Optimizing Basic Allowance for Housing
Posted by Dylan Taft on Wednesday, July 28th, 2010 at 8:05am.
Each month, the government issues a stipend to active duty
military personnel stationed in the United States to alleviate the cost of
housing. This stipend is known as Basic Allowance for Housing, or BAH, and is
dictated by a service member's rank, geography, and number of dependents.
How Does the Government Determine BAH?
The greatest determinate of Basic Allowance for Housing is location. The government carefully reviews data sources and rental listings, and even interviews real estate agents to calculate the proper Basic Allowance of Housing for service members. The government's releases BAH rates once a year, usually in January, and even if a service member who is currently receiving BAH notices that their rank's BAH has decreased, their current stipend will not.
To put it in perspective, an entry level (E01) service member with dependents will most likely have a Basic Allowance for Housing that ranges from $800-$1500 a month, however, BAH for these individuals may be as low as $700 and as high as $2,700. Officers and Warrant Officers monthly BAH are usually higher with a low ranking Warrant Officer with dependents (W01) receiving between $1,200-$1,800 a month on average.
Can BAH Be Used for a Mortgage Payment?
A service member's Basic Allowance for Housing can never decrease which helps lenders calculate an affordable monthly mortgage payment, and assures them that the borrower will have a consistent income for the monthly mortgage payment. With an assured income and the insurance provided by the Department of Veteran Affairs for part of each VA loan, lenders are more likely to approve potential borrowers.
If a service member knows that he or she is going to be stationed in a certain location for an elongated period of time, he or she should consider using their Basic Allowance for Housing to purchase a home. A BAH stipend, in conjunction with a VA home loan, can help a service member achieve homeownership while providing some of the most competitive benefits available to borrowers such as zero down payment, competitive mortgage rates, and limited closing costs.
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