VA Loan Calculator

Updated on March 11, 2024
Article byHarsh Katara
Edited byAnkush Jain
Reviewed byDheeraj Vaidya, CFA, FRM

VA Loan Calculator

This VA loan calculator can be used to calculate the periodical cash outflow in the form of installments, total interest outflow, including the VA loan funding charges, etc. This VA loan calculator can be used to calculate the periodical cash outflow in the form of installments, total interest outflow, including the VA loan funding charges, etc. There is no requirement as such that home loan buyers should be buying a home for the first time. VA loan estimators are generally for residency and cannot be obtained for investments.

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VA loans are best for those who can qualify VA loans offer better security and loans at competitive interest rates. Also, up to a certain limit, there is no requirement for a down payment as well, which is a unique feature of VA loans. There is no insurance requirement, and hence, the expenses of insurance burden on home loan buyers are reduced.

VA Loan

[L x J x (1+J)^N]/[(1+J)^N-1]


Wherein,
  • L is the loan amount
  • J is the rate of interest per annum
  • N is the number of period or frequency wherein loan amount is to be paid
The loan Amount
$
Rate of Interest per annum
%
Number of period or frequency wherein loan amount is to be paid

VA Loan Calculator Explained

The VA loan emerges as a specialized loan program designed exclusively for military veterans, offering them an opportunity towards homeownership with unique benefits. They are backed by the U.S. Department of Veterans Affairs, presenting eligible veterans, active-duty service members, and, in some cases, surviving spouses with an opportunity to secure a mortgage without the conventional down payment requirements.

The absence of a down payment or the need for private mortgage insurance distinguishes VA loan rates from many other loan options, easing the financial burden on those who have served in the military.

The Administration of Veterans offers housing loan guaranty benefits and several other kinds of home-related programs to eligible people such as surviving spouses, service differently-abled persons, etc., and services such as purchasing, repairing, building, retain a home for personal occupancy. Sometimes, VA funding fees are charged to maintain the program as there are chances of default. There could be other charges like taxes and insurance as well. This calculator is similar to the mortgage calculator only difference is there are VA loan funding charges.

One of the defining features of VA loans is their flexibility in terms of credit requirements. While credit history is considered, the VA loan program tends to be more forgiving, accommodating individuals with a range of credit scores. This inclusivity opens the door for veterans who may face challenges securing traditional financing.

Additionally, VA loans often come with competitive interest rates, further enhancing their appeal. This financial benefit, in combination with the elimination of a down payment and reduced closing costs, makes homeownership a more accessible reality for those who have served in the military.

Formula

The formula that acts as the basis for VA loan estimators is as follows:

[L x J x (1+J)^N]/[(1+J)^N-1]

Wherein,

  • L is the loan amount
  • J is the rate of interest per annum
  • N is the number of period or frequency wherein the loan amount is to be paid

How to Calculate?

One needs to follow the below steps in order to Calculate the monthly installment amounts based on VA loan rates.

  1. First of all, determine the loan amount required. Banks usually provide more loans amounts to those who have a good credit score and less amount to those who have a lower credit score. First, we shall enter the principal amount:

    Step #1 -

  2. Multiply the loan amount by the rate of interest.

    LxJ = rate of interest

  3. Now, we need to compound the same by rate until the loan period.

    LxJx1+J^N = Compound untill loan period

  4. We now need to discount the above result obtained in step 3 by the following:

    LxJx1+J^N = Discount

  5. After entering the above formula in excel, we shall obtain periodically for VA loan installments.

You can download this VA Loan Calculator Excel Template here – VA Loan Calculator Excel Template

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Examples

Let us understand the practicality of VA loan estimators through the examples below.

Example #1

Mr. William and Mrs. William were settled in the United States. Mr. William was working in a multinational company, and Mrs. William was working as a part-time tuition teacher in a small academy.

They had planned to purchase a house after 2 years in their favorite locality. But after 1-year Mr. William passes away in a car accident, and Mrs. William is now the surviving spouse.

She learns about the VA loans offered by the administration of veterans and approaches them for housing loans. She was told that she would be offered 100% financing. However, she would also be charged VA loan funding, which is 2% of the loan amount.

The value of the property is $125,000. She opts for 30 years mortgage loan, and the rate of interest applicable for her is 7.76%, and the installments shall be paid on a monthly basis.

Based on the above information, you are required to calculate the monthly installment amount.

Solution:

We need to calculate the EMI amount. For that first, we shall calculate the loan amount, which is 125,000 *100%, which is 125,000. There are VA funding charges, which are 3% of the loan amount, and therefore the total loan amount would be 125,000 + (125,000 x 3%), which is 128,750.

The number of periods it is required to be paid in 30 years, but since here Mrs. William is going to pay monthly hence the number of payments that he shall be required to be paid is 30*12, which is 360 equally installments and lastly, the rate of interest is 7.76% fixed which shall be calculated monthly which is 7.76%/12 which is 0.65%.

Now we shall use the below formula to calculate the EMI amount.

EMI = [L x J x (1+J)^N]/[(1+J)^N-1]
VA Loan calculator Example 1

= [128,750×0.65%x(1+0.65%)^360]/[(1+0.65%)^360–1]

= 923.27

Therefore, the EMI amount for Mrs. William for 30 years on the loan amount 128,750 shall be 923.27

Example #2

Mr. A is a veteran service member and is differently-abled. He is leaving in a house in New York City for around 30 years, and his house has been quite old now.

He enquires for home repair and reconstruction and learns that the total cost would be around $75,000. He is not earning quite that much and doubts if any private bank would lend him the money.

He learns about the VA loan facility from a friend and puts forward his application for a loan amount of $75,000 with all the supporting and quotations that he received from the vendor.

His loan is approved only for 90%, and rest he has to make arrangements. He opts for 15 years, and the rate of interest applicable is 12.36% fixed on the entire tenure with monthly payouts. You are required to calculate the total interest outgo on this VA loan amount.

Solution:

We need to calculate the EMI amount, for that first, we shall calculate the loan amount, which is 75,000 * 90%, which is 67,500. The number of periods it is required to be paid in 15 years, but since here Mr. A is going to pay monthly hence the number of payments that he shall be required to be paid is 15*12, which is 180 equally installments and lastly, the rate of interest is 12.36% fixed which shall be calculated monthly which is 12.36%/12 which is 1.03%.

Now we shall use the below formula to calculate the loan amount.

EMI = [L x J x (1+J)^N]/[(1+J)^N-1]
VA Loan calculator Example 2

= [67,500 x 1.03% x (1 + 1.03%)^180 ] / [ (1 + 1.03%)^180 – 1 ]

= 825.81

Therefore, the EMI amount for Mr. A for 15 years on the loan amount $67,500 shall be $825.81

Total interest outgo equals to ($825.81 * 180) – $67,500 which is $81,146.22

VA Loan calculator Example 2-1

VA Loan Vs Conventional Loan

Let us understand the differences between VA loan rates and that of conventional loans and they key differences through the comparison below.

VA Loans

  • Typically, no down payment is required, offering a significant advantage to eligible veterans.
  • Exempt from private mortgage insurance (PMI), contributing to cost savings over the life of the loan.
  • Tends to be more forgiving with credit scores, making it accessible to a broader range of applicants.
  • Often offers competitive interest rates, enhancing the overall affordability of the loan.
  • Exclusive to veterans, active-duty service members, and qualifying spouses.

Conventional Loans

  • Usually requires a down payment, often ranging from 3% to 20% of the home’s purchase price.
  • Requires PMI if the down payment is less than 20%, adding cost to monthly payments.
  • Typically has stricter credit score requirements, potentially limiting eligibility for those with less-than-perfect credit.
  • Interest rates may vary based on the borrower’s creditworthiness, potentially resulting in higher rates for some applicants.
  • Open to a wider range of borrowers without specific military service requirements.

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