The holidays are over, and PCS season is approaching. Learn how to reset your finances and prepare for a mortgage in the 2026 market. Focus on credit health, debt-to-income ratios, and maximizing your VA loan benefits.
The New Year Mortgage Mindset
The holiday season often leaves even the most disciplined military families with a “financial hangover.” Between travel, gifts, and hosting, your bank statements might look a little different than they did in October. However, with 2026 expected to be a year of market stabilization, now is the perfect time for a reset.
If you are planning a Permanent Change of Station (PCS) move this spring or summer, you must start your mortgage preparation today. According to the Mortgage Bankers Association (MBA), 2026 is seeing a more balanced inventory, but lenders remain diligent with their credit requirements. Getting mortgage-ready requires a clear strategy and a focused look at your financial health.
1. Master Your Credit Score
Your credit score is the most significant factor in determining your mortgage interest rate. Even a slight increase in your score can save you thousands of dollars over the life of your loan.
- Check Your Reports: Download your free credit reports from the three major bureaus. Look for errors or outdated information.
- Pay Down Holiday Balances: High credit card utilization can temporarily lower your score. Aim to keep your balances below 30% of your available limit.
- Avoid New Debt: Do not open new credit cards or take out auto loans while preparing to buy a home. New “hard inquiries” can ding your score and complicate your application.
2. Optimize Your Debt-to-Income (DTI) Ratio
Lenders look closely at your Debt-to-Income ratio. This is the percentage of your gross monthly income that goes toward paying debts. While VA loans are famously flexible, having a lower DTI makes your file much stronger.
According to research from Fannie Mae, the “sweet spot” for many conventional and VA-backed lenders is a DTI of 43% or lower. To improve your ratio, focus on paying off small recurring debts, like furniture store payments or personal loans. This increases your monthly cash flow and your total borrowing power.
3. Leverage Your 2026 BAH Rates
Every January, the Department of Defense updates Basic Allowance for Housing (BAH) rates. In many 2026 military hubs, rates have adjusted to reflect local market shifts.
As a military homebuyer, you should treat your BAH as your primary mortgage-paying tool. Calculate your 2026 BAH and see how it aligns with current home prices in your next duty station. Remember, your BAH is tax-exempt income. Lenders often “gross up” this income, which can actually help you qualify for a higher loan amount than a civilian with the same base pay.
4. Organize Your Paperwork Early
The mortgage process moves fast once you find the right home. Military members have a few extra requirements that can cause delays if you aren’t prepared.
- Update Your COE: Ensure your Certificate of Eligibility (COE) is current. This document proves to the lender that you are eligible for the VA home loan benefit.
- Gather Your LES: Collect your last three months of Leave and Earnings Statements (LES).
- Verify Service Records: If you are transitioning out of the military or are in the Reserves, have your DD-214 or points statement ready.
The Bottom Line for 2026
The 2026 real estate market offers more opportunities for military families than we have seen in years. With interest rates stabilizing in the low 6% range, the dream of homeownership is within reach. By resetting your finances now, you put yourself in the best position to secure a home when your orders arrive.
Take a look at your bank statements this week. Make a plan to pay down holiday debt. Most importantly, speak with a VA-specialist lender early. Preparation is the key to a stress-free PCS move.
