VA Mortgage Calculator
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Mortgage Amortization Graph
VA loans are mortgages granted to veterans, service members on active duty, members of national guards, reservists, or surviving spouses, guaranteed by the U.S. Department of Veterans Affairs (VA). As long as the person was given a DD 214 document which proves honorable discharge on good terms, they may qualify. VA loans were originally intended to help growing populations of homeless veterans in the US find affordable housing and still do to this day. As a portion of all mortgages in the US, they are small due to the specific demographic of people that can potentially qualify, but studies have shown that they have the lowest foreclosure rates of all loans.
- Some mortgage experts have boldly claimed that for anyone who can qualify, VA loans are generally the best option.
- The defining feature of any VA loan is that there is no down payment required up to a certain loan limit. The standard for this (in 2018) is $453,100 for most of the country. Standard loan limits may differ in past years. Although the standard applies to most counties, VA loan limits can differ according to geographic area, as high-cost counties may have higher loan limits. For any mortgage above their county's VA loan limit, a 25% down payment is required for the exceeding part of the loan. There are only a handful of mortgages today that don't require a down payment; the other two are Navy Federal and USDA. In comparison, conventional loans normally require at least 5% while FHA loans require a bare minimum of 3.5%.
- There is no mortgage insurance involved, relieving VA loan borrowers of a big expense.
- Sellers and buyers are allowed to negotiate over the payment of fees. Sellers can pay portions of or even all of the closing fees, up to 4% of the loan amount. However, they are under no obligation to do so.
- VA loans can be used for purchases or refinances on existing loans, and qualified applicants need not be first-time buyers and can reuse their benefit.
- Typically, both the interest rates and closing costs are slightly lower than other mortgages.
- Because property appraisals are done by the VA, homebuyers are given some peace of mind that they probably will not overpay for a certain home.
- Only applicants given DD 214 documents can qualify for VA loans.
- VA loans cannot cover projected home improvements, so no fixer-upper homes.
- Not all sellers or lenders do business with VA purchasers, and the ones who try to are usually not well-versed in dealing with them because they are not as prevalent as other home loans. There have been reports of erroneous information being passed on and lending representatives lacking in knowledge. It is best to find expert real estate agents or lenders who specialize in VA loans, but options for loans are limited to what they can offer.
- VA loans can only be used on primary residences (owner-occupied homes only), not investment properties or empty land.
- Relative to other loans, a lot of paperwork must be done at closing for VA loans.
VA Funding Fee
This is the fee that goes towards the upkeep of the program and used in the case of any VA loan borrower who defaults. It equates to a percentage of the loan amount.
The VA Funding Fee varies from 0% to 3.3%, depending on down payment amount, the veteran's military experience, type of home, and loan purpose.
For applicants with 10% or more service-related disability or their surviving spouses, the fee is waived.
It is the only fee pertaining to VA loans with the ability to be financed into the loan amount, which most buyers tend to do. All other fees must be paid in cash at closing, after negotiations to determine whether buyer or seller are responsible for them.
Below is a visual chart to help understand:
|Down Payment||First Time Use||Second and Subsequent Use|
|Veteran||Reservist / National Guard||Veteran||Reservist / National Guard|
There are also other VA Funding Fee rates given by the VA pertaining to different scenarios:
- Interest Rate Reduction Refinancing Loans: 0.50%
- Also called IRRRL, they can be used to lower interest rates by refinancing existing VA loans. It is also possible to refinance adjustable-rate mortgages (ARM) into fixed-rate mortgages.
- Assumptions: 0.50%
- A loan assumption allows a third-party to step in and take over the remainder of the loan without a new mortgage. Note that the assumer does not have to be a veteran, just as long as they are approved by the lender.
- Manufactured Home Loans (Not Permanently Affixed): 1.00%
- Manufactured homes, or mobile homes that are not permanently affixed, do not have usual VA funding fee rates apply. It's a fixed-rate at 1.00%.
Other Common Fees Paid at Closing
- Loan Origination Fee—Used to cover administrative costs for processing of VA loans. Usually 1% of loan amount.
- Loan Discount Points—Charged in order to receive interest rates lower than current market rates. Two discount points, or 2%, is considered to be reasonable. Discount points may be paid by either the buyer or seller.
- Credit Report—Between $50 and $65, this fee is paid to credit agencies to evaluate the credit history of a potential borrower. It may not be refunded, even if the loan never closes.
- Appraisal Fee—Average of $400-$450 for single family residences. Appraisals are formal statements of property value to determine maximum loan amounts obtained without a down payment. Non-refundable even if loan never closes.
- Hazard Insurance and Real Estate Taxes—Necessary to insure payment of taxes and insurance during the first year.
- Title Insurance—Used to verify there are no outstanding liens against the property.
- Recording Fee—Used to record deed on county records. Averages from $20 to $75.
Certain fees are normally not paid by buyers. These include brokerage fees, real estate commissions, and title insurance is some of them.
The practical application of entitlements are as promises to repay VA lenders in the event borrowers default on their VA loans, while also encouraging lenders to extend loans to veterans. However, it is also an act of appreciation for hard-earned and well-deserved services to the nation.
The primary entitlement is $36,000.
Please note that an entitlement is not a guarantee that a buyer is qualified for a VA loan, it is simply an amount that the government is willing to insure if they do qualify.
There are no prepayment penalties or early payoff penalties associated with VA guaranteed loans. According to Title 38 of the Electronic Code of Federal Regulations, "The debtor shall have the right to prepay at any time, without premium or fee, the entire indebtedness or any part thereof not less than the amount of one installment, or $100, whichever is less." More often than not, buyers take on VA loans without down payments, resulting in some of the heftiest mortgages around. By not paying 20% down, which is usual with conventional loans, or even something as small as 3.5% down on FHA loans, financing so much of the housing costs will result in mounting interest going into the future.
Quick Tip: Understandably, veterans or their spouses are prone to financial ups and downs in their lifetimes, hence why VA loans allow such facile upfront costs at the beginning. However, during times of financial freedom, it can be immensely relieving on future finances to make supplemental payments towards existing VA loans. In the calculator under More Options, there is an Extra Payments section to help with this. Simply enter amounts for monthly, yearly, or single payment and calculate to determine the financial feasibility of supplemental payments towards VA loans.
To determine the house affordability of a VA loan, please use our House Affordability Calculator. In the Debt-to-Income Ratio drop down selection, there is an option called VA Loan.
Although DTI ratio requirements are used by VA lenders as main tools to gauge risk concerning potential borrowers, if they cannot be met, other possible considerations are reviewed before an application is finally rejected. VA lenders may look at things such as history of income or dutiful payments of credit as compensating factors.