The Gross-Up Most Loan Officers Miss — And How It Adds $60k+ to Your Pre-Approval
VA disability, BAH, BAS, combat pay, and tax-free pension income all get grossed up 25% for mortgage qualifying. Miss it and veterans buy less house than they've earned.
If you're a veteran or active-duty service member and your last pre-approval didn't gross up every one of your tax-free income sources at 25%, you were quoted for less house than you actually qualify for. This is the single most common mistake we see when we re-underwrite files that started with another lender.
The 30-second version
Agency guidelines let lenders inflate documented nontaxable income by 25% for qualifying purposes. That means $4,000/month of VA disability counts as $5,000/month of qualifying income. Same veteran, same benefits — different debt-to-income math.
The income sources that qualify
- VA disability compensation (any rating)
- BAH — Basic Allowance for Housing
- BAS — Basic Allowance for Subsistence
- Combat pay, hazardous duty pay, hostile fire pay
- Military retirement pay in tax-exempt states
- SSDI and other nontaxable federal benefits
- Nontaxable child support and alimony (post-2018)
Most loan officers were trained on the VA disability example and stop there. They forget BAH and BAS qualify too — even though those often add up to more than the disability payment itself.
A real number
Take a retiring E-7 with $2,800 in VA disability, $2,400 BAH, $460 BAS, and a $3,100 taxable pension. Without the full gross-up: qualifying income of $8,760/month. With every nontaxable source correctly grossed up at 25%: $10,175/month. At today's rates that's roughly $85,000 in additional loan amount — for zero change in the file.
What to do next
Run your own numbers on our gross-up calculator, then ask your current LO which sources they grossed up. If the answer is anything other than 'all of them, at 25%', get a second opinion.
About the author
Megan leads our refinance desk and has spent a decade helping military families translate VA jumbo, cash-out, and IRRRL scenarios into concrete monthly-savings numbers. Featured commentator on VA lending policy changes.