Do My Military Allowances Count As Income for a VA Home Loan?
Military members who apply for a VA loan must submit their income sources–their military pay and allowances, plus any additional income from part-time jobs or other employment. All of this is subject to verification by the lender, which is required by the Department of Veterans Affairs.
VA home loan rules say only regular, dependable income to be included in the VA loan application for purposes including debt-to-income ratio calculation. Regular military pay, also known as base pay, is part of that equation as are many of the allowances listed on the military borrower’s Leave And Earnings Statement.
There are a variety of allowances, bonuses and other income that qualify as “stable and dependable” income. BAS and BAH are two of the most common. BAS is the military’s acronym for a “subsistence allowance”–food money–provided to military members based on their circumstances.
BAH is a military housing allowance and is paid to anyone living off base or off-post (if they are authorized to do so). These two allowances are not taxable, but do contribute to the VA loan applicant’s paycheck and the VA allows them to be included as income once verified.
There is also a military clothing allowance, paid annually. The VA rules allow this payment to be included since it is regular, even though it’s not paid on a monthly basis. The lender adds the clothing allowance to a borrower’s monthly debt-to-income ratio by dividing the total by 12 and adding the sum to the monthly verifiable income amount.
Special pay is also allowed under certain circumstances. A military pilot getting flight pay can list that as income, but it too must be verified by the lender.
The same is true of hazardous duty pay and other special allowances. In some cases special pay is circumstantial and stops after the qualifying circumstances are over. Troops deployed to a war zone may get hazardous duty pay only to have it cease once the deployment ends.
The reason the VA requires such allowances to be verified is to insure the pay will continue and is not a temporary benefit. According to VA rules, “To consider a military allowance in the underwriting analysis, obtain verification of the type and amount of the military allowance, and how long the applicant has received it….all of these are subject to periodic review and/or testing of the recipient to determine continued eligibility.”