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Use Military Allowances and S&I Pay to Qualify for a Mortgage


Posted on: September 28, 2017

by Ron Bennett, VA Loan Officer and 35-year U.S. Army Veteran.

Active duty military personnel receive various types pay above their regular pay during their military career such as allowances and special and incentive (S&I) pay. Your extra pay depends on what you do and where you serve.

It also depends on if you are single or married, or if you live on post or off post.

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This additional pay could boost your borrowing power when you get ready to purchase a home and qualify for a mortgage. Some of the different types of incentive pay are:

  • BAH (Basic Allowance for Housing): This allowance used to be called Basic Allowance for Quarters (BAQ) and is given to members in order to provide housing for themselves and their dependents, usually his or her spouse and children. It’s given when the member is not living in government housing. This is a non-taxable benefit paid on a monthly basis. The amount received is determined by their pay grade, where they are stationed, and if the member has dependents or not.
  • BAS (Basic Allowance for Subsistence): This allowance is given to the service member to offset the cost for member’s meals.  Its level is linked to the price of food, and is adjusted yearly based on the price of food as measured by the USDA food cost index.

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There are several other types of military income which are commonly referred to as Special and Incentive (S&I) pay.  This pay is for specific qualifications or events. Here are some examples:

  • Hazardous Duty Incentive Pays (HDIP)
  • Flying Duty
  • Parachute Duty Pay
  • Aviation Career Incentive Pay (ACIP)
  • Submarine Duty Incentive Pay (SUBPAY)
  • Diving Duty Pay
  • Hardship Duty Pay (HDP)
  • Plus many more

In order to determine if you qualify to use BAS, BAH, or S&I pay towards your VA loan, the lender will have to first determine whether you will receive this pay for a foreseeable future.

Lenders will consider this pay usable as long as you are not within 12 months of separation from the military. Also, we have to be able to verify the income being used. This can be done by providing your Leave and Earning Statement (LES) which will show the how much you are receiving, and how long you are going to receive it.

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If you are within 12 months of leaving the service, and you plan to use this income, you should:

  • Have documentation that you have re-enlisted or extended your active duty to a date beyond the 12 month period
  • Verify that you have an offer of a local civilian job following your release from active duty (you will have to  prove your income is sufficient to make up for the income you were making in the military)
  • You can make a statement that you intend to remain on active duty beyond the 12 month period
  • You get a statement from your commanding officer that says you can re-enlist or extend, and that there is no reason it won’t be granted

For people who are in the Reserves and National Guard, it would be best to contact a lender, as these kinds of allowance will be calculated differently. However, as a general rule, you should be able to use average pay received over the previous two years, as long as it’s expected to continue.

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Ron Bennett (NMLS 57792, MLO-57792) is a Sr. Mortgage Advisor in Washington State. Contact Ron at 253.561.9704 and visit him on Facebook. Ron’s military experience: last rank – Master/First Sergeant (E-8); 35 years of service; U.S. Army.