Buying a home when you are in the military, or must move frequently due to work, can be tricky. We believe purchasing a home only makes sense if you can commit to living in the house for at least five to seven years. If you move much sooner, it is possible the home may have dropped in value and you could be underwater on your mortgage. Planning to live in a home longer-term helps ensure it won’t negatively impact your finances when you move.
This can be difficult for someone in the military that may move to a different base every two to four years. Here are some housing considerations for those in the military:
- Plan to live in your home long-term if buying. It is very difficult to plan to live in a home longer-term when serving, but if you want to buy a house, we do want you to be in the house for at least five to seven years.
- Keep total housing costs below 25% of your income. The lower your housing costs are, the less of a negative impact it could potentially have on your financial life.
- Renting is not throwing money away. When you buy a home, you pay for maintenance, repairs, homeowners insurance, and more. In the early years of your mortgage, much more is going to interest than it is building equity in your home. Renting is not throwing money away, but paying for flexibility which can be invaluable for members of the military. There is even more flexibility available through the Service Members Civil Relief Act, which allows military members to terminate leases early without penalty under certain conditions (such as a PCS move or deployment orders).
Know what’s covered
Members of the military have access to VA home loans, which allow you to put less than 20% down without needing private mortgage insurance (PMI). If you do buy a home while in the military, using a VA loan can help lower your monthly costs if you put less than 20% down on your home. The Basic Allowance for Housing, or BAH, provides a monthly tax-free subsidy for rent or mortgage payments. You can use the online calculator here to estimate your BAH by zip code, year, and pay grade.
When you are required to move, the military does cover some of the costs. Depending on your rank and how many dependents you have, your dislocation allowance (DLA) ranges from around $1,000 to over $5,000. Temporary Lodging Expense, or TLE, is an allowance to pay members of the military for lodging and/or meal expenses incurred while moving. Percentage reimbursement ranges from 100% for military members and decreases for dependents, and expenses are limited to $290 per day for up to 7 to 14 days, depending on whether your move is within the continental United States or out of the continental United States.
TLE applies right before or after you are physically moving, while permanent change of station (PCS) per diem applies while traveling. This rate is currently $157 daily and if traveling in a “convoy,” you may receive a smaller daily allowance for your spouse and/or dependents. Generally one day of travel time is allowed for each 350 miles of official distance of ordered travel. For example, if you are moving 1,000 miles, you are allowed three days of PCS per diem (not including TLE which may apply before and after traveling).
Members of the military have a moving weight allowance which increases with rank. Cost to move items beyond the limit will be charged to the service member, so try to stay within these limits if you want the military to cover your move. If you drive your own vehicle when moving, you are eligible for a monetary allowance in lieu of transportation, or MALT. Rates are $0.22 per mile as of July 1, 2022.
Navigating financial decisions when you are in the military, like buying a home, isn’t easy. Fortunately the military has programs in place to make buying a home and moving a little bit easier. There is nothing wrong with renting, especially if you serve in the military and aren’t sure where you will be living in the next five to seven years.
