How to Calculate a VA Mortgage

By Mark Kennan

The United States Department of Veterans Affairs backs mortgages taken out by veterans to help them obtain mortgages with smaller down payments, and in some cases no down payment. The VA charges a funding fee, which can be rolled into the cost of the loan, if necessary. To calculate your monthly payment, you first need to know how much the fee will add to your mortgage amount.

Consult the VA mortgage funding fee table, downloadable from the VA's pre-loan frequently asked questions Web page (see Resource), to find your funding fee. The funding fee varies, depending on whether you served in the regular military or the National Guard, whether you've had a VA mortgage before and the size of your down payment. For example, an Army veteran who has not had a VA mortgage before and does not make a down payment would pay a funding fee of 2.15 percent.

Multiply the funding fee percentage by the amount of your mortgage to find the funding fee cost. In this example, if you took out a $130,000 mortgage, you would multiply $130,000 by 0.0215 to get a funding fee of $2,795.

Add the funding fee to the amount of your mortgage, if you want to have the fee rolled into your mortgage, to find your total amount borrowed. (You do have the option to pay the fee rather than adding it to your mortgage.) In this example, if you roll the fee into the mortgage, you would add $130,000 to $2,795 to get $132,795.

Figure the number of monthly payments you will make by multiplying 12 by the number of years in your VA mortgage. For example, a 15-year VA mortgage would have 180 monthly payments.

Divide the annual interest rate expressed as a percentage by 12 to find the monthly interest rate. In this example, if you pay an annual rate of 7.12 percent, you would divide 0.0712 by 12 to get 0.005933333.

Add 1 to the monthly interest rate. Here, you would add 1 plus 0.005933333 to get 1.005933333.

Raise the Step 6 result to the power of the number of monthly payments you would make. In this example, you would raise 1.005933333 to the 180th power to get 2.900386713.

Subtract 1 from the Step 7 result. Here, you would subtract 1 from 2.900386713 to get 1.900386713.

Divide the monthly rate by the Step 8 result. Here, you would divide 0.005933333 by 1.900386713 to get 0.003122172.

Add the monthly rate to the Step 9 result. In this example, you would add 0.003122172 to 0.005933333 to get 0.009055505.

Multiply the Step 10 result by the amount borrowed to find the monthly payment. Here, you would multiply $132,795 by 0.009055505 to find the monthly payment to be $1,202.53.

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