by Bennett Leigh
It’s a common dilemma for service members and their families moving to a new duty station — should you buy or rent? There are pros and cons for each option. The key is to determine what makes the most sense for your situation. The experts at Realtor.com have put together a list of pros and cons to consider before you decide to buy or rent with your next PCS:
Buying a Home
PRO: You may be eligible for a Department of Veterans Affairs loan. With a VA loan, you may not need a down payment. These loans also offer limited or no closing costs and don’t require private mortgage insurance.
CON: Loan limits are capped at $417,000 in most counties. That doesn’t mean you can’t get a larger loan, but you will probably have to make a down payment and the rate or amount the lender will lend you can be affected. Also, a VA home loan typically won’t apply to some fixer-uppers as the home has to be live-in ready at the time of sale.
PRO: If you’re moving with a large family or large pets, you may have trouble finding a rental. Apartment complexes in your area may not offer the number of bedrooms you need and you may struggle to find a landlord willing to take your large dog. Buying means you can find exactly what you need.
CON: Depending on the area, buying may also be more expensive if you need something specific like a large backyard or four or more bedrooms. You may strike a better deal by renting a larger house from a private landlord.
Renting It Out
PRO: You can rent out your home while you’re deployed. This can give you a steady income you can store away or invest in remodeling and upgrading your home (see sidebar).
CON: You may have to hire someone to handle maintenance requests and collect rent while you’re away, which will cut into your profits. And if you come back early, you’ll have to honor the rental agreement and find another place to live until your tenant’s lease ends.
Renting a Home
Renting a home may give you more freedom, but consider the potential advantages and disadvantages before you sign a lease.
Mobility Versus Equity
PRO: Not sure if your new location is where you want to live? Mobility is a big bonus for rentals. Short-term rentals can ease the pressure of deployment orders since you can pack up and ship out.
CON: You’re not building equity. Sure, your basic housing allowance will help or even take care of your rent costs but, like all rentals, you’re not investing in a home — which you might sell later — and building equity. Money spent on rent is money that isn’t invested.
What’s This Place Called Again?
PRO: If you’ve relocated recently, you will likely be looking at property in an unfamiliar place. You’ll need to take time to understand the neighborhoods and the town. If you rent, you can keep an eye on the real estate market and make a better informed decision before you buy a home. For example, read the local paper for new construction that may value or de-value your property of choice, and look for signs of people flocking to or flocking from the area.
CON: You might miss out on some real estate opportunities, especially if you move to an area just before a growth spurt. Housing may increase in price or become scarce when you decide to buy. l
5 Questions to Ask Yourself When Deciding to Rent or Buy at Your Next Duty Station
1. Do you plan on living there for at least three years?
2. Do you have a budget, good credit and emergency savings?
3. Do you have enough for the down payment and related expenses?
4. Do you have steady income?
5. Can you cover the recurring cost of owning a home?
Answering “No” to any of these questions means renting is better for you right now. Changes in your life or financial readiness could make you more prepared for becoming a home buyer in the future:
1. The longer you keep the home, the more likely you will be able to sell it without paying anything out of pocket. Three years may be long enough to allow you to recoup your down payment and expenses in many housing markets, but not everywhere. You may plan on keeping your home and renting it out in a hot military market, but keep in mind the costs that go with that option, as well.
2. Good credit can potentially help you save money by qualifying for a lower mortgage interest rate and insurance rate. As for savings, set aside money so that life’s suprises don’t cause too much of a financial hardship. Start by setting aside $1,000 and then build your savings to three to six months of living expenses.
3. The VA Loan helps many military home buyers with the zero down option, but making a sizeable down payment can lower your mortgage payment and help you save on the upfront fees and interest. Your lender can tell you your minimum down payment requirement. Closing costs on a home purchase average more than $2,500.
4. This is usually not an issue for those in the military, but recent downsizing and military cuts may cause a potential home buyer to think twice.
5. The total costs of homeownership include taxes, insurance, utilities, maintenance, repairs and homeowners association fees in addition to the mortgage.
— Courtesy USAA
—Bennett Leigh is a military spouse and freelance writer who lives outside of Washington, D.C.