Disability compensation counts as income
VA disability compensation can be used as qualifying income for a mortgage. Lenders typically verify it with your VA award or benefit summary letter. Because it's ongoing and not tied to a job, it's generally treated as stable income.
Why tax free income stretches further
Most income is counted before taxes. Disability compensation isn't taxed, so $3,000 in disability pay goes further than $3,000 in salary. Many lenders can "gross up" non taxable income when calculating your debt to income ratio, often by 25%, depending on the program and lender. That can increase how much you qualify for.
The benefits stack
No funding fee. Veterans receiving disability compensation are exempt, which can save thousands at closing. See the funding fee guide.** Lower property taxes.** Florida offers a $5,000 exemption at 10% or higher, a discount for veterans 65 and older with combat related disabilities, and a full ad valorem exemption for total and permanent ratings. Lower taxes mean a lower payment and more buying power. See the Florida tax benefits guide.** Residual income.** VA looks at what's left each month after major expenses. Tax free income helps here too, because less of it goes to taxes.
Other income veterans often overlook
Military retirement pay counts.** BAH and BAS** count for active duty borrowers.** Social Security and SSDI** count.** A spouse's income** can be added if they're on the loan.** A new civilian job** after separation can often be used right away, since military service counts toward work history.** Self employment and 1099 income** can work with the right documentation.
Estimate your monthly housing budget
A rough estimate of the total monthly housing payment you might qualify for, using VA's 41% debt to income guideline.
Rough estimate only. Residual income, credit and lender guidelines also apply. Housing payment includes principal, interest, taxes, insurance and HOA.
A 70% rating and a bigger budget
Mike retired from the Air Force and receives disability compensation at a 70% rating, plus a civilian salary. Counting his disability pay as tax free, grossed up income raised his qualifying income noticeably.
He paid no funding fee, and his $5,000 Florida exemption trimmed his taxes. Together, it moved him into a price range that his salary alone wouldn't have reached.
Frequently asked questions
How much house can I afford with 100% VA disability in Florida?
It depends on your other income, debts and the home's taxes and insurance. With a total and permanent rating, Florida's full ad valorem exemption can lower your payment significantly. Use the calculator, then let me run the real numbers.
Is VA disability income grossed up for a mortgage?
Many lenders can gross up non taxable income, often by 25%, depending on the loan program and lender.
Can I use BAH to qualify?
Yes, for active duty borrowers, BAH and BAS are generally counted as income.
Does a pending disability claim help?
Income from a claim that hasn't been awarded can't be used yet. But a rating issued before closing can still exempt you from the funding fee.