Only Base Pay Counts? The FHA Guideline Says Otherwise
Everyone says the only military pay a lender counts is your base pay. The FHA guideline says otherwise. Flight or hazard pay and proficiency pay are included as Military Income. Meet Julie, a fictional buyer whose story shows why that line matters.
Meet Julie
Julie is an illustration of a situation that comes up often. She is an active-duty service member near Darlington, South Carolina, and she is ready to buy a home. Her VA entitlement is not available for this purchase, so the loan under review is FHA. That is the only reason FHA is the focus here. For a service member whose VA entitlement is available, VA is normally where the conversation begins.
Julie has heard the same advice from coworkers and online threads: lenders only count base pay. Her pay statement shows more than base pay, and she has been quietly assuming those other lines will not help her.
What the FHA guideline actually says
FHA guideline Section II.A.4.c.xii.C.1 reads exactly like this:
Military Income includes: base pay, Basic Allowance for Housing, clothing allowances, flight or hazard pay, Basic Allowance for Subsistence, proficiency pay. The Mortgagee may not use military education benefits as Effective Income.
Read that slowly, because it does two separate jobs. The first sentence tells you what falls under Military Income. The second sentence draws a hard line around one category that does not count.
Reading the list the way a borrower should
The list has six items. Base pay is the one everybody knows. Basic Allowance for Housing and Basic Allowance for Subsistence are named. Clothing allowances are named. Flight or hazard pay is named. Proficiency pay is named.
The point is not that every service member has every item. The point is that the list exists, and the idea that only base pay matters is not what the guideline says. If you receive flight or hazard pay or proficiency pay, the guideline places them inside Military Income, so they belong in the conversation with your lender.
Why education benefits are different
The second sentence of the guideline says the Mortgagee may not use military education benefits as Effective Income. So while the list widens what counts, it also protects you from a bad plan. If you were hoping to lean on education benefits to qualify, the guideline says that is not allowed. It is better to know that before you fall in love with a house than after.
The question Julie asks
Instead of assuming, Julie asks her lender this:
Under FHA guideline Section II.A.4.c.xii.C.1, which items on my pay statement are you counting as Military Income? Please go through them line by line, and tell me whether flight or hazard pay and proficiency pay are included.
That question does three things. It names the exact guideline, so the conversation stays on the rule instead of on opinion. It asks for a line-by-line walk through, so nothing is skipped by habit. And it names the two items people most often dismiss.
What you can do today
Request your Leave and Earnings Statement. Lay it next to the guideline list and check each item against it. Mark which lines match the list and which do not. Then bring that marked-up statement to your lender and ask Julie's question.
If your lender has already told you only base pay counts, you do not have to argue. Ask them to show you which guideline they are relying on. Staying calm and specific is the fastest way to find out whether an assumption was made.
If you want help with this, I am glad to look at it with you. My approach is to find the path, and for an active-duty buyer that starts with reading the pay statement honestly, line by line.
Jason Sharon, Mortgage Broker, Home Loans Inc. Company NMLS #1728740, Jason Sharon NMLS #1281448. Call 843-LOW-RATE. Equal Housing Opportunity.
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