The best kept secret in the Military is the 0% down VA home loan for Active Duty Military and Veterans.
The VA loan is such an incredible tool yet it is grossly underutilized, why?
There are a lot of misconceptions on the internet and throughout the Military community in which I plan to address in this article.
Birth Of the VA Loan
The Veteran Home Loan was created to make homeownership more affordable for Military service members in 1944 as a part of the original GI Bill of Rights.
The goal was to level the financial playing field for those who served our nation during WWII yet were unable to keep up with the housing market once they returned from war.
There have been many changes to the program since inception to allow the program to keep up with the ever-changing landscape of the market and now after 75 years, the VA Home Loan Program continues to support Veterans and their families.
In a lot of cases the VA loan is the only realistic path to homeownership.
The VA Advantage
Those who do not have access to the VA benefit have to go through a considerable amount of planning in order to reach the goal of homeownership. For example, let’s say we have a family of four in California with no Military affiliation where the average home price is around $600,000.
This family consists of 2 adults and 2 children. In order to purchase a home, they must save between $21,000 to $120,000 for the down payment, which doesn’t include all the other fees associated with closing costs.
In the current economy this is very difficult for most families. Often, a family must wait and save for a significant amount of time in order to purchase a home losing out on years of equity due to renting. They also lose out on the ability to build a portfolio quickly.
A Military family, however, after earning the benefit of the VA Home Loan can take advantage of the $600,000 as long as they qualify with their finances.
Active Duty personnel have Basic Allowance for Housing which automatically qualifies them for a range of houses supported by Their BAH value or income value. This Basic Housing Allowance payment tends to keep up with inflation and usually mirrors the current housing market in terms of affordability.
What this means is a Military family unlike its civilian counterparts can utilize their tax-free Basic Allowance for Housing to make monthly mortgage payments on a house that they didn’t put any money down on to begin building wealth through homeownership.
This is phenomenal and puts service members at an advantage financially if done correctly. There are tons of stories where we see service members sell homes and retain 5- and 6-digit profits or keep the home long term utilizing it as another income vehicle in retirement via property management. Check out our article on the 2 House Retirement system to learn more.
Lets circle back to a question I asked earlier. If this is such a powerful tool then why is it so underutilized?
The problem stems back to a lack of information and accountability within the real estate industry. Real estate is a big transaction but just because it is big doesn’t mean it has to be scary.
The process is fairly straightforward when you work with the right people. That is why we created Duty Station Relocator.
Our aim is to educate and pair Military personnel with the right Realtors and Mortgage lenders. We have done all the heavy lifting and negotiating for you. Also, the service is free for the Military to utilize.