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When’s the perfect time to buy a house?
If only we could predict the future.
The answer to that question has dozens of variables, and will be different from person to person.
A home, whether it costs $60,000 or $600,000, will likely be the largest purchase of your life. It’s adulting to the max. Even just deciding if home ownership is the right move can be super stressful. But buying a home is like a lot of things in life – only you will know when it’s the right time.
Here are a few questions to ask yourself before you take the leap into home ownership:
Is this a good location?
For most military families, each PCS comes with a new, unfamiliar location. If you’ve never lived there before, spend some time researching and getting to know neighborhoods, commute times and schools (note on the latter: even if you don’t have kids, schools matter for future resale or rental potential).
Check out the housing market. Are homes selling fast or sitting for several months or more? The first scenario is what’s known as a seller’s market, which means you are not as likely to be able to negotiate price and other conditions. The latter means it’s a buyer’s market, which gives you more power. Note that neither is a deciding factor, but knowing the real estate trends in the area can give you a better picture of what to expect during the buying process.
Do I have enough cash in the bank?
You don’t necessarily have to have a ton of cash on hand to buy a house. VA loans don’t require a down payment, and many banks and credit unions have special programs that make it easier for first-time homebuyers or military homebuyers in general.
Of course you’ll have a lower mortgage payment if you put money down, but many home buyers are surprised to learn it’s not an absolute requirement.
How much does it cost to buy a house?
There’s more involved in buying a house than just the sales price. Closing costs – which include things like taxes, appraisals and title fees – can be several thousand dollars. Often these can be rolled into the loan or negotiated for the seller to pay. But sometimes you will need cash for these expenses.
A mortgage calculator can help estimate your costs.
What are the costs of home ownership?
Taxes, insurance, maintenance, homeowner’s association fees, any upgrades you want to make … owning a home isn’t for the faint of heart.
If you’re handy with maintenance and renovations, it may be worth your while to buy a cheaper fixer upper. But if you’ve never touched a power tool in your life, a newer home that’s move-in ready might be more your style.
Either way, an emergency fund is essential to pay for any unexpected repairs.
What loan type do I qualify for?
The most common choices for military homebuyers are VA loans or conventional loans. You can get a VA loan from most any bank or credit union, but credit unions usually have lower rates. The main benefit of a VA loan is that no down payment is required. A common myth is that VA loans are easier to qualify for if you have less than stellar credit or a lot of debt. That’s not the case, so keeping your credit shipshape is key.
The best way to decide which loan is right for you is to talk to an expert at your financial institution.
What happens when we move?
This is one of the trickier aspects for military families when they buy a home. Most people who purchase a house plan to stay in the area long-term. Military families don’t always have that luxury. Look ahead at your options to sell or rent your house when you move. There’s no surefire way to predict the real estate market, so there’s no way to know if you’d make a profit or not until it actually comes to sell.
Many military families buy houses and then rent them out when they move on. This can be a great way to build equity and turn the tables by having someone else pay your mortgage. You’ll still need an emergency fund as you are responsible for all maintenance. You’ll also have to consider whether you are comfortable with being a landlord and whether you would use a property manager or not.
Bottom line: Can I afford to buy and maintain a home?
Ask yourself this question, taking into account all the factors above, as well as your own personal financial situation.
If the answer is yes, go for it! If not, continue to save, pay down debt and prepare for when the time is right.
Navy Federal Credit Union is federally insured by NCUA. Equal Housing Lender.