Homeownership will be a bit more affordable for eligible U.S. servicemembers in 2013.
The Department of Defense (DoD) has increased its Basic Allowance for Housing (BAH) for 2013, giving most active duty personnel larger monthly stipends to offset VA mortgage payments and other housing expenses.
The change is well-timed. VA mortgage rates — along with other U.S. mortgage rates — are projected to rise by 1 percentage point or more in 2013.
What Is A Basic Allowance For Housing?
The Basic Allowance for Housing is a monthly, non-taxable stipend paid to many active duty military members. Previously, the Basic Allowance for Housing was known as Basic Allowance for Quarters (BAQ).
BAH rates are based on average housing costs, and are updated annually with data from property managers nationwide. Current rental rates for townhomes, duplexes, apartment units, single-family homes and other residence types are considered in the Basic Allowance for Housing, as is other information culled from the American Community Survey, an annual U.S. Census Bureau publication.
The Basic Allowance for Housing is payable to military members in non-government quarters and there are three factors which determine a military member’s individual Basic Housing Allowance :
- Pay Grade
- Number of Dependents
As would be expected, military member with higher pay grades (i.e. rank) receive a larger Basic Allowance for Housing. The same is true for military members living in “expensive” cities as compared to inexpensive ones.
Military homeowners in cities such as Fredericksburg, Virginia; Camp Pendleton, California; and El Paso, Texas receive a higher Basic Allowance for Housing than homeowners in Green Bay, Wisconsin or Syracuse, New York.
And, lastly, military personnel with dependents receive higher monthly allowances as compared to personnel without dependents.
Basic Allowance For Housing Increases For 2013
Beginning January 1, 2013, eligible servicemembers will receive an averageBasic Allowance for Housing increase of 3.8%. Personnel in some areas will receive an increase which is larger than the national average; some will receive less.
For example, the 2013 Basic Allowance for Housing increase is higher in New York City. The BAH is raised 14.7 percent, on average, for residents of Manhattan, Brooklyn, Bronx, Staten Island and Queens.
Altus Air Force Base in Oklahoma gets a significant 2013 BAH increase, too, of 14.1 percent as compared to 2012.
Military personnel with VA home loans can apply their monthly Basic Allowance for Housing entitlement to mortgage payments, which can offset rising mortgage rates into 2013.
VA Home Loan : Offset Payments With BAH
For homeowners using VA home loans — either to finance a home purchase or to refinance via the VA Streamline Refinance program — the 2013 Basic Allowance for Housing increase can help to offset rising mortgage rates in 2013.
Experts and economists are predicting higher mortgage rates for 2013 and higher mortgage rates lead to bigger mortgage payments. The BAH can lessen the punch of rising mortgage rates.
However, today, mortgage rates remain low. Get the best of both worlds — low rates and a bigger BAH. Get started with a VA home loan today. See today’s mortgage rates and how they’ll fit your budget.