FHA Loans, Verifiable Income, and VA Benefits

• variable housing allowances

• clothing allowances

• flight or hazard pay

• rations, and

• proficiency pay.

These types of additional pay are acceptable when analyzing a borrower’s income as long as the probability of such pay to continue is verified in writing.”

The FHA loan rules also instruct the lender to take into account whether the pay or benefits being reviewed are tax-exempt or not.

One important military benefit that does NOT count as verifiable income is associated with military education pay. The GI Bill features a housing allowance or stipend for many eligible service members, but this stipend cannot be counted as income by the lender. Why?

The housing allowance is only paid when the student attends classes. It is not paid over breaks or in the summer in between classes. It also has a very limited time of availability–once the student has attended a certain number of classroom time, those benefits end.

That means the pay is not “likely to continue” and is only temporary. The lender can’t use it to calculate the borrower’s debt to income ratio, therefore it’s not allowed to be included in the “income” column. Speak to a participating FHA lender if you aren’t sure whether your current VA benefits or military pay/allowances can be included in your list of verifiable income sources.