How Much House Should I Buy

by Karina Gafford

home_buyingIn a quick search on how much house I should buy, almost every site either encouraged me to either a) select a mortgage that amounts to 25 percent of my income, or b) buy a home with my long-term living needs in mind.
Well, thank you Google, but that’s just not good enough advice for military families.
First of all, we don’t calculate our housing expenditures based on income; we calculate based on housing allowance. For some, housing allowance may only make up 25 percent (or less) of their monthly income; for younger service members, it may make up 50 percent of their income. The amount paid provides what Dear Government has deemed the amount that a service member at that rank and family size would need to spend in order to live in quarters akin to a civilian of his status.
So, the 25 percent rule doesn’t cut it. We need to consider how much we can actually afford based on that housing allowance. However, how much we can afford depends entirely on the values that each military family places on affordability. In our blog on How Much House Can You Afford on Your Military Family’s Budget, you can find three different ways that military families define affordability when spending their BAH dollars.
Second, most military families don’t have the luxury of buying for long-term living. It’d be nice to plan a home that would comfortably accommodate a mother-in-law suite (or two), bedrooms for future children, rooms for guests, and an office for your future home business. The reality, though, is that your new home likely won’t have the opportunity to experience any of those life changes. Heck, by the time guests schedule a visit, you’ll likely be packing up for your next PCS, wishing you never bothered to go to the expense of furnishing and air conditioning that guest room for two years! Next time, guests can stay at the hotel down the road, and you’ll just keep those utility dollars in your wallet.
The problem is, though, military families are eternal optimists. We believe in an American Dream, and we entrust our spouses to fight for it. We don’t believe in a world without a strong America, and so we invest in the future of our country.

That means we buy homes. 
Few investments more fascinating than real estate exist—well, few that most military families can afford, that is. Unlike your boring mutual fund account that only inspires in you something akin to interest when the quarterly statement shows an increase in the balance, your real estate investments are far more personal. Real estate that you purchase is a tangible, and quite visible, expression of your identity. Your 3,000 square foot, modern-colonial style, gated community, suburban home shares a piece of how you wish to portray yourself to the world; it’s a vision quite different from the version of yourself that may have instead chosen a sleek, urban high rise or a cozy, craftsman-style bungalow in a historic neighborhood.
We purchase homes because we value that ownership as part of the American Dream—or whatever of it remains, anyway. We also believe that real estate functions as an investment. Mr. O’Hara from Gone with the Wind summed up generations of our collective belief in the power of harnessing our income to produce wealth when he told his stubborn daughter,
Do you mean to tell me, Katie Scarlett O'Hara, that Tara, that land, doesn't mean anything to you? Why, land is the only thing in the world worth workin' for, worth fightin' for, worth dyin' for, because it's the only thing that lasts. 
Yes, Mr. O’Hara, real estate does last, but here’s the thing, my dear military families…that advice doesn’t necessarily apply to you. Your primary home at your current duty station is not an asset; it’s a liability.

As for that boring mutual fund, that thing’s an asset, so you should probably do something useful with that statement, like file it away for safekeeping. Just a thought.
That piece of real estate that you bought at your current duty station only becomes an asset once you no longer live in it. Any home you live in is a liability, and not an asset. So, that means that the gorgeous stone countertops you installed, the custom built-in seat in the bay window, and those pricey plantation shutters in the front room are all a big, fat liability. That is, until you either sell or rent with a plan for a long-term investment.
Maybe I’m coming across a little harsh, but it’s critical for military families to recognize that every dollar they sink into their primary residence—whether in the initial purchase or during the duration of occupancy—is a dollar that they either need to recoup come PCS time or later as a rental property. If you are going to buy instead of rent at your next duty station, then you need to think of your home purchase objectively—it’s part of your family’s financial portfolio.
I totally get it, though. Notification of orders have arrived for our family, and this real estate obsessed blogger is literally chomping at the bit to go on a house hunting vacation. Hello, real estate, my love!
But, I must take my own advice:

  • My primary residence purchase is a liability. It will cost me money every month that I live in it. I’ll pay utilities, maintenance, a mortgage, interest, and taxes. Any upgrades that I make are an additional liability.
  •  I need to purchase based on what we can afford. For our family, that means a 15-year mortgage instead of a 30-year mortgage, because we value the financial peace that comes with paying off a mortgage more quickly. That piece of advice does not work for all military families, though. In fact, most choose the 30-year mortgage; if you’re just starting out in your career and you don’t have savings socked away, then the latter will probably make more sense for you, too.
  •  I need to plan my purchase knowing whether I’m buying to keep and rent, or buying for a quick turnaround sale. I know that two, three, or maybe four years down the line, we’ll receive orders again. It’s an inevitable part of the military lifestyle. Have an Exit Strategy will help you see how buying to rent motivated the successful purchase of a cookie-cutter home amid options of the beautiful craftsman style homes I would have preferred. 

I implore you to follow the same advice. In writing about military families and real estate, I’ve heard more than my share of unfortunate circumstances. Military families have experienced crushing debts from carrying two mortgages at a time, or worse, taking money from that mutual fund—y’know, the thing that’s actually making you money—to cover the loss when selling their home at PCS time. It’s painful to hear, but it’s even more painful to experience.
I want YOU to be a military family real estate success story (and then tell me all about it!). So, when you’re considering how much house you should buy for your military family, don’t take the first piece of Googled advice that works for the other 99 percent of the population. You are different (in a good way!)!