Purchasing A Home After Leaving The Military: A record-breaking 1.2 million VA-backed loans originated in 2020 — more than the past two years combined. Homebuyers using VA loans also increased by 11.4%. Purchasing a home after leaving the military can certainly be challenging. Fortunately, however, all you need is the right knowledge and planning and you’ll find it’s possible to purchase your own home after leaving the service without breaking the bank.
Prioritize finding work
It’s important to have work lined up before attempting to secure a home loan, since lenders will be assessing your debt-to-income ratio. They’ll also look at your expiration of terms of service (ETS) date; being anything less than under a year away from leaving the service means you won’t be considered as having future income. So, instead, you need either 30 days of pay slips from your new employer or an official letter from your future employer outlining your start date and salary.
You also need to be able to prove you have income in the same location you want to buy property — particularly if you’ll be using a VA loan. So, for example if you’re still serving in California and want to purchase a home in New York, you’ll need to wait until your DD-214 comes through and have a job secured in this area. Many veterans go into temporary housing after leaving the service before purchasing a home of their own (the Joint Personal Property Shipping Office can store your belongings for 90 days).
Determining your income-to-debt ratio
Outstanding loans, including credit card debt, also influence your income-to-debt ratio and your final loan amount. Your monthly income also generally needs to be roughly triple your monthly loan amount. So, for example, if you’re looking for a $400,000 loan with monthly payments of roughly $2,000, your monthly income will need to be over $6,000. Take note: your GI bill education benefits and Social Security Disability Compensation aren’t classed as income that can go toward purchasing a home. Additionally, it’s often common for military families to invest in property with VA loan benefits during service.
VA loans make it easier for veterans to purchase homes with a 0% down payment and great rates. By consulting a VA loans guide, you can learn more about the application and approval process. After moving to a new location, these families may then rent out their properties. However, even if you use rental income to pay your mortgage, lenders still don’t officially class this as income (since the continual flow of rent can’t be guaranteed). So, rental properties are therefore considered as debt in your debt-to-income ratio, which means you’ll qualify for less money when trying to purchase a new home.
Although purchasing a home after leaving the military is rarely easy, it’s certainly possible with proper knowledge and planning. By finding work before attempting to secure a home loan and understanding income-to-debt ratio, you’ll be in a better position to buy a home.