Should You Rent or Buy a Home? Four Things to Keep in Mind

Homeownership is often seen as the ultimate American dream, but should military families pursue this goal when they are moving to a new area for just a few years?

My family has owned a house at two duty stations and has rented at six others. As a financial counselor, I’ve helped folks create spending plans that include homeownership, and I’ve also taught home buying classes.

While I don’t profess to be a real estate expert by any means, one thing has become clear to me: most people do not properly understand the costs and responsibilities involved when they purchase a home.

Here are four things to keep in mind when you are considering whether you should buy or rent a home.

Cost of Home Buying Process

While most potential homebuyers focus on the price of the house and the mortgage interest rate, there are a lot of costs involved in buying a home including application and recording fees, survey and appraisal fees, home inspections, pest inspections, agent fees, escrow fees, and prepaid property taxes and homeowner’s insurance.

Many military families use a VA-backed loan to avoid having to put down a large down payment, but there may still be a funding fee of up to 3.6 percent of the purchase price.

While some of these costs can be rolled into the home loan so that buyers don’t have to pay out of pocket, they will result in a higher monthly mortgage payment.

Hidden Costs of Homeownership

Some military families simply look at the monthly cost of renting in an area and compare it to the various online mortgage calculators and conclude that since the monthly costs appear to be similar, they’d rather be building equity than paying rent to someone else.

However, a monthly mortgage payment is only the beginning when it comes to the costs of being a homeowner.

Aside from utility costs, which most renters would also face, homeowners must foot the bill when it comes to maintenance, repairs, insurance (which is much pricier than renter’s insurance), home improvements, property taxes, and homeowner association fees.

Most experts advise keeping a maintenance fund on hand that is between 1-3% of the home’s worth. For a $300,000 home, for example, between $1,000-3,000 should be set aside in a separate account each year.

Post-Move Income May Be Different

Many military families look ahead to their next duty station and start the buying process before they’ve even hit the ground. This can be problematic if there are changes in income once the move is complete.

For example, a spouse may take a cut in salary after a move. Or childcare costs could be higher. Or the commute and tolls could become more expensive. All this might result in less take home pay, and could make paying a mortgage plus maintenance/upkeep more of a hardship.

You May Become a Reluctant Landlord

The last time we were homeowners, which was three duty stations ago, when it came time to PCS overseas, selling our house did not make financial sense. Because we had a VA backed mortgage, we had not put a down payment on the house and so we had not built up very much equity. Home values had stayed flat.

Not only would we not break even on the sale of our home, but we would also have to pay some of the closing costs out of pocket. We reluctantly placed our house on the rental market.

The rent paid most of our mortgage, but we still had to pay for repairs, a home warranty, insurance, and a property manager. After two years, our original tenants moved out and the new tenants ended up skipping out in the middle of the night. We were forced to pay rent on our house in Germany while paying for a mortgage back in Virginia.

We eventually sold the house a year later and considered ourselves lucky to only pay around $800 at closing.

While homeownership continues to be a lifelong dream for many military families, it may not make financial sense if frequent moves are in the cards. Potential buyers should be aware of the costs involved and not enter into a purchase lightly.

Financial counselors on installations and Military OneSource can help military families learn about the home buying process for free.

Having an adequate emergency fund on hand before venturing into the real estate market is important, but it’s also fundamental to have another, separate account earmarked for homeownership. 

Do you need inspiration and motivation to save for a goal like owning a home? Take the Military Saves Pledge today and then visit and follow us on social media!

Tip of the Day

  • Written by Guest Blogger | February 11, 2014

    #Save just 1% of your income this year and grow $250-$500 in savings by the end of the year depending on your salary:

Saver Stories View all »

Setting a Goal Leads to Success

Written by Super User | May 24, 2019

Growing up, Marisa’s dad had always talked about saving first, but she said she didn’t really internalize it until much later. “I was drifting along with no plan, carrying a little bit of revolving debt, saving some money here and there, but without a real plan for it.”


Making Saving Automatic Leads to Personal Success

Written by Lila Quintiliani | May 27, 2020

Ryan’s savings journey started when he was an active duty airman. Frequent deployments and temporary duty assignments gave him the opportunity to save. By the time he transitioned out of active duty, he had built up a healthy rainy-day fund and had started to aggressively save for retirement.


Building a Six-Figure Savings While Enjoying Life

Written by Jackie Toops | November 13, 2020

Does the idea of saving up hundreds of thousands of dollars seem impossible? How about doing it while still living an enjoyable lifestyle?

For military spouse Martina and her husband, an E-5 in the Navy, accumulating a six-figure savings has become a reality. One might think that in order to save this much, it would take a great deal of sacrificing and forgoing a certain quality of life, but Martina and her husband would disagree. “Over the past few years (about five), we've managed to save almost $120,000 while mostly living on one income. We've learned so much about easy ways to save money and live a good life,” shares Martina.