- Work with a Realtor to avoid many of these issues
- Avoiding overspending is probably the most important rule
- The VA loan is great – but not necessarily your only or even best option!
If you haven’t taken into account all the costs of homeownership and how it will impact your current budget, you could be putting yourself in a tough spot in a few years’ time. I recommend aiming to spend as little as is necessary to get you what you want in a home. Don’t budget based on yoru lender’s maximum preapproval. Budget based on what you can afford plus putting aside extra each month for contingencies.
Using a mortgage calculator? Don’t forget to include the monthly mortgage insurance! And remember to budget for utilities, maintenance, lawn care, and other things that your landlord might have taken care of when you were still a renter.
Budgeting wisely is especially important in an area like Fort Hood where appreciation generally just keeps up with inflation and the VA loan rolls the funding fee into the mortgage, meaning buyers are underwater on the mortgage for the first few years.
Buying New Construction Without a Realtor
I can’t source it, but I think I read that approximately 30-40% of buyers working with a builder do not have their own agent representation. I wrote an article on why you should strongly consider still using a real estate agent when buying from a builder, beginning with the fact that the builder has budgeted to pay your agent already. You are not likely gaining anything financially by forgoing representation.
More important, however, is a reason related to the bad budgeting mistake. Builders are plentiful in the Fort Hood area, and also very appealing. The process is smooth, the sales agents know their stuff, the model homes pristine, and being your home’s first owner is exciting!
But that does not mean it is the right decision.
Builders charge the top of the market, and I have frequently seen homeowners – especially military homeowners – sucked into the allure of new construction only to find themselves buying more home than they can afford and facing foreclosure in a few years’ time. Talking with a Realtor can allow you to explore all your options and ensure buying from a builder is the right decision for you.
In addition, there are over 40 builders in the Fort Hood area of all different types. It is unlikely you have explored all the buidler options. Speaking with a local Realtor is a great way to narrow it down to the ones that might be the best fit for your circumstances.
How To Budget Your Mortgage
- Budget based on your monthly mortgage payment, not your purchase price
- Plan on that mortgage going up
- Your lender is your #1 resource for planning your budget
Not Considering Foreclosures
I hear that many other Realtors are wary of foreclosures, often recommending buyers avoid them.
I think this is a huge mistake.
Foreclosures in the Fort Hood area aren’t like those in other markets. Homes in our area tend to be newer, and foreclosures are no exception. That means many are in pretty good condition, often just needing a few cosmetic upgrades like new carpet and paint.
Realtors also complain that the foreclosure process can be more complicated and take longer, but that is not true for most foreclosures in the Fort Hood area. Most foreclosures are VA foreclosures, which has a pretty simple process very similar to making an offer on any other home, and in my experience takes no longer at all than a typical resale home.
What are the benefits to buying a foreclosure? You get a deal! Many of these are priced $20,000-$30,000 off the full value of the home, repaired and ready to go. Foreclosure buyers often find that they can sell their home in just a few years and break even or even make a modest profit, or rent their home for better cash flow than a “normal” home buyer can.
If you have even just a few thousand dollars set aside for some closing costs and modest repairs, foreclosures should be on your list to consider!
Using the Listing Agent
I’ve gotten phone calls from home buyers who thought I was the listing agent on a home they were interested in. When I let them know I wasn’t, they politely said “thanks” and hung up.
Where in the world did so many people get the idea that they should approach the listing agent when looking for a home?
I suspect folks think they can get a deal if they go to the listing agent directly. Not only is that nonsensical, but going directly to the listing agent to buy a home is one of the best ways to get snookered. This is obviously not just a Fort Hood issue, but I imagine an issue for home buyers throughout America.
This advice includes new construction home buyers. The builder’s representative represents the builder, and not you, and there is a whole list of reasons why you should have a Realtor during the process of buying a new home.
True or False?
- Are Fort Hood area homes cheap?
- Do I automatically get a VA loan if I’m military?
- Do I have to have good credit?
Ignoring USDA Loans
The VA loan gets all the love in a military town like Fort Hood.
But one overlooked loan might be the best kept secret in the mortgage industry: the USDA loan.
Sponsored by the United States Department of Agriculture, the USDA loan has the reputation of being “for farms”. But that is not the case (you cannot use it for active ranches or farms with commercial purposes). Instead, it is simply available for homes outside a defined city radius.
USDA loans, like the VA loan, feature a 0% down payment, but are generally only available to first time buyers, so if you are buying your first home, consider a USDA loan, even if you’re military! Save your VA loan entitlement for another duty station.
Ruining your Financing During the Deal
Preapproval in hand, you are not suddenly invincible to a change in your financial situation – even a minor one.
Buying a car, cosigning a loan, or even just moving your money around can derail a transaction. Before you make any signficant purchases, investments, or withdrawals, check with your lender first and ensure they are okay with it.
If you are under contract, review my Ten Home Buyer Commandments to help keep you on track for closing!
Fortunately, avoiding these mistakes is not difficult. And while you may make a few mistakes, they don’t have to be fatal.
Plus, the Killeen area has a lot of great options at nearly any budget. Working closely with a knowledgeable and experienced Realtor is the #1 method to avoid these mistakes.