Settling back into civilian life is never easy. Even if you spent your deployment in the kitchen or behind a desk, the military life becomes such a part of you that leaving it behind can be frightening for even the most hardened veterans.
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Thankfully, there are ways to ease the transition. One of the most common – and most expensive – is buying a home.
While that process is very similar for veterans as it is for those coming from other sectors, there are some details that veterans need to keep in mind. Here’s how to make the most of the benefits you’ve earned during your time in the military, along with veteran-specific tips on buying your new home.
Compare VA Loans and Conventional Loans
Unlike most Americans, veterans have the option to choose between a conventional loan and a VA loan. A VA loan is one of the benefits veterans earn for serving their country and is often better than a conventional loan.
Veteran Ryan Guina of The Military Wallet said every former service member should compare the loans before they sign up with a lender. Even a small difference in interest rate could have a huge impact if you sign up for a 30-year loan.
“VA Loans have had slightly lower interest rates, on average, for the last few years,” he said. “But that is not always the case. It’s very important to compare the total cost of a VA Loan to a conventional mortgage before deciding which is better for you.”
Use a loan calculator to compare every offer, no matter how much of a slam dunk it might seem.
Wait for the Disability Rating
Many VA loans come with a funding fee, which is a separate fee that lenders charge to process VA loans. Those who have a disability rating can have their funding fee waived. Navy veteran Doug Nordman of The Military Guide said many people apply for a mortgage before they get their rating and end up paying an unnecessary fee.
“If they close the mortgage before they have a veteran’s disability rating, it’s highly unlikely that they’ll be able to get the VA or the lender to refund it later,” he said.
It can take several months to receive the rating, and Nordman recommends renting until you receive your status.
Avoid Funding Fees
Veterans without a disability rating can still partially avoid funding fees if they put together a downpayment of 10% or more.
The funding fee is currently 2.15% of the home’s purchase price for a veteran’s first VA loan and 3.3% for the second. That means a $200,000 home will have a funding fee of $4,300 for a first-time VA loan applicant.
Instead of paying a funding fee, save the down payment required to waive it. A down payment can not only help eligible veterans avoid most of the funding fee, but it can also decrease the interest rate and monthly payments.
Nordman said many veterans buy their homes when they get their first post-military job in the private sector. Research shows they rarely stay in that position for more than two years. When they leave, they might struggle to pay their mortgage or find a new home in a different city.
“Wait until you know you’re in the right job (at least a year) in the right location,” Nordman said. “That way you’ll know your expenses and be confident about how much home you can afford.”
Veterans tend to be in a rush to settle in and put down roots but remember – there’s no rush. Your new life is just beginning, so take the time to make sure it’s the kind of life you’ll be happy with.