From the Barracks to the ‘Burbs: Housing for the Military
The military has always played an integral role in Nick and Alison Lund’s marriage. The two met while they were both at Texas A&M — she was a member of the school’s Air Force ROTC and he was in the Army ROTC — and married soon after graduating in 2010.
She left the Air Force while he remained in the Army, and the Lunds’ life soon became like any other military family — always at the whim of the Army.
“The military is kind of volatile with orders,” says Alison, 26. “One week my husband has orders to deploy to South Korea, and then the next week we have orders to move to Georgia.”
Given the peripatetic and unpredictable nature of being a service member, decisions such as where to live and whether to buy or rent a home can be tricky. The U.S. government understands this, which is why there are housing programs available to help military personnel live affordably — as a renter or homeowner.
“The goal of most homeowners is to invest as much into a home as possible, since ideally it will be their house forever,” says Alison. “Most military families will not be living in one area for more than five years.”
Help with Renting
For families that simply want to rent rather than invest in a property for the long haul, there is the Basic Allowance for Housing, better known as BAH.
BAH offers service members a housing allowance for rent that’s determined by the area where service members are serving, their pay grade, and whether they are married or have children. BAH is intended to help military members live “comfortably and comparably to their civilian counterparts,” according to a promotional video produced by the Department of Defense.
In the case of the Lunds, once Nick graduated from Texas A&M, he was sent up to Kentucky for initial officer training while Alison remained in Texas. Given his training was only to last for eight months, he used his BAH money to rent an apartment near the base for $1200 a month while she crashed at her brother’s place back in Texas.
After eight months of training, Nick was sent back to Texas, where he was going to be deployed to Afghanistan for a year. After his deployment, the Army intended to station him at Fort Hood in Killeen, Texas for another three years. That meant Alison and her husband would be spending the following four years in one place.
“If we were going to be here for four years, we need to maybe invest in property,” Alison remembered herself saying to her husband.
Since Nick was in the Army, the two were qualified for mortgage assistance they initially knew very little about: the VA Home Loan.
Help with Buying
Since its inception in 1944, the VA loan has helped eligible service members purchase homes, offering favorable terms due to a partial guarantee of the loan by the Department of Veterans Affairs.
The loan often comes with a number flexible provisions — such as lower credit score requirements and no requirement for mortgage insurance or a down payment — that borrowers would otherwise not receive through a conventional mortgage.
Because of the favorable terms and low interest rates, these government-backed loans have experienced “explosive” growth since the housing downturn in 2007. VA loans have increased in volume by 370 percent, says Chris Birk, Director of Education for Veterans United Home Loans, a VA-approved lender.
One reason for this growth is due to the increasing difficulty of securing conventional financing, says Birk. “About one-third of veterans aren’t aware they even have a home loan benefit, yet it has increasingly become a lifeline for veterans and service members who don’t have great-to-excellent credit or who don’t have the ability to save.”
Some veterans and active duty service members cannot make the 20 percent down payment required for financing, which is “not a cost you have to bear with the VA loan,” says Birk.
Last year, 84 percent of VA buyers purchased their homes without putting down a single cent for a down payment, according to Birk. That may also explain why veterans own homes at a larger rate than civilians — 81 percent versus 65 percent for civilian homeowners.
Alison went to the United Services Automobile Association, or USAA, which specializes in financial services for service members and their families, to look at the different loan types that were available to them. “The interest [for the VA loan] we were getting to buy the house was only 3.5 percent,” she says. “It was such a better deal.”
Securing the VA loan was relatively easy. The Lunds were pre-approved for a loan up to $350,000, “which in Texas — especially in Killeen — is a lot of money for housing,” she says. They also did not have to make a down payment.
But finding a home to use the loan towards was a different story altogether.
The first home they looked to buy in the Fort Hood area was available for short sale. The home had preexisting damage to its chimney, along with an ant infestation that needed to be treated.
Per the terms of the VA loan, the home had to be termite-free to qualify for purchase with a VA loan. Thus, the Lunds could not close on the home.
These minimum property requirements, or MPRs, are intended to insure that veterans “are getting into safe and sound properties that continue to have marketability,” explains Birk.
The owner of the second home they looked at backed out of the sale after she literally got spooked. “She said her dead mother spoke to her and told her to stay in the home and not to sell it,” says Alison.
They eventually found a three-bedroom home on a one-acre lot located in Gatesville, Texas, about an hour from Fort Hood. “It’s really scenic,” says Alison.
For the Lunds, another plus of the VA loan is the flexibility that the lower payments afford them — perfect for a military family that may have to move to another base in another state at a moment’s notice.
“You can still have this house and pay this lower mortgage and still be able to afford to rent on another base just in time, until you figure out what you’re going to do with the other property,” says Alison.
Here are some tips on how to learn more about the VA Home Loan:
1. Get educated:
HUD-approved nonprofits like the Housing Opportunities Collaborative in Santa Ana, California offer classes on the homebuying process, along with foreclosure prevention and trustee sales.
Do your homework about the lenders and the options that are out there for you. Knowledge about these loans can prove beneficial when shopping for a loan.
“This is the largest purchase you will make in your life — especially here in California, where it can be expensive,” says Connie Der Torossian, program manager at the Housing Opportunities Collaborative. “If something looks wrong or doesn’t sound right, you at least have a resource to help [the homebuyer] go back to.”
2. Quiz your real estate agents and lenders:
The VA loan is a specialized program that not all real estate agents and lenders may be entirely familiar with.
“Doing your homework about the lenders and the options that are out there and gravitating towards those who understand the limitations of this program is absolutely critical,” says Birk.
3. Research online resources and know your “MPRs”
Veterans United offers several guides that detail the home buying process when the borrower is approved for a VA loan.
To meet the minimum property requirements for VA loans, the home must:
- Satisfy all local building codes
- Have an adequate heating system
- Have a roof in good condition
- Be termite-free
Homes that do not qualify for a VA loan include:
- Properties located within a high-pressure gas pipeline easement or high-voltage transmission line easement
- Homes that are substantially damaged
- Non-owner-occupied rental properties
- Properties that have not been allocated for residence.
Click here to find a local VA regional loan center near you.