Help! My BAH Doesn’t Cover My Mortgage

The BAH for my grade doesn’t begin to cover my mortgage payment. What can I do?

Sorry, but there isn’t anything you can do. BAH is based on rental data. Homeowners’ monthly mortgage payments are not used in the computation because the monthly cash outlays of homeowners are not a good indicator of the economic costs of home ownership. The variables needed to compute this include such difficult-to-measure factors as the expected appreciation in the value of the residence, the amount of down payment, the opportunity costs of interest from down payments, settlement costs, and the tax savings due to the interest payments deduction. Therefore, BAH reflects the current rental market conditions rather than the historical circumstances surrounding various mortgage loans.

What is the source of BAH Rental data? 

Current data is obtained from multiple sources, employing a “checks and balances” approach to ensure reliability and accuracy of data. Current residential vacancies, identified in local newspapers and real estate rental listings, are an important, but not the only source of data. Vacancies are selected at random, and subjected to a multi-tiered screening process to ensure accuracy and reliability. Telephone interviews establish the availability and exact location of each residential unit sampled. The sample is designed to obtain a statistical confidence level of 95% or higher. Yellow page listings of apartments and real estate management companies are also used to identify units for rental pricing. It is not uncommon for real estate professionals in a certain locality to be consulted to obtain important confirmation and additional sources of data. Where available: fort/post/base housing referral offices are also contacted to tap local military expertise and gain insights into the local concerns of our members. Finally, DOD and the Services conduct on-site evaluations at various locations to confirm and ensure reliability and accuracy of the cost data. Future enhancements include examining potential uses of the Internet as well as housing data available from other government agencies.

The Bottom Line

If you choose to purchase a home rather than rent, it is beneficial to plan your mortgage payment around your BAH allotment. Rather than have a mortgage broker tell you the largest mortgage amount you can qualify for, ask to have a top amount calculated based on what the monthly payment would be with a specific down payment and interest rate you can get. Only look at homes that fit this price range, and you will keep money in your pocket while letting your BAH pay for your home.

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