There Are Better Options

The author's advice: For now, concentrate on getting your new life and career off the ground while saving some money, not buying a home. Fei Meng

Dear Dave,

I’m coming up on a transition phase in my life. I’ll be leaving the military soon, and I’ve been evaluating my living situation once I am out. My parents said I could live with them for a while, but I am not sure that would work out well. I have done some research on renting versus buying a home, but I understand that you hate VA loans. Can you clarify as to why you feel this way and give some advice for a person in my situation?

Tyler

Dear Tyler,

Hate might be a strong word for how I feel about VA loans, but there are some things you should know about them. No. 1, VA loans are usually more expensive, with the interest rate and all the fees, than FHA or conventional loans. No. 2, the reason most people gravitate toward a VA loan is they can get a house with no money down. But if you’re trying to buy a house with no money down, it means you’re too broke to buy a house!

When you buy a house, and you’ve got no money in the bank, that house is going to be a curse instead of a blessing. What happens if you buy a home this way, and the air conditioner goes out next week? What happens if your car needs a new transmission next month? Most people who find themselves in situations like this start piling on debt to fix things, and that’s not a wise answer.

VA loans and other “no down payment” mortgage loans allow you to buy a home from a position of financial weakness rather than a position of financial strength. Don’t get me wrong, I want you to own a home someday. I just don’t want the home—and a bunch of other debt stacked on top—to own you.

My advice is to rent a decent, affordable place for a while and concentrate on getting your new life and career off the ground while saving some money. You might even consider a roommate situation for a while to help cut costs. But you don’t need to be buying a home right now.

Good luck and God bless, Tyler. And thank you for your service to our country!

—Dave