Retiring from the Military? It May Be Time to Buy Your Own Home

December 09, 2010
Buying a home can be an exciting part of retiring from the military. Think of it as your permanent PCS: a place where you can spend time with your family, find a community, and enjoy the next phase of your life. While buying a house can be thrilling, it is daunting. There will be many important decisions, starting with asking yourself “where do I want to live?”

Picking Your Own PCS

When house hunting, most people start with location: city versus country, small town versus downtown. Retiring service members need to consider additional factors when looking at a home’s location. For example, you may want to live in a state where there is no tax on military pensions. Being close to the amenities a military installation can offer, as well as having a VA hospital nearby, can help you make the most of your military benefits. Resources such as the new “Best Places for Military Retirement” list commissioned by USAA and Military.com can help you find a location that offers these benefits along with a high quality of life.

While a “best places” list is a great reference, you also may consider simplifying your search process with easy-to-use tools and services tailored for the military community. One example is USAA’s Home Circle™, which offers free access to local Multiple Listing Services that lets you search by military base, as well as city, zip code, or neighborhood, in addition to finding important information about schools. It consolidates listings from many trusted sources, putting all the information members need in one convenient place. The service also provides access to a MoversAdvantage® real estate agent. These agents understand the specialized needs of military families, and in most states, members who use MoversAdvantage can save up to $3100 when buying and selling a home.

Financing Your Future

Once you’ve found the right spot, be sure you know much house you can afford, especially now that you’re providing your Basic Housing Allowance from your own pocket. Carefully consider your income, debts, expenses, and how much you have for a down payment. The next step is to determine how you’ll pay for that dream home, which many times includes applying for a mortgage. First, check your credit reports; make sure nothing is wrong and fix anything that you can.

Most lenders suggest you put down 20 percent of the mortgage. If you can’t, you may still qualify for a loan, especially a Veteran Affairs (VA) Loan. With a VA Loan you may not have to make a down payment or pay mortgage insurance premiums. It’s a good idea to talk to a lender who has experience with VA Loans, as well as other standard mortgage offerings, to help you find the best option for your needs. For example, Home Circle helps you compare mortgage terms and loan rates, finance a mortgage, and apply for a home loan.

USAA CERTIFIED FINANCIAL PLANNER™ June Walbert says, “Every military retiree will be eligible for the Veterans Affairs Home Loan. It can be a wonderful opportunity as they will be able to fully finance a mortgage.”

Now is a great time for military retirees to buy a home: the U.S. Government extended the homebuyer tax credit for military members to early 2011. If you buy or sign a contract for your first home by April 30, 2011, you will be eligible for an $8,000 (or 10 percent of purchase price) credit. This offer accompanies the VA Loan.

Insuring your investment

For most homeowners, buying insurance isn’t a choice since; mortgage lenders typically require you to obtain a homeowner’s insurance policy as part of the loan agreement.

In deciding how much coverage is needed, you should carefully weigh the relative risks associated with their home and its location. Keep in mind that being underinsured can be financially devastating in the event that your home is damaged or destroyed. Regardless of your home’s market value, it is important to consider the replacement value of your home and its belongings in choosing the amount of coverage you need.

First, find the cost of construction per square foot in your area and apply that cost to the area of your home. Next, look at risk factors in your area, particularly the potential for tornadoes, floods, earthquakes or hurricanes. It is important that you understand what your policy covers and what is excluded, so don’t be afraid to ask questions.

Conclusion

When you retire from the military choosing where to live may be one of the bigger decisions you have to face. Weigh each of your options carefully, take your time and enlist the help of an expert. When it comes time for your permanent PCS, you’ll be ready to walk through the front door of a place you’ll be proud to call home.

Notes

Housing-related expenses

Housing expenses often depend on where you are buying your home, which makes choosing the right place even more important to your budget. Some typical home expenses include:
• property tax
• mortgage insurance (if applicable)
• flood insurance or other property insurance
• maintenance costs
• utility costs
• home association or condo fees

MoversAdvantage® offered by USAA Relocation Services, Inc., a licensed real estate broker and subsidiary of USAA Federal Savings Bank. Not available for employer-sponsored relocations, or for transactions in Iowa or outside the U.S. This is not a solicitation if you are already represented by a real estate broker. Cash bonus limited in some states. Bonus ranges from $350-$1,550 based on sale price of home sold/purchased. You must enroll in program before contacting participating real estate firm and be represented by that firm at closing to qualify for bonus. Equal Housing Opportunity.

Home Circle™ is a program provided by United Services Automobile Association. Availability, eligibility restrictions and fees may apply to certain banking, insurance or ancillary products. Bank products provided by USAA Federal Savings Bank, Member FDIC. Some products provided through Home Circle are provided, directly or indirectly, by third party providers. Each company or provider has sole liability for its own products. The trademarks, logos and names of other companies, products and services are the property of their respective owners.

Financial planning services and financial advice provided by USAA Financial Planning Services Insurance Agency, Inc. USAA Financial Planning Services Insurance Agency, Inc. (known as USAA Financial Insurance Company in California, Lic. #0E36312), a registered investment adviser and insurance agency and its wholly owned subsidiary, USAA Financial Advisors, Inc., a registered broker dealer.