How to Calculate VA Mortgage Payment

By Jim Hagerty

Calculating monthly payment on your U.S. Department of Veteran's Affairs or VA mortgage is simple. Doing so involves calculating a standard mortgage payment with an extra step involving the VA Funding Fee common on the majority of VA mortgages. Read more for help.

Know your funding fee requirement. VA mortgage payments are calculated just like conventional loans, however, they often include an amount added to your monthly payment. This amount represents the VA Funding Fee, which is required by law, except for disabled veterans. The VA Funding Fee ranges from 0 to 3 percent of your loan amount, depending on your circumstance. For example, a 2 percent funding fee on a $100,000 loan would be $2,000, increasing your loan amount to $102,000. This means that your monthly principal and interest payment will be calculated on $102,000, not the original $100,000.

Know the amount of your annual real estate taxes and homeowner's insurance premiums. VA loans require escrows of property taxes and insurance. This means if your annual taxes are $2,000, that amount will be divided into 12 monthly installments. In other words, $166.67 will be added to your principal and interest payment. Your homeowner's insurance is treated the same way. If your annual premium is $450, $37.50 will also be added to your monthly payment.

Calculate your VA Funding Fee and your total monthly mortgage payment. In the example in Step 1, a 2 percent funding fee on a $100,000 mortgage is $2,000, bringing the base loan amount to $102,000. Using a business or financial calculator, first calculate your principal and interest payment using the basic time value of money formula. The calculation looks like this:
Base loan amount (Present Value) = 102,000
Interest rate = 6%
Term = 30 years or 360 months
Monthly principal and interest payment (PI) = 611.54
Monthly real estate taxes = 166.67
Monthly insurance = 37.50
Total monthly payment = $811.71
The time value of money formula can be calculated on a business or financial calculator is done like this:
102,000 - Present Value (PV)
360 - Number of Months (N)
6 - Interest per year (I/Y)
Compute Payment - (CPT PMT)
Some calculators vary in how present value, number of months, interest and payment. However, all financial calculators contain time value of money features that are fairly self explanatory.
The standard mathematical formula looks like this.
M = P [ i(1 + i)n ] / [ (1 + i)n - 1]. You simply solve for M, your monthly payment.

Contact the Veterans Administration for exact funding fees. Funding fees differ for those in specific circumstances. First-time home buyers and active duty military personnel often pay a lower fees than other veterans.

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