 Buying a Home? 

Buying a home while serving in the military or as a veteran can be one of the most challenging lifestyle decisions you’ll make. The difficulty comes not just from deciding whether to purchase a house, but also from understanding the entire process involved.

First-time homebuyers often feel overwhelmed, and that’s perfectly normal. Learning how to successfully buy a home is a new skill that requires solid guidance and reliable information, like what you’ll find in this resource and buy partnering with an experienced military Veteran with MilitRe.

Rest assured, you’re not alone in this journey. According to the National Association of Realtors, half of all active duty military homebuyers are purchasing for the first time. This is where it is important to partner with MilitRe experienced real estate professionals, whom are military spouses or veterans themselves, ready to help you navigate the process.

Contact a MilitRe real estate professional, to understand what’s involved in buying a house. Doing your homework in advance will make the process smoother and more efficient for both you and your agent.

9 How To Get Your Finances in Order To Buy a Home

Step 1: Understand What Lenders Evaluate in Your Finances

When applying for a home loan, lenders want to ensure you can repay them. They will look at your steady income, available cash for a down payment, closing costs, taxes, and other expenses. Your recent banking activity, investments, and overall financial situation will also be scrutinized.

If you are eligible for a no-down-payment loan, such as a VA loan through the Department of Veterans Affairs, you’ll need to provide documentation to prove your eligibility.

Lenders will review your credit to assess your history of repaying debts and consider your outstanding debt. While different lenders might focus on various aspects of your finances, their goal is the same: to determine the risk of lending to you and decide the interest rate to charge. Here’s what lenders typically evaluate:

To improve your chances of getting a favorable home loan, save as much as you can for your down payment, reduce your debt-to-income ratio to below 43%, and work on improving your credit scores, particularly those from Fair Isaac Corp. (FICO), which are standard in the mortgage industry.

Raising your FICO scores can be challenging, but adopting certain practices can help, especially if you start a year or more before applying for a mortgage:

If you have poor credit, sticking to these strategies can raise your scores over several months. Improved credit can lead lenders to view you as a lower risk, potentially offering you better interest rates.

9 Why Your Credit Score Matters

Your credit scores significantly impact your mortgage interest rates. For instance, a $250,000 mortgage over 30 years with a fixed interest rate will have varying interest costs based on your credit score. Use FICO’s site to estimate your interest payments based on your scores.

Saving for a substantial down payment is crucial. The more you can put down initially, the more equity you will have in your home from the start, making you a lower-risk borrower to lenders and often securing you a lower interest rate.

Another reason to save for a larger down payment is to avoid private mortgage insurance (PMI). Lenders typically require PMI if your down payment is less than 20% of the home’s purchase price. PMI can add up to thousands of dollars annually, costing between 0.5% and 1.5% of the loan amount per year.

You should also prepare for additional closing costs, including home inspections, appraisals, and escrow expenses like homeowners insurance and property taxes.

Your debt-to-income ratio (DTI) is another critical factor lenders consider. It measures your total monthly debt payments as a percentage of your gross monthly income. To qualify for a mortgage, most lenders prefer a DTI of 43% or less.

To calculate your DTI, add up all your current monthly debt payments (e.g., student loans, personal loans, credit cards) and your expected mortgage payments, including principal, interest, taxes, and insurance. Then divide this number by your gross monthly income.

If your DTI is too high, focus on paying down existing debts. Some strategies include paying off smaller debts first for quick wins or targeting high-interest debts to save on interest over time. Choose a method that you can consistently follow to reduce your overall debt.

9 Tips for Choosing a Home You Can Afford

Saving for a down payment, improving your credit scores, and lowering your DTI can take time, but these efforts will make loan approval easier and secure better loan terms.

Determine how much you can comfortably afford for a monthly mortgage payment. Getting preapproved for a mortgage can help, but remember that lenders base their calculations on financial data, not your personal comfort. Ensure you’re comfortable with the amount you’re borrowing.

Consider the type of environment you want to live in—urban, suburban, or rural. Narrow your search to specific neighborhoods based on:

Decide whether you want a single-family home, townhouse, condo, or apartment. Consider factors like:

By considering these factors and preparing your finances, you’ll be better equipped to find a home that fits your needs and budget.

Should Military Families Buy or Rent a Home?

As a military family, deciding whether to buy or rent a home can be challenging. While it’s generally believed that owning a home is more cost-efficient in the long run, the transient nature of military life often means families don’t stay in one place long enough, however they can build equity and also start to build a wealth strategy by owning multiple homes and turning them into reoccurring revenue through renting them. The key factors to consider are cost and affordability in the short term. Some military families may find buying a home worthwhile, while for others, renting may be a more practical choice.

If you’re weighing the decision to rent or buy, here are a few important points to consider:

By carefully evaluating these factors, military families can make a more informed decision about whether buying or renting is the best option for their unique circumstances.

9 Tips for Choosing a Home You Can Afford

Once you’ve found a home that fits your budget and needs, it’s time to make an offer. With your agent’s guidance, submit a formal purchase offer to the home seller. Be prepared for the possibility that your initial offer may not be accepted right away.

The seller might respond with various counteroffers, such as:

Negotiating these terms with your agent will help you reach a mutually agreeable deal.

After the seller accepts your offer, you’ll both sign a real estate contract. At this point, you will typically provide an earnest deposit, which is placed into an escrow account. This good faith money is returned if there’s an issue with financing the mortgage or if the home does not pass inspection.

Your agent will guide you through the appraisal, disclosures, and inspections leading up to the final approval from your lender. During this time, you’ll have the opportunity to analyze various documents, such as flood maps, geological surveys, and private property ordinances. Researching county records for outstanding home inspections can give you an idea of what to expect during your current inspection.

Sellers must disclose major issues that aren’t visible to the naked eye. Trained inspectors and real estate agents can identify these, but everyday buyers might not. However, if significant problems like water damage and mold are found and properly fixed, the seller does not have to disclose the history.

If you’re considering an “As Is” property, note that the seller isn’t required to provide a disclosure statement and doesn’t intend to make any repairs before closing. They also don’t guarantee everything is in working order, so you’re responsible for any future repairs. However, sellers must meet state and federal disclosure standards, revealing issues like lead paint.

Be cautious if the disclosure includes significant issues such as:

If these issues are revealed, you can cancel the deal, get your escrow deposit back, and walk away. Alternatively, if you’re still interested, your agent can help renegotiate the terms, such as having the seller fix the issues or reduce the sales price.

Real estate agents often have professionals in mind for the inspection. If the inspection reveals discrepancies with the seller’s disclosure statement, this is another chance to either cancel the deal or renegotiate the terms.

Remember, many states follow “buyer beware” laws, meaning it’s up to you to ask questions, hire professional inspectors, and thoroughly research before finalizing your purchase.

The lender has the final say on releasing funds for a mortgage, but they must confirm two critical factors:

The lender will review your financial profile in detail, even if you have a pre-approval statement, to ensure you can cover your monthly mortgage payment. During this time, avoid major purchases to keep your debt-to-income ratio stable.

To determine the home’s value, the lender will order an appraisal inspection and compare the property to other homes on the market. If the appraisal value differs from the sale price, you or the seller can contest the assessment.

A day or two before the scheduled closing date, you and your agent will take a final tour of the property. During this walkthrough, you’ll inventory what is included with the home, such as appliances, window treatments, and any other items defined in the contract. Inspect the house’s overall condition and ensure it matches the contract terms. If any issues are found, your agent will address them with the seller’s agent. If everything meets the contract’s standards, you can give your approval, moving the home buying process towards closing. Remember, this is your last chance to opt out of the purchase if the home does not meet the agreed-upon standards.

As you approach the official closing day, ensure you’ve completed all due diligence, checked the property’s documents with local and state agencies, and fully understand what you’re inheriting after the home inspection. If you’re buying a home or condo with a homeowners or condo owners association, the seller must disclose the official association documents for your review. You have three days to decide if you can meet the association’s requirements. If not, you can withdraw from the contract.

Given the mobile nature of the military lifestyle, your closing appointment can occur wherever you are. You may meet at the agent’s office or sign paperwork remotely. Here’s what you’ll need: