Basic Allowance for Housing

by Levi Newman on June 30, 2010

As a reliable source of income, Basic Allowance for Housing (BAH) puts money in the pockets of veterans to help them afford housing. BAH payments are based on duty location, pay grade and dependency status.

When the government doesn’t provide housing to military personnel, it distributes BAH in amounts comparable to civilians’ cost of living in that area. By investigating local housing markets with the help of phone interviews, real estate agents and rental listings, the government computes median housing costs.

Consequently, a service member might need to make up for some costs. Should median housing costs for an area ($1,600/month) exceed housing costs for an individual ($1,200/month), he or she is responsible for paying the difference ($400). But if median housing cost ($1,000/month) is lower than the service member’s housing expenses ($1,200/month), then he or she lands some extra cash.

Of course, those who live in more expensive housing markets can expect higher BAH. In any market, veterans and service members can combine BAH with a VA loan to finally buy the house they’ve always wanted.

Though BAH income may not cover an entire monthly mortgage payment, it makes for a more favorable debt-to-income ratio. Even when getting a borrower-friendly VA loan, lenders use this ratio in the underwriting process. Verifiable income like BAH certainly swings the ratio in your favor.

There’s a chance that BAH rates change annually. However, service members subject to a decrease in BAH income fall under safeguards to prevent such decreases.

Photo thanks to Crartist under creative common license on Flickr.

Leave a Comment

Previous post:

Next post: