June 13, 2016, by Jerry Nelson – The big day has arrived. You’re an E7 and ready to buy your first home. Retirement is just a few years off. You’re stationed in an area which you wouldn’t mind calling home. It’s time to buy – or is it?
Often, service members find themselves surrounded by real estate agents ready to pounce and make that commission on a home sale.
Stop. Breathe. Look around. And consider your options.
Here’s a listing of questions you want to consider before approving the deal and obligating yourself to 30-years of monthly payments.
Go In for the Long Haul
Understand home buying is a long-term commitment and the days of flipping houses for a quick profit are over. Plan to hold the home for at least ten years.
For military personnel with three and four-year assignments, buying a home doesn’t often make sense. It may be smarter to live beneath basic housing allowances and save the difference. That could be a good chunk of a down payment for when the time to buy is right. Scott Haveson, a realtor in Seattle, encourages potential home buyers to find realtors who understand the vagaries of home buying by service members. Spend some quality time online researching the options in your area.
Ask yourself many questions before buying. A home will be the biggest purchase in your life, so make sure you are making the best decision. Answer a few questions about how this commitment matches your lifestyle:
- Are you alone? Or will you be starting a family?
- Do you need a home with a yard?
- Are you tired of mowing the lawn? Maybe a condo would be appropriate.
- Are you an urbanite spirit or do you believe you should cling to the suburbs?
Don’t move too fast just because you enjoy the current low-interest rates. Instead, make sure you cred reports are in good shape. Credit reports can be reviewed once annually for free at AnnualCreditReport.com
Focus on what is affordable to you. Lenders are going to check your debt-to-income ratio. To calculate the debt-to-income ratio, here’s what you do:
Add all of your debt payments such as mortgage principal, property taxes and other recurring debt like student loans and car payments. The ration should be 36 percent – or less. Do whatever you have to do to stay out of the danger zone.
If you gross $5,000 a month, don’t pay out over $1,800 on bills. If you are pushing over $1,800 out the door, your credit-to-income ratio isn’t good. Just because your lender says you qualify doesn’t mean you can afford it. If everything looks good, but a home which is affordable if there is just one income. This will leave some wiggle room in case someone loses a job.
Maximize your tax benefits. As the tax laws stand, mortgage interest is tax deductible. That makes it a fabulous incentive to buy a home since your taxable income will be lowered by the amount paid in property taxes.
Besides the down payment, a move-in fund will help cover closing costs, furniture and other things you didn’t need in base housing.
In Doubt? Rent
If you are in doubt about your desire or ability to buy – then don’t buy. Rent instead. At the end of the day, delaying the purchase until you’re ready – career-wise and financially – will make more sense than taking the plunge.
Were you able to come up with answers that satisfied you? Great – then buy!
Author Bio: Jerry Nelson, a Vietnam Veteran, is an American writer and photojournalist and is always interested in discussing future work opportunities. Email him at firstname.lastname@example.org and join the million-or-so who follow him on Twitter @Journey_America.