A key portion and benefit of the military pay includes BAH. Otherwise known as Basic Allowance for Housing, it provides an income tax free pay. The purpose of this income is what the name says – allowance to cover the customary housing expense for a certain geographic area. Although, BAH rates are not the same for every service member. Actually, BAH varies based on rank, with or without dependents, and geography.
Factors That Increase BAH Rates
- Higher rank = Higher BAH
- Spouse / dependents = Higher BAH
- Assigned to higher cost areas = Higher BAH
BAH Rate Calculator
When changing duty stations, one of the key things service members want to know is how much will my pay be? As mentioned above, the housing allowance rate does vary based on housing costs in the military base market. Plus if buying a new home, it is important to know the new BAH rates that will be used to qualify for a VA loan.
How Does BAH Help Me Qualify for a VA Loan
When it comes to any home loan qualification, income is a key factor. Military pay includes both taxable and nontaxable income. The main taxable portion is the “base income” and other potential sources. Then, the two main nontaxable income sources are BAS (rations) and BAH (housing). When it comes to VA or other loan types, these sources may be counted towards borrower qualification. Additionally, since this is nontaxable income it may be grossed up to a higher amount. For VA loans, nontaxable income may be grossed up 25%. For easy numbers, it means that $1000 in nontaxed income would be counted as $1,250! That means easier qualification for a mortgage loan.
Actually, did you know that pastoral housing allowance is treated the same way? Yes, it may be grossed up as well!