VA Mortgage Calculator

A VA loan is a mortgage from a private lender that is partly guaranteed by the U.S. Department of Veterans Affairs. The guaranty, which covers a portion of the loan if the borrower defaults, lets lenders offer terms that are hard to match elsewhere: no down payment for most borrowers, no private mortgage insurance, competitive interest rates and limits on closing costs.

Eligibility depends on service. Veterans, active-duty service members, members of the National Guard and Reserves who meet minimum service requirements, and some surviving spouses can apply for a Certificate of Eligibility through the VA, often with the lender's help. Since 2020, borrowers with full entitlement have no VA loan limit, although lenders still apply their own credit and income standards.

VA loans can be used to buy a primary residence, build a home, buy a condo in a VA-approved project, make energy-efficiency improvements, or refinance. A VA cash-out refinance can replace any existing mortgage, and the Interest Rate Reduction Refinance Loan (IRRRL) streamlines refinancing from one VA loan into another at a lower rate. The home must be the borrower's primary residence and must pass a VA appraisal that checks both value and minimum property requirements.

VA Funding Fee

Instead of mortgage insurance, most VA borrowers pay a one-time funding fee that helps keep the program running at little cost to taxpayers. It is charged as a share of the amount borrowed, and the share shrinks as the down payment grows and whether you have used a VA loan before. It can be paid in cash at closing or, more commonly, added to the loan.

Financing the fee is convenient but makes the loan larger. With the calculator's defaults, a $500,000 home with no down payment carries a 2.15% fee of $10,750, raising the loan to $510,750 and the monthly principal and interest to $3,435.16.

Several groups are exempt from the fee entirely: veterans receiving compensation for a service-connected disability, those who would receive it if they were not getting retirement or active-duty pay, surviving spouses receiving Dependency and Indemnity Compensation, and active-duty service members who have received the Purple Heart. The fee is refundable if a disability rating is awarded retroactive to before closing.

Loan = (price − down payment) × (1 + funding fee %) · M = L × r(1 + r)ⁿ ÷ [(1 + r)ⁿ − 1]

L

loan amount, including a financed funding fee

r

monthly interest rate (annual rate ÷ 12)

n

number of monthly payments

M

monthly principal and interest payment

Property tax, insurance, HOA dues and other costs are added on top of M. VA loans do not charge monthly mortgage insurance.

Other Common Fees Paid at Closing

Beyond the funding fee, VA buyers pay many of the same closing costs as other borrowers: an appraisal fee set by the VA, a credit report, title search and title insurance, recording fees and prepaid property taxes, homeowners insurance and interest. Total closing costs often fall between 2% and 5% of the loan amount.

The VA protects borrowers by capping what lenders can charge. A lender may collect either itemized origination charges or a flat fee of up to 1% of the loan, but not both, and certain charges such as attorney fees for the lender cannot be passed to the veteran. Sellers may pay all of the buyer's normal closing costs, and up to 4% of the price in additional concessions, such as paying the funding fee or prepaid items. Buyers can also negotiate lender credits in exchange for a slightly higher rate.

Pros and Cons of VA Loans

Advantages:

• No down payment required for borrowers with full entitlement, which removes the biggest barrier to buying for many families.
• No monthly mortgage insurance, even with zero down, which can save hundreds of dollars a month compared with FHA or low-down-payment conventional loans.
• Competitive interest rates that are often below conventional and FHA rates for similar borrowers.
• Flexible underwriting: the VA sets no minimum credit score, and lenders weigh residual income alongside a 41% debt-to-income guideline.
• Limits on closing costs and the right to have the seller pay many of them.
• No prepayment penalty, and the loan is assumable by a qualified buyer, which can be valuable when market rates are higher than your rate.
• Entitlement can be restored after the loan is repaid, so the benefit can be used more than once.
• Disadvantages: the funding fee can add thousands of dollars to the loan, especially for subsequent use with little down. Borrowing with no down payment means starting with no equity, so a price dip could leave you owing more than the home is worth.
• VA loans are limited to primary residences, so they cannot be used for vacation homes or pure investment properties, though a multi-unit property of up to four units is allowed if you live in one.
• The VA appraisal and minimum property requirements can be stricter than a conventional appraisal, occasionally requiring repairs before closing, and some sellers in competitive markets view VA offers as slower to close.
• Allowing someone else to assume the loan can tie up your entitlement unless the buyer is also an eligible veteran who substitutes theirs.

Prepayment

VA loans never carry prepayment penalties, so you can make extra payments or pay the loan off at any time. Extra principal reduces interest for the rest of the loan; open the extra-payment options in the calculator to see the effect. For example, adding $200 a month to the default $510,750 loan pays it off 4 years and 9 months early and cuts total interest by about $138,000. Biweekly payments, which add the equivalent of one monthly payment per year, have a similar effect. Before prepaying, weigh the return against other uses for the money, such as retirement savings or high-interest debt.

House Affordability

The VA does not cap the price you can pay, but lenders do check whether the payment fits your budget. They generally look for a total debt-to-income ratio of 41% or less and enough residual income after the mortgage and other obligations, based on family size and region. The house affordability calculator can help you estimate a comfortable price range before you shop.

Frequently asked questions

Sources

• U.S. Department of Veterans Affairs – VA funding fee and closing costs
• U.S. Department of Veterans Affairs – VA home loans
• Consumer Financial Protection Bureau – Owning a Home