Last updated: October 2025
Quick Answer
You can use your Basic Allowance for Housing (BAH) as qualifying income when applying for a VA loan. Because BAH is consistent, non-taxable, and based on your duty location and rank, it increases your gross income and reduces your debt-to-income ratio.
Lenders like Salute Mortgage include your BAH in full when calculating your maximum home purchase power—helping you qualify for more home with zero down payment.
Start your VA loan pre-approval using BAH now.
What is BAH?
Basic Allowance for Housing (BAH) is a non-taxable monthly payment provided to eligible active-duty service members to cover the cost of housing near their duty station.
The amount is determined by zip code, pay grade, and dependency status.
Service members can estimate their specific BAH amount using the official Department of Defense BAH Rate Lookup calculator.
Unlike most conventional mortgages that rely solely on taxable income, VA loans let you count non-taxable allowances like BAH and BAS (Basic Allowance for Subsistence) toward your total qualifying income.
Why does BAH matter in a VA mortgage application?
- BAH adds thousands to your qualifying income
- You don’t pay taxes on it, so your effective income is even higher
- It’s included in your LES and accepted by VA underwriters
- It makes homeownership more accessible in high-cost military markets
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How lenders calculate income using your LES and BAH
When applying for a VA loan, your lender will request your most recent Leave and Earnings Statement (LES). This document outlines all sources of your military compensation and verifies your current duty status and end-of-service date.
Salute Mortgage uses your LES to capture and calculate:
- Base pay
- Basic Allowance for Housing (BAH)
- Basic Allowance for Subsistence (BAS)
- COLA or other location-based allowances (if applicable)
These amounts are totaled to form your gross monthly income. Because BAH is consistent and non-taxable, it’s viewed as stable income and can push your eligibility to a higher loan bracket compared to civilians with similar take-home pay.
The effect of BAH on the debt-to-income ratio (DTI)
Your DTI ratio is a key factor in VA loan approval. The DTI ratio compares your monthly debts to your gross monthly income. A lower DTI means more room in your budget for a mortgage.
How BAH helps:
- Increases the total income used in the DTI formula
- Not offset by taxes, which improves affordability
- Reduces the likelihood of a DTI rejection, even in higher-priced areas
Example: A borrower earning $3,000 base pay and $2,200 in BAH has $5,200 in total qualifying income. If they have $600 in monthly debts, their DTI is just 11.5%, which easily meets VA guidelines.
Residual income and why it matters more than DTI
The VA adds a second filter beyond DTI: residual income. This is the amount left after you pay monthly expenses like housing, taxes, insurance, and recurring debts.
Each VA loan must meet a minimum residual income standard based on your region and family size. BAH helps here, too, because:
- More income = more residual left over
- The VA gives credit for non-taxable income, which means your take-home pay goes further
- It supports higher purchase prices, especially in expensive military zip codes
Salute Mortgage calculates your residual income during pre-approval so you know exactly how much home you can afford.
How much more can you qualify for using BAH
The additional buying power from BAH depends on your rank, location, and dependents. In many cases, it can boost your home eligibility by $50,000–$100,000 or more.
Example 1: E-4 in Killeen, TX (Fort Cavazos)
- Base pay: $3,027
- BAH (w/ dependents): $1,620/month
- Total income: $4,647/month
- Estimated loan eligibility: $308,000–$352,000
Example 2: E-6 in San Diego, CA
- Base pay: $3,132/month
- BAH: $3,150/month
- Total income: $6,850/month
- Estimated loan eligibility: $475,000–$525,000
Note: These estimates assume minimal consumer debt and full VA entitlement.
Why Salute Mortgage uses full income analysis (not quick pre-quals)
Many online lenders offer “pre-qualifications” that rely on self-reported income and skip non-taxable allowances, such as BAH. This leads to underestimation and weaker offers.
Salute Mortgage provides full underwritten pre-approvals based on:
- Verified LES and current pay status
- Accurate BAH and BAS by zip code
- Current duty station and projected PCS dates
- Updated residual income calculations per VA guidelines
With this approach, your offer is stronger, and your approval is more predictable, even if you’re shopping from across the country.
How BAH works near military bases and in high-cost areas
In military-heavy markets, like San Diego, Norfolk, Fayetteville, or Colorado Springs, rents can rival mortgage payments. BAH is adjusted for these areas to make housing more accessible.
With a full BAH-based loan calculation:
- You can buy instead of renting in high-cost zip codes
- You can retain BAH even if you’re living off base
- You can use the allowance to build equity instead of paying landlords
These areas often feature new construction and older resale homes. With a VA loan, you can use your BAH to qualify for either, with no private mortgage insurance (PMI) and no down payment.
How to handle BAH changes during the process
If your BAH is scheduled to change due to PCS orders, your lender can often use your projected BAH at the new duty station.
What you’ll need:
- A copy of your official PCS orders
- Your updated duty location zip code
- Any changes to your rank or dependents that affect BAH
If your BAH decreases post-closing, you are still responsible for the full mortgage. Always review your housing budget with your lender based on your new location.
Can BAH help you avoid paying rent?
Absolutely. BAH is designed to help service members secure stable housing. By using your BAH strategically, you can:
- Buy a home near your base
- Lock in a fixed monthly payment
- Build equity with every payment
- Eliminate rent increases and base housing waitlists
Many service members are surprised to learn they can qualify to buy a home for less than their current rent, just by including their BAH in the pre-approval.
Use your full benefit to buy with confidence
Your Basic Allowance for Housing isn’t just for rent. With a VA loan, it’s a major qualifying asset that can help you buy the right home in the right location, without needing perfect credit or a large down payment.
Salute Mortgage helps military borrowers like you turn BAH into real buying power by analyzing your full income —quickly and accurately, with attention to PCS realities —to calculate your eligibility.
Start your VA loan pre-approval using BAH now.
FAQ: BAH and VA loans
A: Yes. BAH is considered qualifying income and can be included in your mortgage application when determining how much home you can afford.
A: Absolutely. Because BAH increases your total monthly income without increasing your taxes, it improves both your DTI and residual income metrics. This often results in higher loan approval amounts.
A: In most cases, yes. If you have official PCS orders, your lender can use the BAH rate for your new zip code when calculating your eligibility—even if you haven’t reported yet.
