Using Military Basic Allowance for Housing (BAH) for Mortgage Payments
Philadelphia Mortgage Brokers
Philadelphia Mortgage Brokers Pennsylvania
Published on April 2, 2024

Using Military Basic Allowance for Housing (BAH) for Mortgage Payments

The Basic Allowance for Housing (BAH) is a military entitlement provided to service members to for “equitable housing compensation based on housing costs in local civilian housing markets within the 50 U.S. states.” The allowance reflects the costs associated with household rental and updates the amount annually. A service member who lives on base will have their full BAH applied to the military base. Alternatively, they can choose to apply their BAH benefits toward the cost of renting or even owning a home.

Do I have to keep my living expenses within the BAH amount?

No! You can have rent or a mortgage that has a higher cost than your BAH. That is totally up to you. In fact, in many areas a monthly mortgage will inevitably cost more than your BAH particularly when you consider property taxes and other costs associated with owning a home.

Why buy a house instead of living on base or renting if it costs more than my BAH?

Owning a home is an investment. Putting your BAH funds toward the cost of a home provides you the opportunity to see a return on those funds rather than putting the towards a rental or base housing that would not eventually belong to you.

In addition to having funds available to pay your monthly mortgage through BAH, eligible service members are able to secure VA mortgages with no down payment and they can finance their closing costs into their mortgage. This makes buying a home even more accessible.

Here are some key points about the Basic Allowance for Housing (BAH):

  1. Purpose: The primary purpose of the BAH is to ensure that service members can afford suitable housing for themselves and their families, especially when they are stationed in areas where the cost of living is high.
  2. Calculation: The BAH is calculated based on several factors, including the service member’s pay grade, location (determined by zip code), and whether they have dependents. The Department of Defense conducts regular surveys to determine the median rental costs in each area, which are used to establish BAH rates.
  3. Dependents: Service members with dependents (spouse and/or children) typically receive a higher BAH rate compared to those without dependents. This is to accommodate larger housing needs.
  4. Non-Taxable: The BAH is not considered taxable income, which means it is not subject to federal income tax. However, it may be subject to state income tax in some cases.
  5. Use of Funds: Recipients of the BAH are expected to use the allowance to cover housing-related expenses, such as rent or mortgage payments, utilities, and renter’s insurance.
  6. Differences in Rates: BAH rates vary widely depending on the geographic location of the military installation. Rates are adjusted annually to reflect changes in housing costs.
  7. Housing Types: The BAH can be used for various types of housing, including rental properties, off-base housing, or purchasing a home. However, the amount of the allowance is based on the median rental costs for the area, regardless of the service member’s housing arrangements.

Benefit for Dual-Military Couples: In cases where both spouses are service members and are not stationed together, each member may be eligible for a separate BAH based on their individual pay grades and locations

If you have questions about VA loans, using BAH benefits, or homebuying in general, we’re here to help! Give us a call to see how to put your benefits to work for you.

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