest you pay on up to $375,000 in mortgage debt.
If you purchased your home on or before Dec. 15, 2017, you can deduct the interest you pay on up to $1 million of mortgage debt if you’re filing as a married couple filing jointly or an individual. If you’re a married couple filing separately, you can each deduct the interest you pay on up to $500,000 of mortgage debt.
You can also deduct at least a portion of the state and local property taxes that you pay each year on your home. You’re allowed to deduct up to $10,000 for state and local taxes each year. This figure doesn’t rise even if your property taxes are higher than that amount.
You’ll Build Equity
You’ll also build equity as you pay down your mortgage. Equity is the difference between what you owe on your mortgage and the current value of your home. For example, if you owe $200,000 on your mortgage and your home is worth $350,000, you have $150,000 in equity.
You can borrow against this equity in the form of home equity loans or home equity lines of credit. You can then use the proceeds from these loans to fund everything from a major kitchen renovation to consolidating your high-interest-rate credit card debt into the lower-interest loan.
Equity matters when you’re selling your home, too. The more equity you’ve built, the more money you’ll walk away with when you sell your property. Say you owe $70,000 on your mortgage and you sell your home for $250,000. You’ll generate $180,000 on that sale. Remember, though, that some of those funds will be used to pay for your real estate agent’s commission and any closing costs you must cover. You may also need to pay capital gains tax, depending on your situation.
How To Buy A House In The Military
Ready to make the move to homeownership? Here are the steps to follow.
1. Work With A Real Estate Agent
It’s important to work with a real estate agent who knows the market in which you want to buy. It’s good, too, to work with an agent who has helped members of the military buy homes in the past. Such an agent will better understand the needs of service members.
An agent can make sure you don’t overpay for a home. They will also lead the negotiations with the sellers when you find a home to buy. Best of all? When you’re buying a home, you may not have pay your real estate agent anything. Instead, the home’s sellers typically cover your agent’s commission from the profits of the home they’re selling.
2. Consider Your Financing Options
If you need a mortgage to finance the purchase of your home, you have several options. You can apply for a conventional mortgage loan, one not insured by any government agency; an FHA loan insured by the Federal Housing Administration; or a USDA loan insured by the U.S. Department of Agriculture if you’re buying in a disgnated rural area of the United States. However, there may be a better option for service members.
If you’re an active-duty member of the military, you can also apply for a VA loan, a mortgage insured by the VA. These loans are available to active-duty service members, veterans and eligible surviving spouses and offer several benefits that other financing options don’t. These benefits include:
- Lower credit score requirements: Most lenders require a minimum score of 580.
- No down payment required: You can come up with a down payment if you’d like, but VA loans don’t require you to do so.
- No mortgage insurance required: You won’t have to pay mortgage insurance each year with a VA loan. But you will have to make a one-time funding fee when you apply for your loan.
Before you start looking at homes, work with a lender to get pre-approved for a mortgage. During this process, a lender will check your credit and verify your income to tell you how much of a mortgage you can afford. This way, you won’t waste time looking at homes outside your price range.
3. Start Touring Properties
Once you are pre-approved for a mortgage, it’s time to start looking at properties in person. You can find homes that interest you online. But it’s best to tour homes in person with your real estate agent. Sometimes, kitchens, bedrooms and bathrooms look larger online than they do in person. It’s best to get a first-hand look at homes before making any offers.
4. Make An Offer
When you’ve found the home you want, it’s time to make an offer. Your real estate agent will help you draft the offer after recommending a price. Once the sellers receive your offer, they can accept it, reject it or submit a counteroffer. Your agent will lead the negotiations until you and the sellers agree on a price and closing terms or until you or the sellers decide to break off the negotiations.
5. Schedule An Inspection
Once you and the sellers agree on a sales price and you sign a contract to purchase the home, it’s time to order a home inspection. During the inspection, a home inspector will tour the property you’re buying to look for current and potential issues. The inspector will then prepare a report listing any red flags, both large and small, with the home.
On average, an inspection costs around $350 as of June 2023, according to HomeAdvisor. The actual cost of yours will depend on the size, location and age of the home. But don’t skip this step. If the inspector finds serious problems, you can ask the sellers to fix them, lower the sale price of the home or provide you with funds to hire contractors to make any necessary repairs.
Without a home inspection, you might only discover these expensive problems after you move into your new home.
6. Close On The Home
If the inspection goes well, it’s time to move to the closing table. When you close on a home, you’ll sign several documents, including the title to your new home. You’ll also sign a mortgage agreement that states when your monthly payments are due, how much you’ll pay each month and when you’ll have your loan paid off. This agreement also lists the interest rate attached to your loan.
You’ll pay closing costs, too. These costs are charged by your lender and third-party providers and can run from 3% to 6% of your home’s purchase price. You can’t pay these costs with a personal check. Instead, you’ll need a cashier’s check or certified check from your bank.
