The unstable mortgage rates that affect the current housing market affect all Americans to some extent because real estate fuels the economy. When housing is distressed, all aspects of the economy are distressed. For an active duty military family, facing a long term deployment or long distance relocation can potentially mean financial ruin.
Current Real Estate Conditions Affecting Military
The United States government has recently taken steps to help alleviate some of the financial strain a military family may face as a result of the current housing market conditions.
• If a service member has an FHA backed mortgage, they may be entitled to a reduction in FHA fees when refinancing. The current 1% premium at loan initiation can be reduced to .01% and the 1.15% fee added to the monthly premium could be reduced to .55%.
• If a service member is forced to sell their home due to a permanent relocation, they may be entitled to compensation if they are forced to sell their home at a loss.
• If a service member was foreclosed upon in violation of the Service Members Civil Relief Act, they may be able to be compensated and reimbursed for their loss.
Challenges to Military
One of the most significant challenges a military family faces is the possibility of a long distance relocation. While it is difficult enough to move family and belongings across the country or across the ocean, if there is a house with a mortgage located in an area of distressed housing, the challenge become enormous.
The options to a military family are:
• Buy and risk financial uncertainty in the event of relocation
• Rent and forgo the stability of home ownership and equity growth
Purchasing a Home While On Active Duty
If a service member makes the decision to purchase a home while on active duty, there are several things to do to insure the property will not become a burden should deployment or relocation become a reality.
• Work with a real estate agent familiar with the market where you want to live. They will be able to show you comparable properties, what they have sold for in the past and whether or not the area is in a declining market.
• Contact at least three different lenders to be pre-qualified for a mortgage loan. Know and understand every fee they quote.
• Don’t buy more house than you can comfortably afford.
• If you choose FHA or VA financing because you don’t have enough money for a 20% down payment you are at the greatest risk of not being able to sell you house should you need to move while the country remains in a real estate slump.
Active duty military face a greater chance of experiencing the challenges of an uncertain real estate market due to the possibilities of deployment or relocation. They are also at the greatest risk of having the American Dream turn into a financial nightmare. Keep the dream alive by choosing a home that is well within your budget and use the rest of your money to pad that emergency fund!