Challenges of Homeownership
The VA loan program does a tremendous job helping ensure veterans can truly afford the homes they purchase. This no-down payment program has exceptionally low foreclosure rates but there are no guarantees. No matter the situation, the mortgage still needs to be paid. There are potential financial challenges when you buy a home.
- New monthly expenses: Your monthly mortgage payment will usually cover your principal and interest, along with a portion of your annual property tax and homeowners insurance bills. The principal and interest portions won’t change on a fixed-rate mortgage but property taxes and homeowners insurance premiums can change annually. There also may be new expenses you didn’t have as a renter, from water and trash bills to unexpected repairs.
- You are responsible for maintenance. It’s appropriate to budget about 1 percent of your home’s value each year for maintenance and repair costs. That’s $2,000 on a $200,000 home.
- Relocation may be more difficult as a homeowner. Veterans and military homeowners on the move can’t walk away from a mortgage without facing some steep credit and financial consequences. Selling or renting your home must be considered along with the costs involved. Renters can wait for a lease to end. Active-duty military members can many times break the lease without penalty in certain situations whereas homeowners must sell or rent out their homes. You should also keep in mind that there are costs and time associated with selling your home.
- Failing to stay current on your mortgage payments can take a significant toll on your credit. Late payments, loan modifications, and foreclosure can crush your financial profile.
It is imperative, to be honest with yourself about the potential risks given your own personal and financial circumstances. If the future is a bit uncertain, don’t rush into buying a home at this time. Remember, the goal is sustainable, responsible homeownership, a reward that will serve you well for years to come.
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