Let’s play devil’s advocate: just because rates dropped doesn’t mean every military family should run out and buy a house tomorrow. Here are five things you need to know before you take the plunge.
1. Your PCS orders matter more than the rate.
If you will be on a typical two-year assignment, you may want to hold off on pulling the trigger on the home-buying process. A huge consideration is whether your property will gain enough equity to not only maintain its value in fluctuating markets, but also potentially increase in value so that it will outweigh the total costs.
Things like realtor fees, closing costs, and other hidden costs, such as potential repairs, will add up quickly. Even when VA loan rates are favorable, you may find it more of a headache to buy unless you will be on location for three or more years.
2. Monthly payments are only part of the picture.
That lower interest rate may look enticing, but let’s not forget about what we pay for beyond the mortgage payment. Things like property taxes, homeowners’ insurance, and HOA fees can put a damper on your budget in a hurry. So, unless you found a really great property with a low price tag, consider your BAH in comparison to all fees associated with the home purchase, not just the mortgage.
3. VA loans still have hidden costs.
Of course VA loans have great benefits, like zero down payment and no PMI (which saves hundreds per month compared to civilian mortgages). But a funding fee can creep up on you like a thief in the night (unless you’re exempt). Funding fees may range from 1.25% to 2.3% of the loan amount. For example, a $300,000 house will add about $7,000 to the loan.
4. The market might still be crazy.
Just because the VA loan rates are lower overall doesn’t mean that you will get a fair share of the price of the property. “The only good time to buy” is when you are in the best financial position to do so, not because the “market” says so. Don’t let the lower rate bait you into a bidding war to overpay for a home you don’t plan on living in forever.
The area in which you plan to purchase also plays a huge role, especially if buyer demand is greater than what the market has to supply.
5. Your loan is a superpower—use it wisely.
Imagine owning three homes at once, selling two and keeping one as a rental, only to discover a year later that you could have paid a lot less. Well, this was us. We bought our third property (from a military family) when the market was rough, and although we would have loved to keep it as a rental, the rate/payment was too high for us to risk not being in the negative trying to rent it out.
One underrated benefit of VA loans (that we, of course, didn’t know): they’re assumable. If you buy a home now with a low rate, and later sell to another military family, they can assume your loan, which makes your house more attractive in a high-rate market. That’s long-term leverage most buyers don’t get. Just think of how much money we could have saved had we assumed the loan on that third property.
Bottom Line:
The VA loan is one of the best benefits out there, and the dip below 6% makes it even more powerful. But rates alone don’t tell the full story. Not every loan is created equal. Be sure to check with your lender because rates can vary based on your lender, credit, and other factors.
Remember, buying a home should not be based on market trends if it doesn’t fit your family’s lifestyle, season, or needs at the time. Make buying a home make sense for you.
