Using BAH With Your VA Home Loan

Your Basic Allowance For Housing (BAH) is a powerful benefit because it can be used towards your monthly VA mortgage payments. BAH is the monthly allowance paid to service members when government housing is not available. The benefit varies by your pay grade, time in service, location, and status, so it is important to verify your amount with the DoD. If you decide to spend less than your eligible rate, you can use the difference for other expenses. Conversely, if your monthly mortgage payment is more than your BAH allowance, you will have to pay the difference. Either way, this benefit can allow you to purchase a home and build personal wealth. 

VA Home Loans & BAH | After you have verified your BAH allowance, you can use it as effective income toward qualifying for a VA home mortgage loan. Your BAH allowance could cover most of your monthly mortgage payment. So, if you are receiving BAH and are interested in homeownership, it is an incredible opportunity. 

BAH For Housing | The Department of Defense (DoD) calculates BAH rates on an annual basis. They look at rental, utility, and insurance costs to determine the BAH allowance for a specific metro area. Remember that your BAH is based on the service member’s location, not the location of the residence (they may be in different BAH areas). BAH rates are subject to change each year, but the DoD has instituted rate protection that prevents your BAH from going down during that duty station assignment. Other caveats include pay grade reductions or changes in dependent status. Most mortgage lenders will use your Leave and Earnings Statement (LES) to verify your BAH. 

BAH & Your Home Purchase | Since your BAH counts as income and is non-taxable, VA lenders ‘gross-up’ this income to create a pre-tax (gross) figure for calculating your debt-to-income ratio (DTI). When lenders figure out how much home you can afford, ask for them to run the numbers using monthly payments of your current BAH allowance alone, and also BAH plus a monthly amount that you may be willing to add to the investment. If you are willing to add funds over your BAH allowance, the price of a home that you can afford goes up as well. It is important to consider the very real possibility that you will be moving in a few years. Do you want to sell when the time comes to PCS, or do you want to retain your investment and rent out your home. This is a big decision to make. Another consideration is if you will be retiring soon, your BAH is different from the monthly housing allowance provided to veterans with the Post-9/11 GI Bill education benefits. Lenders will not count those benefits toward your income and buying power toward your home mortgage. 

Our Military Relocation Specialists can speak to these issues and assist you in making decisions during the home buying or selling process. And, if you decide to keep your home as a rental property, we can connect you with outstanding property management professionals to protect your investment. Our services are currently limited to the Hampton Roads, Southeastern Virginia, and Northeastern North Carolina region of the United States.