December 30, 2008 • June Walbert
Q: I have been in the military for two years now, and am currently deployed. My husband is also deployed, but in a different branch than me. We have been debating about buying a house. What kind of down payment and or price range can we afford to look into? We are both e4, and he is about to get his e5. We get out of the military in 2 and half years. Should we buy now and start putting the housing allowance toward it, or save and buy later. Thanks.
--Katie
A: I really like your last four words…“save and buy later.” Clearly one lesson that we have to take from the recent real estate market slump is that a home purchase is a long term proposition. I would recommend that you start building your “home fund” by stashing away money – including your good idea of saving your Basic Allowance for Housing (BAH) - into a high yield money market or savings account. In the meantime, decide where you want to live for the long term and figure out what you’ll do for civilian employment. Your savings can be used for a down payment, closing costs, or just to outfit your future home. When you actually get to the point where you’re ready to settle down and buy, a Veteran’s Affairs loan may make sense—it offers competitive interest rates and would allow you to buy without necessarily making a down payment. That makes sense especially when you’re buying a fixer upper. For now, focus on staying safe and building up your savings.
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June Walbert is a CERTIFIED FINANCIAL PLANNER TM practitioner with USAA Financial Planning Services, one of the USAA family of companies.
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Home prices are one factor in determining your cost of ownership, but so are interest rates and financing availability. Even though interest rates have gone up in the last six months, they are still near historic lows. Since your monthly mortgage payment is a combination of paying down your principal and paying the interest owed, if home prices come down a little further but interest rates go up, it could cost you even more to service a mortgage on an identical home!
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