2010 BAH Rate Protection
April 7, 2010
The Basic Allowance for Housing, or BAH for short, is a military benefit that comes in handy when applying for an FHA loan or VA home loan because it provides the lender with an easy-to-measure proof of a veteran's ability to pay a mortgage. While BAH isn't specifically designed to help military members pay a mortgage, it is an important military benefit for anyone considering taking an FHA or VA loan on that first home.
BAH is tied to the state of the local rental market in the applicable zip code. If the local housing market is expensive, BAH tends to run higher than in areas where rents are lower.
In 2010, BAH also has a few additional features to contemplate when factoring in the Basic Allowance for Housing into your home buying budget.
BAH PROTECTION
If you moved into a new zip code and receive $750 per month in BAH for 2009, but there's a BAH decrease to $650 the following year, something called BAH rate protection prevents you from taking a cut in your 2010 housing allowance. As long as you are still eligible to receive BAH at the "old" higher amount, BAH rate protection keeps your BAH at the amount you started with. In our example, you would keep your $750 per month in BAH unless you fit one of the following exceptions.
PERMANENT CHANGE OF STATION MOVE TO A DIFFERENT LOCATION
If you are reassigned to a new area with a lower BAH for that zip code, you will begin receiving that amount per month in BAH. This isn't a problem for renters because the new BAH is tied to the housing market. Those who purchased homes with FHA loans or VA mortgages and didn't sell prior to the PCS move will have to content with the lower BAH rate when budgeting for their mortgage payments and rent in the new location.
Many people avoid this by selling the property before a PCS move, but a homeowner who decides to hang on to the home should anticipate changes to their BAH when making long-term financial plans.
CHANGES IN DEPENDENCY STATUS
If you were single when you started BAH in a given zip code, but get married, your new BAH rate will be the current amount per month at the "with dependents" rate. If you were married but got divorced, your new BAH is the current amount authorized in your zip code "without dependents. In most cases, your BAH rate does not change until your marriage or divorce is legal and official. Check with your finance office to learn the rules and procedures for changing your marital status.
DEMOTION
If a military member gets demoted for any reason, BAH changes to the current amount authorized for that rank and zip code.
PROMOTION
If you get promoted, your new BAH is the current amount in that zip code for your new rank. You won't get "protected" BAH at the higher rank.
Remember, BAH is calculated on local rents. Mortgage amounts are not used to compute Basic Allowance for Housing. You may be able to offset some or all of your monthly mortgage payments using BAH, but it's not designed to do so. Make your financial plans carefully when factoring in BAH as a contributing source of income for your house payment.
BAH is tied to the state of the local rental market in the applicable zip code. If the local housing market is expensive, BAH tends to run higher than in areas where rents are lower.
In 2010, BAH also has a few additional features to contemplate when factoring in the Basic Allowance for Housing into your home buying budget.
BAH PROTECTION
If you moved into a new zip code and receive $750 per month in BAH for 2009, but there's a BAH decrease to $650 the following year, something called BAH rate protection prevents you from taking a cut in your 2010 housing allowance. As long as you are still eligible to receive BAH at the "old" higher amount, BAH rate protection keeps your BAH at the amount you started with. In our example, you would keep your $750 per month in BAH unless you fit one of the following exceptions.
PERMANENT CHANGE OF STATION MOVE TO A DIFFERENT LOCATION
If you are reassigned to a new area with a lower BAH for that zip code, you will begin receiving that amount per month in BAH. This isn't a problem for renters because the new BAH is tied to the housing market. Those who purchased homes with FHA loans or VA mortgages and didn't sell prior to the PCS move will have to content with the lower BAH rate when budgeting for their mortgage payments and rent in the new location.
Many people avoid this by selling the property before a PCS move, but a homeowner who decides to hang on to the home should anticipate changes to their BAH when making long-term financial plans.
CHANGES IN DEPENDENCY STATUS
If you were single when you started BAH in a given zip code, but get married, your new BAH rate will be the current amount per month at the "with dependents" rate. If you were married but got divorced, your new BAH is the current amount authorized in your zip code "without dependents. In most cases, your BAH rate does not change until your marriage or divorce is legal and official. Check with your finance office to learn the rules and procedures for changing your marital status.
DEMOTION
If a military member gets demoted for any reason, BAH changes to the current amount authorized for that rank and zip code.
PROMOTION
If you get promoted, your new BAH is the current amount in that zip code for your new rank. You won't get "protected" BAH at the higher rank.
Remember, BAH is calculated on local rents. Mortgage amounts are not used to compute Basic Allowance for Housing. You may be able to offset some or all of your monthly mortgage payments using BAH, but it's not designed to do so. Make your financial plans carefully when factoring in BAH as a contributing source of income for your house payment.
Do you know what's on your credit report?
Learn what your score means.
