All About The Basic Allowance for Housing and VA Loans

Legal Adviser December 22, 2017
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American soldier with family standing outside home

American soldier with family standing outside homeAs an active military member, you probably know that you are eligible for BAH or basic allowance for housing. Your BAH could aid lenders in gauging the amount mortgage payment you could comfortably afford. Service members are given a monthly allowance for covering housing costs according to their rank, geography, and dependent status. This allowance helps them in keeping up with the distinct expenses of civilian rentals in various volatile real estate markets.

How The Basic Allowance for Housing Work

Due to the link between real estate prices and rates, military members who reside in more expensive areas would typically be given higher basic housing allowances. Do note however that BAH payments could only be utilized for defraying monthly mortgage payments, but those mortgage payments aren’t exactly part of the BAH calculation. Currently, BAH also enables veterans to reside in civilian rental housing.

Depending on your exact location, however, you might need to cover some of your housing costs. For instance, let’s say that you currently live in a three-bedroom apartment and you pay $1,500, using your BAH, every month for utilities and rent. But if the median local rent price for that particular residence type is about $1,700 every month, you’ll need to pay for the extra $200 out-of-pocket. If the local median price is $1,300 however, you could use the extra $200 for something else.

In general, the federal government calculates median housing prices by taking into account various data sources such as rental listings, residential vacancies, real estate agencies, as well as telephone interviews. The government gathers this information annually, and it covers single-family rentals, townhouses, and apartments in various local areas. BAH rates differ from one year to the next; there are however safeguards in place to help protect military members that are subject to a potential decrease of their BAH.

The Bottom Line

Aside from helping you out with rental costs, the funds that you could get from your BAH could also help you achieve your dream of becoming a homeowner. While it won’t be enough to cover your entire monthly mortgage payment, it is considered a reliable and verifiable income that lenders could use for determining your eligibility for VA loans, explains a mortgage specialist from Top Flite Financial, Inc. in Missouri. To learn more about your eligibility for VA loans, talk to an experienced VA loan lender.


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