Military Housing Allowances As Verifiable Income for a VA Home Loan

VA loan rules about verifiable income can be a bit confusing–especially if you’re new to the VA loan program.

One reader asks, “I am a bit confused with your reply to (a previous reader question) about BAH from Post 911 counting as income for a VA loan with USAA. You stated that the BAH is not income that can be used to qualify for a VA loan. The confusion for me is that the article clearly states it can be counted. Are you referring to just the BAH that is from the Post 911 GI Bill, not the active duty BAH pay, or to both of these BAH allotments? Can you please clarify?”

There is one important difference between the BAH a military member gets while on active duty and the kind received when attending school on the Post 9/11 GI Bill.

BAH–also known as the Basic Allowance for Housing or military housing allowance–is an ongoing payment active duty military members get when living off base or off post at home or abroad. When serving on active duty, BAH payments are considered stable and reliable income for the purposes of a VA home loan provided the BAH isn’t likely to end soon because of separation or retirement from the military.

For the active duty military VA loan applicant, BAH may be considered by the lender if it is verified as likely to continue based on that criteria and other applicable guidelines. But for those receiving the Post 9/11 GI Bill, the rules are different. BAH in those cases is paid only while school is in session and would not meet the requirements for being “likely to continue”. When summer break occurs, for example, the BAH would stop.

And there’s an expiration for these BAH payments–the borrower only has a specific number of months he or she is eligible for BAH under the GI bill. While a lender MIGHT be able to consider these BAH payments as a compensating factor to offset debts 10-24 months into the VA home loan in some cases (this would be circumstantial, at the lender’s discretion, and may not even be possible depending on circumstances) it cannot be counted directly as income since it’s not “likely to continue’ as part of GI Bill benefits.

So the answer to the reader’s question: BAH as part of active duty military pay and benefits is verifiable provided it meets certain criteria, while the Post 9/11 GI Bill BAH would not qualify as verifiable income because it will not continue–it stops and starts depending on the school schedule and eventually runs out based on the rules of the GI Bill program.

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