real estate

Buying and Selling a Home When You're in the Military

Benefit from special perks and resources to ease military moves.

Military families tend to move often, sometimes with little notice, which can make it tough to decide whether to buy a home or rent. But you also have access to some special perks that can help homebuyers.

It helps if you eventually plan to move back to the area, either before or after you leave the military, so you’d only need to rent out the house for a limited number of years.

Compare Several Types of Mortgages

Servicemembers can qualify for a VA loan, which lets you buy a home with zero money down and no private mortgage insurance (see benefits.va.gov/homeloans for details). Interest rates on VA loans tend to be comparable to other mortgages, but fees are sometimes higher. If you have a good credit score and can make a down payment, the VA loan may not be the best deal, says Andy May, chief operating officer for AAFMAA Mortgage Services, which specializes in helping military families with a variety of types of mortgages.

“Only one in three people we work with select a VA loan when they’re presented with all of the options,” he says. Veterans with a disability rating, however, get a break on VA loan fees, usually making that their best deal. If you do get a VA loan with no down payment, recognize that if prices fall even modestly, you could wind up underwater, which means you’ll owe more than the house is worth.

Boost Your Emergency Fund

Keep extra money in a safe and accessible account that you can use to cover your mortgage, utilities and other expenses for a few months if you can’t find a new renter right away. The Servicemembers Civil Relief Act makes it easy for members of the military to get out of leases when they’re deployed or receive orders to move—which can be great when you’re the renter, but tougher when you’re the landlord and lose your tenant with little notice.

Understand Special Tax Rules for Home Sale Profits

If you eventually sell your home for a profit after renting it out, there are special tax rules that can minimize the bite. To claim tax-free profit (up to $250,000 for singles or $500,000 if you’re married filing a joint return), civilian homeowners must live in a house for two of the five years leading up to the sale. Military families, however, must live in the house for just two of the preceding 10 years to qualify for this tax break. See IRS Publication 3, Armed Forces Tax Guide for details.

Take Advantage of Available Mortgage Help

For more information about special programs that help servicemembers who are struggling with mortgage payments, see Fannie Mae’s advice at knowyouroptions.com/military.

You also can find a housing counselor approved by the U.S. Department of Housing and Urban Development at www.hud.gov, or by calling 800-569-4287 or 888-995-HOPE. And learn about government programs to help with loan repayment at makinghomeaffordable.gov.

The Consumer Financial Protection Bureau has resources to help servicemembers with mortgage issues as well.

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