How Your Basic Allowance for Housing (BAH) Can Boost Your VA Loan

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The Basic Allowance for Housing (BAH) is already familiar if you’re in the military. But did you know it can be a powerful financial ally when teamed with a VA Home Loan? Not only does the BAH impact your standard of living, but more often than not, it’s the cornerstone for your house-hunting budget. 

Because BAH is not calculated by your expenses and, instead, is based on the cost of housing in a specific area, understanding the full impact of your BAH and budgeting accordingly will allow you to fulfill your financial goals. 

Let’s look at some frequently asked questions for a clearer insight into the BAH and how to use it to your best advantage.

What is BAH?

According to the Department of Defense, BAH is an allowance to offset the cost of housing when you do not receive government-provided quarters. Your BAH depends upon your location, pay grade, and whether you have dependents. BAH rates are set by surveying the cost of rental properties in each geographic location. Therefore, BAH rates in high-cost areas will be much greater than in low-cost areas. The Defense Travel Management Office (DTMO) handles BAH for the DoD.

How often do BAH rates increase?

BAH rates increase annually. The Department of Defense released the BAH rates for 2023, which received an average increase of 12.1%, resulting in the largest raise in more than a decade. These increases are automatic, so you don’t have to do anything to receive them. 

Does BAH cover all of my housing expenses?

Not quite. BAH was never meant to cover 100% of your housing expenses. But it does cover 95%. Military members will have to pay the remaining 5% out of pocket. And this is where budgeting becomes critical. If you live in a relatively low-cost area of the country, that 5% coming out of your paycheck won’t have the same impact as the hundreds of dollars that could fly out if you live in a high-cost location.

Does my BAH remain the same when I PCS from one state to another?

No, because BAH fluctuates, military families must deal with new budgets each time they move from one duty station to another. From food and housing to gas and utilities, these living expenses can swing widely depending on where you relocate. For instance, if you currently own a home in Hawaii and then receive orders to a PCS in Georgia, you’ll see that your BAH will now reflect the cost of living in that Southern state, which is far different from Hawaii. But, of course, some moves are more linear, and you won’t notice much of a change in your BAH (an increase of a hundred dollars or so) if you PCS from Cheyenne, Wyoming to Louisville, Kentucky, for instance. Typically, the amount of BAH you receive depends on your location, pay grade, and whether you have dependents. 


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What happens to my BAH when my kids leave home?

If you can no longer claim your children as dependents, then you receive a reduced BAH.

If my military spouse and I are both eligible for BAH and have children, do we get the “with dependent” rate?

Sorry, but no. One spouse will receive the higher “with dependent” rate, and the other will receive the lower “without dependent” rate. Ultimately both will still get BAH.

Are all active-duty servicemembers eligible for BAH?

No. The military doesn’t have a finite amount of housing available on its bases. If there’s no on-base housing available, then servicemembers can live off-base and thus receive BAH. According to the DTMO, a member assigned to permanent duty within the 50 United States, who is not furnished government housing, is eligible for BAH based on the member’s rank, dependency status, and permanent duty station zip code.

Note that new servicemembers attending basic training will receive BAH only if they have dependents. And the BAH rate is determined by the dependent’s location, not where the new servicemember is training or attending a technical school. 

Does it make more sense to buy or rent using my BAH?

That’s a highly personal choice, and there’s no set answer for everyone. Making this decision is where your budget comes into play once again. However, the DoD bases BAH on the rental housing cost data (including utilities), not the home purchase market. But the BAH is yours to spend any way you choose. Keep in mind, though, that you should consider more than rent or a mortgage payment when budgeting your BAH. Don’t forget to add utilities, renters or homeowners insurance, and property taxes. Neglect those, and not only will you have to pay for them out of pocket, but you’re now potentially spending more than you earn, and that’s a fast track to financial woes. 

How can I use my BAH to purchase a home?

Your BAH can boost your home buying power when adding it to your loan application as an additional income source when applying for a VA Home Loan. At Aligned Mortgage, our loan officers are familiar with BAH and can answer your questions on proceeding with a VA Home Loan application that includes your Basic Allowance for Housing.

I’m PCSing overseas; does my BAH follow me?

No. BAH is not available overseas. The Overseas Housing Allowance (OHA) replaces the BAH.

Final thought

Your BAH can make it possible for you to buy more house or even cover your entire rent in some instances, but it was never meant to be your final budget. It’s up to you to determine how to make your BAH work to meet your financial goals.

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