For many career servicemembers in the U.S. military, relocation is part of the job. Known as a
This is where lenders and real estate agents can play a critical role by understanding how PCS timelines and military benefits shape mortgage needs.
When is the PCS season?
The normal PCS season is from May through September and brings along a unique set of challenges that need to be addressed.
The PCS season may overlap with the normal spring homebuying period but unlike
"The moves are more sensitive," Perlman said. "They're a little more stressful too, because logistically they're more complex, especially for families."
This year, Navy Federal launched what it termed its "enhanced Permanent Change of Station Initiative." The goal is to give those servicemembers involved tools to navigate the unique complexities involved with PCS moves, which can be different than a civilian relocating for a job opportunity.
Navy Federal's PCS Initiative
In aiming to address the challenges of these relocations, this year, Navy Federal Credit Union in Pensacola, Florida launched what it termed its "enhanced Permanent Change of Station Initiative." The goal is to give servicemembers tools to navigate the unique complexities involved with PCS moves, said Christopher Davis, the credit union's assistant vice president.
A key part of Davis' role is educating real estate agents and home sellers on how to work with active-duty servicemembers and veterans, including
"We get to dispel some myths for them," Davis said. "We get to give them ammunition to take to the seller or to the listing agent that says, 'we don't want to sell to a veteran because it might be difficult.'"
The credit union just rolled out a website, Preparing for a Military PCS, and it is available to both members and nonmembers as a source of information.
When the loan officer talks to a military family that is affected by the PCS, a starting point is finding out what their new housing allowance is going to be. This has an impact on affordability. This question then extends into whether it is going to be best for the family to rent or purchase.
Expected time at the new assignment is important in that decision; if the PCS is going to be shorter-term, Davis said, such as one year or so for training, it would be the better option to rent.
But it is not just the real estate agents and sellers that need some education in this situation.
The advantages of the VA program
"One of the things that we want to talk to our servicemembers and make sure that they understand is the benefits of a VA loan if they're looking to buy," Davis said.
The biggest advantage is the ability to use the benefit multiple times. "This is important for real estate agents to understand; obviously, this is important for our servicemembers and for our veterans to understand," Davis said.
When a military family needs to relocate, they can sell their current house, pay off the existing VA mortgage and then use the entitlement again when they purchase the next property, Silver Fin's Perlman pointed out.
Many are mistakenly saving their eligibility for when they retire, largely on the belief the benefit can only be used once. Navy Federal once did a survey and half of the active duty respondents were not aware that they could use their benefit multiple times, Davis said.
Meanwhile the VA loan also provides 100% financing, lower closing costs and lower interest rates than a conventional mortgage. It is also
Even though those are lower than on a conventional mortgage, the VA does not set closing costs, Davis pointed out.
Another advantage is the
However, it is important for real estate agents to make certain their clients are working with an originator for which the VA product is their niche, he said.
What other loans are available for PCS servicemembers?
Some PCSing families have different needs and have to look at other product options.
For example, if the servicemember is planning to retire from the military and does not have a civilian job lined up, going from full pay to retirement salary means a cut in income. Their new earnings might not be enough for them to qualify for a VA mortgage. Other programs, such as the Federal Housing Administration, can help them acquire a home, Davis noted.
If the servicemember is likely to be moving again in a short period, they might want to take
Another pair of programs that offer no down payment options are Military Choice and Homebuyers Choice. The former, Davis said, is a conventional loan specifically for current service members, which "I like to say, mirrors the VA loan. There's some additional and unique terms that come with it."
It includes an option for borrowers to reduce their interest rate to the market rate for a fee. The opportunity can be exercised multiple times over the life of the loan, Davis said. This is also available on Homebuyers Choice.
If the loan amount exceeds VA limits, Navy Federal has jumbo mortgages on its menu as well.
Perlman is a specialist in VA lending, and of the 60 wholesalers Silver Fin works with, 30 of them do this product.
Coming from a military family, Perlman brings a certain perspective to the needs of PCS-ing servicemembers.
When it comes to income, some have
Another positive is that "the veteran's spouse income is eligible for income qualification as well," Perlman said. "If the spouse has a job, whether it's hourly salary, even self-employed income, that is applicable and would come into play as a factor to help qualify."
VA underwriting also allows for a higher debt-to-income ratio, at 60%, rather than the near-50% for most conventional financing, Perlman added.
Experience in this area is key to aiding these families during the process.
"I can assist with giving them some leverage in terms of market knowledge and guidance," Perlman said. "If they tell me where they potentially want to move, I can do research, I can put them in touch with a local market expert, like a real estate agent who knows that area."
Davis added "if you're a servicemember, I think it's that much more important to work with a real estate agent that understands the needs of a servicemember and a servicemember's family."
Questions for loan officers to ask
In working with a PCS family, Perlman suggested asking the following questions:
- What is your report no later than date?
- Are you moving alone or with family?
- Do you have your PCS orders yet?
- Are you planning to buy or rent in the next duty station?
"That'll give me some good barometer as to how to direct you properly," Perlman said.Families also need to organize their budget, look at where they are heading to and what they can afford in that area, Davis said. Plus, make your housing choices based on your expected length of stay.
Most importantly, get educated on the home purchase process.
"I don't care if you bought five homes before, go get reeducated," Davis said. "If you've never bought a home before, if you're a first time home buyer, get educated on the process."
Even providing these families emotional support is part of the job description, said Perlman, whose father was a Marine.
"The reality is, in my world, it won't help me for my career, but if it helps the veteran, I would rather not make money and put them in a better place, because I care very much about my veterans," Perlman said. "They're the most precious population that we have for our country, they're the reason that we are who we are right now."
