The Basic Allowance for Housing (BAH) is a military benefit that comes in handy when applying for an FHA or VA home loan. It is based on pay grade, geographic duty location and dependency status. It helps the lender to judge a veteran's ability to pay down the mortgage. The main aim of BAH is to provide identical and equitable housing compensation based on housing costs in local civilian housing markets. This allowance is payable when government quarters are not provided to the servicemen.
Features of Basic Allowance for Housing (BAH):
- BAH is calculated on local rents.
- While calculating BAH, mortgage is not taken into consideration.
- You may offset some or all of your monthly mortgage payments using BAH, but it's not planned to do so.
In the year 2010, BAH has some additional features. If a veteran has moved to a new zip code where BAH is lower compared to his previous location, he or she will get a BAH rate protection. This rate protection will help the veteran to receive the old higher amount.
However, there are certain exceptions in receiving the old higher amount. Let's take a look:
- Permanent change of station - If a veteran is permanently transferred to a new area with a lower BAH for that zip code, then that person will start receiving a lower amount as allowance. This won't be a problem for them as BAH is tied to the housing market.
- Changes in dependency status - The BAH rate will change as per your dependency status. If you are single, then you will receive the BAH as per the rate given in that zip code. However, if you get married then the rates will change. Your new BAH will be the current amount per month at the "with dependents" rate.
- Promotion - With a promotion, your BAH will also change. Your new BAH will be the current amount in that zip code assigned for your new rank.
- Demotion - If a person, entitled for BAH, gets demoted for any reason, BAH will also change. It will become the current amount authorized for that rank and zip code.