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 a 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.
Keep in mind that no down payment isn’t the same as no closing costs. Also, just because you qualify for a VA loan does not mean you need or even want to use it. It is crucial to weigh all options, and in some circumstances you may find It be more financially advantageous for you to use a different type of loan and that leads us to our 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.) Not all mortgage lenders are created equal, some have different additional requirements on top of what the VA spells out, and some are just way easier to work with.
The reason a lender should be your first stop is twofold: to manage expectations when it comes to the process and your buying power, and to give your prospective real estate agent peace of mind that they’re working with a pre-approved buyer. Notice we say pre-approved, because if you’re only prequalified based on some verbal information and a credit pull, there’s no guarantee for funds to go through. A good lender is going to pull your credit, your Certificate of Eligibility, ask for two months of income statements and financial statements, employment verification information, and two years of tax returns and W-2s. Without a thorough examination of all of these items, your pre-qualification is at risk.
Once you’re under contract for a home, it’s essential to get it over to your lender right away. Make sure the closing date is something they can meet, ask them to order the inspection right away, and to provide you with updated payment numbers based off of unique property information such as loan amount and taxes. Also get started shopping for homeowner’s insurance right away so you can have a complete picture of your monthly payment. It’s also important to shop around in the very beginning, and compare loan estimates, keeping in mind the differences between lenders. Section “A” of the loan estimate will break down fees coming from the lender such as origination, processing, underwriting, etc. and points you pay (if any) to be in the rate you’re being quoted. Our staff has a recovering mortgage lender on board – don’t be shy to reach out for help in comparing these things – you’re not alone!
In our experience, the best lenders are ones that give the time to give a thorough pre-approval up front while educating you on the mortgage process. A great lender wants to be your partner and look out for your best financial interest (worthy to note: not all states require lenders to be trusted fiduciaries, aka look out for your best financial interest over their business ones, so it’s super important to find someone who is either mandated to do this or makes it a point to do it on their own). 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.
3) CHOOSE A REAL ESTATE PROFESSIONAL
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.
PCSgrades collaborates with Realogy Military Rewards to tap into their network of trusted, experienced, A-Team agents that will not only provide world-class service but offer a cash-back reward of $350-$7500* on your home sale or purchase. Having an agent that knows your unique needs as a military family and has a proven track record of success is going to save you so much headache in the long run – trust us! We wouldn’t be partnered with the largest brands in real estate such as Century 21, Better Homes & Gardens, Corcoran, ERA, and more unless we would (and have) used them ourselves!
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. This is where working with an agent through our Realogy Military Rewards partnership and the cash-back reward they offer will come in super handy! Also, paying close attention to frivolous “Section A” fees in your loan estimate to avoid those out of pocket lender costs mentioned before can literally save you thousands! Nevertheless, you’ll likely need to spend several hundred, if not thousands, of dollars at the closing table covering the escrow requirements such as pre-paid hazard insurance, pre-paid taxes, and title insurance, just to name a few. These fees do NOT change lender to lender, and are fixed costs associated with the home, but you can shop around for title insurance/settlement companies to have some control over the settlement fees.
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. Some utility companies waive certain set up fees for the military – be sure to ask! 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 except shopping around for mortgage rates in a two week window of time
- 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. It is like receiving a financial colonoscopy! 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. Also, never attempt to hide anything from your lender – it’s just not possible and could put you at risk of losing your loan!
Those are our 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.
This article was originally posted in 2015 by Amy Clements and refreshed in 2020 by the PCSgrades team.