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BAH and VA Loans

Basic Allowance for Housing, or BAH, is a tool that can help VA lenders gauge what kind of mortgage payment an eligible veteran can handle.

Published on January 11, 2021

Basic Allowance for Housing (BAH) helps pad housing costs when living off base. Those eligible to receive BAH are service members with dependents or those without access to government-provided housing.

Service members receive this monthly allowance to cover housing expenses based on their rank, dependent status, and geography. This benefit helps service members keep up with the unique costs of civilian rentals in changing real estate markets.

BAH also counts as effective income towards your VA loan.

How BAH Works

Because of the link between rates and cost of living, service members who live in costlier areas will typically have higher housing allowances.

If housing prices exceed the allowance, the service member would need to pay the difference out of pocket.

For example, let's take a service member who lives in a two-bedroom apartment and pays $1,000 per month in rent and utilities. If the local median cost for that type of residence is $1,200 per month, the service member must cover that $200 gap. On the other hand, if the median rent is $900, the service member can dedicate that extra $100 to additional needs, such as utilities.

Service members near bases can run into issues because landlords can look up the BAH rate, then set their rental rate (property "quality" allowing for adjustments there). BAH rates can fluctuate each year, but there are protections to help safeguard service members subject to a decrease.

Calculating BAH

The government calculates the median housing costs by looking at a host of data sources, including residential vacancies, rental listings, telephone interviews, and real estate agents. This information is gathered once a year, covering a local area's apartments, townhouses, and single-family rental units.

It is important to note that a service member's duty location, and not his or her residence location, is used as the basis for BAH.

The Department of Defense has an easy-to-use BAH rate query that allows service members to determine their allowance by inputting their rank and Zip code.

BAH and Home Ownership

Basic Allowance for Housing funds can help service members achieve the dream of homeownership. BAH may not cover an entire mortgage payment. Still, it's verifiable and typically reliable income that can be used to calculate a prospective borrower's debt-to-income ratio, a critical factor in loan underwriting.

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