How to Calculate Mortgage Insurance for VA Loans

By Lynn Lauren

The VA, or Veteran's Administration, created a loan program to allow those who served our country to get a low cost, low down payment loan, with looser credit restrictions than traditional, conventional financing. While monthly mortgage insurance is not required, the VA funding fee (or MIP--mortgage insurance premium) is charged to the borrower at the closing of the mortgage. The fee varies based upon each situation.

Find out the borrower's total loan amount, including closing costs, if not paid out of pocket by the borrower but rolled into the loan amount itself.

Find the corresponding funding fee to the borrower's situation.
For first time users of the program with no down payment who were members of the full time military, the fee is 2.15 percent. For second time users with no down payment, the fee is 3.3 percent. For full time military members using the program for the first or second time, the fee is reduced to 1.5 percent for less than 10 percent down and 1.25 percent for more than 10 percent down.
For Reserve and National Guard members using the program for the first time, the fee is 2.4 percent for no down payment on the first usage and 3.3 percent on the second. With a down payment of less than 10 percent, the fee is reduced to 1.75 percent and 1.5 percent for a 10 percent or more down payment.
Cash-out refinances, however, have different fees. For regular military there is a 2.15 percent fee for first time users and a 3.3 percent fee for subsequent users. For Reserves and National Guard members, the requirement changes to a 2.4 percent fee for first time users and a 3.3 percent fee for subsequent users. Yet on interest rate reduction loans, the VA funding fee is .50 percent and it is 1.0 percent on all Manufactured Home Loans.

Convert the funding fee from a percentage to a decimal by dividing the percentage by 100. Simply move the decimal place over two spots to the left and add a 0 as necessary.

Multiply the funding fee by the loan amount to get the final dollar amount of the funding fee.

When comparing VA loans to traditional loans, make sure to include the monthly PMI on a regular loan (for less than a 20 percent down payment). This will help you to better see which loan is cheaper in the loan run.

The VA Funding Fee can be waived, however, in certain circumstances. These situations include those who are disabled due to military service and to surviving spouses of those who were disabled or killed during their military service. However, the VA reserves the right to make the final decision on waiving the fee.

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