Article by: Amy Clements
Military members and veterans move more than almost anyone else in the country. No doubt some of those moves involve the decision to buy a home; and what do we love the most when it comes to complex processes that involve high stress? That’s right, checklists.
Here’s my checklist of the 5 basic things you need to consider before buying a home:
1) VA Loan
One of the big things that sets military and veteran buyers apart from the crowd is the VA loan. These are loans that are guaranteed by the government and therefore come with a few perks; the biggest one is that no down payment is required. None. Nada. But because the government is involved, eligibility comes with many rules and requirements so one of your first steps is to verify your eligibility. You can check the VA loan requirements here and if you qualify, get your Certificate of Eligibility (COE).
Keep in mind that just because you qualify for a VA loan does not mean you need or even want to use it. It may be more financially advantageous for you to use a different type of loan and that leads me to my second, and very important step….
2) Talk To A Mortgage Lender
Before you even call a real estate agent or look at houses, you need to talk with a lender (unless you’re a cash buyer and then you can pat yourself on the back and proceed to step 3.) This does not need to be the same company you bank with.
Your need for a lender has two phases. The first phase is simply to determine your buying power, that is, how much you can spend on a house. They will pull your credit report and get some financial details from you. Once they’re satisfied, they’ll give you a pre-qualification letter, or more involved still, a pre-approval letter. This is your ticket to begin serious house-hunting.
I personally recommend speaking with one (and only one) lender in this phase. Why? Because any lender’s pre-qualification will get you close enough on your purchasing power to begin hunting. Also, if they don’t do it properly, each time they pull your credit score will create a new ding on your score.
Phase two occurs after you have found the house you want to buy and is where you need to shop lenders more thoroughly. How much time you have to shop lenders once you’re under contract on a home varies from state to state so make sure you discuss this timeline with your real estate agent. I recommend calling two or three lenders to compare interest rates, closing costs and your monthly payment. The quotes each lender provides will be specific to your house and the contract price. You can truly compare apples to apples at this point.
In my experience, the best lenders are local. You need to be able to go into their office, sit down at their desk, look them in the eye and have a good, old-fashioned discussion about your best financial strategy. You can read reviews by other military and veterans in your area online at PCSgrades.com as well as ask your real estate agent for recommendations. They know which lenders in town offer the best customer service. There is so much more to choosing a lender than the interest rate. Your lender will be one half of your home buying dream-team so take this decision seriously.
Your real estate agent is the second half of your home buying dream-team. This is a person that will guide you through the process from this point forward. This is a person you will likely communicate with daily for at least a month. It is essential that they are competent at their job and that you enjoy working with them. Life is too short to dread answering the phone every time their number pops up.
Some of the best ways to find a good agent involve asking trusted friends and reading reviews online. Again, PCSgrades.com is an excellent resource for military members. The reviews are written by people just like you; active duty members, veterans, and their families. Even better…every agent selected through the website provides a 20% rebate on their commission (in states where allowed by law).
Once you have a few agents you’re interested in, don’t hesitate to conduct interviews. This is a great way to get a sense of their personality, availability, comfort using technology and commitment to your home-buying process. You can let them know you are considering several agents but don’t ask them to show you homes until you’ve decided on who you’d like to work with. Trust your gut on this. Once you find someone that you connect with, let them know and make an appointment to begin house-hunting!
4) Save Money
Start saving immediately. Even if you’re using a VA loan, you will still have closing costs to cover, not to mention a host of other expenses. Consider looking for a lender that offers a lender credit to help offset these costs. Nevertheless, you’ll likely need to spend thousands of dollars at the closing table covering the origination fee (called a funding fee for VA loans), escrow requirements such as pre-paid hazard insurance, pre-paid taxes, and title insurance, just to name a few.
After the closing table, you’ll have additional costs of moving and setting up a home including installation fees or deposits for cable and utility companies. You’ll also likely have a few renovations in mind; perhaps carpet or duct cleaning, painting, and new locks. If you’ve bought a new construction home, there are many move-in expenses to consider including blinds and window treatments (unless you plan to give the neighbors a show!), fencing and appliances.
5) Don’t Buy Anything When You’re Under Contract
This is a hint most buyers never consider unless they’ve bought a home before or have been warned by their agent or lender. Once you’re under contract and locked into a loan (again, this tip doesn’t apply if you are a cash buyer), do not make any major purchases such as a new car or even appliances you might want for your new home. While you’re at it:
- Don’t change jobs, become self-employed or quit your job.
- Don’t use credit cards excessively or let accounts fall behind.
- Don’t do anything that will originate an inquiry into your credit.
- Don’t make any large deposits without discussing it with your loan officer first.
- Don’t change bank accounts.
- Don’t co-sign on a loan for anyone.
This may seem excessive but trust me, there is nothing more intrusive than getting a mortgage. An underwriter investigation is second only to an IRS audit so make sure your financial world is stable, even dull. Any change at all could ruin your chance of closing on your home so tread lightly and when in doubt, call your lender.
Those are my five best tips for getting started. You’ll have plenty of other decisions to make along the way, but as long as you have a good lender and agent to help, you can tackle them all in stride. Happy house-hunting and leave any comments and questions below.
Amy Clements is a prior Air Force officer and current military spouse, from Colorado. She and her husband have been part of the Air Force community for over 15 years and have been stationed all over the world including Japan, South Korea, and England. Amy is the broker and owner of Clements Real Estate. Her areas of expertise are military relocation and referrals.