Hong Life CalculatorsUnderstanding the VA loan calculator — concept and principle
VA-backed home loans let eligible US veterans, service members and some surviving spouses buy a home, often with no down payment. Most borrowers pay a one-time VA funding fee. This calculator finds the fee, the loan amount with the fee financed and the monthly principal-and-interest payment.
How it is calculated
- Funding fee = loan amount × fee rate. For purchase and construction loans: below 5% down 2.15% (first use) or 3.3% (after first use); 5% or more down 1.5%; 10% or more down 1.25%.
- Other loans: cash-out refinance 2.15% (first use) or 3.3%; IRRRL 0.5%; manufactured home not permanently affixed 1%; loan assumption 0.5%.
- If the fee is financed, loan = base loan + fee.
- Monthly payment = L × i ÷ (1 − (1 + i)^−n), with i = rate ÷ 12, n = years × 12.
The principle
The VA guarantees part of each loan, which lets lenders offer favourable terms without private mortgage insurance. The funding fee helps pay for the program. It falls as the down payment rises, because a larger down payment lowers the risk. Veterans receiving VA compensation for a service-connected disability, eligible surviving spouses receiving Dependency and Indemnity Compensation and some others are exempt.
Worked example
Default inputs: price 400,000 USD, no down payment, purchase, first use, fee added to the loan, 6.25%, 30 years.
- Down payment share = 0%, so the fee rate = 2.15%.
- Funding fee = 400,000 × 2.15% = 8,600 USD; paid in cash at closing = 0 USD.
- Loan amount including the fee = 408,600 USD.
- Monthly principal + interest = 408,600 × 0.0052083 ÷ (1 − 1.0052083^−360) ≈ 2,516 USD.
- Total interest over 30 years ≈ 497,095 USD.
| Home price, or new loan amount for a refinance (USD) | Monthly principal + interest (USD) |
|---|---|
| 100,000 | 629 |
| 200,000 | 1,258 |
| 300,000 | 1,887 |
| 400,000 | 2,516 |
| 500,000 | 3,145 |
| 600,000 | 3,774 |
| 800,000 | 5,032 |
How to read the result
Financing the fee avoids paying it at closing, but you pay interest on it for the life of the loan. A down payment of 5% or 10% lowers both the fee rate and the loan. Property taxes and homeowners insurance come on top of this payment.
Common mistakes
- Forgetting that the funding fee rate is higher for subsequent use with less than 5% down.
- Not checking exemption eligibility.
- Treating principal and interest as the full monthly housing cost.
- Comparing VA and conventional loans without counting the fee and mortgage insurance.
Frequently asked questions
How much is the VA funding fee?
For a first-use purchase with less than 5% down it is 2.15% of the loan amount.
Who is exempt from the VA funding fee?
Among others, veterans receiving VA compensation for a service-connected disability and eligible surviving spouses receiving DIC.
Do VA loans require mortgage insurance?
No. VA loans do not require private mortgage insurance.
Sources: US Department of Veterans Affairs, VA funding fee and loan closing costs · 38 U.S.C. § 3729 (loan fee)