VA Loan Calculator

The VA loan calculator helps you estimate a VA loan's monthly mortgage payment, the debt-to-income ratio that qualifies you for the loan, the total cost of the loan, and the amount of VA entitlement or guaranty you have on the loan. The Veteran Affairs (VA) mortgage program is specially designed to help eligible American veterans, service members, and their surviving spouses purchase or refinance a home without a down payment and with a low interest rate.

But the real challenge before making any financial decision is asking the huge question: "Is this right for me?" Mortgages are long-term commitments, and "no down payment" does not mean "no cost". So, it's always important to get all the facts before making your decision to take a VA home loan. The VA loan calculator is here to help with that, and this is a comprehensive article to provide you with all the information about a VA loan, who qualifies for a VA loan, VA appraisal, how much house you can afford with a VA loan, etc.

Before you settle on a mortgage option, you should assess all other alternatives, and we have a bunch of calculators to help you make the best decision:

• FHA loan calculator will help you decide if the FHA loan, also a government-backed loan like the VA loan – that allows you to make down payment as low as 3.5% — is the best option for you; and
• Biweekly mortgage calculator will help calculate your mortgage payments on a biweekly basis so that you can make 13 months' payment in a year.

Getting a home can be quite a challenge if you don't meet the requirements of a lender. And if you're a veteran or serving in the military, there is a likelihood that meeting these requirements will be more complex. Hence, the US government passed the GI Bill of Rights, which created the VA home loan program in 1944 to help veterans returning from World War II transition into civilian life with ease. Since its inception, the program has undergone several improvements and gained popularity so much that in 2020 alone, VA loans financed over 1.2 Million homes compared to 624,500 homes in 2019.

The VA loan is offered by qualified lenders, such as banks, credit unions, or mortgage companies, but guaranteed by the US Department of Veterans Affairs (VA). If the homeowner defaults on payments, the government will foot the bill. This means that the government also sets the rules for who may qualify and issues minimum guidelines and eligibility requirements. Simultaneously, the lender provides a lenient credit requirement and much better loan terms to eligible borrowers, such as no down payment, low VA loan rates, and no private mortgage insurance.

To qualify for a VA loan, you must meet three basic VA loan requirements:

1. You must meet the military qualifications of the Department of Veterans Affairs:

• Be an active-duty military member with six months of service;

• Be a National Guard member or Reservist with six years of service;

• Be a US military veteran who was honorably discharged and met the minimum service requirements of 90 consecutive days during wartime or 181 days during peacetime – automatic VA loan qualification; or

• Be a surviving spouse of a veteran who died from a service-connected disability, missing in action, or is a prisoner of war.

2. You have to meet the minimum financial requirements of the lenders:

Not all lenders offer VA loans, but those who do set their financial criteria in tandem with the US Department of Veteran Affairs guidelines. You must compare loan terms and VA mortgage rates to ensure you're getting the best deal. Therefore, keep in mind that:

• Credit score — Although the VA doesn't require a specific minimum credit score for VA loans, a lender can set their own minimum VA loan credit score requirement, usually a 620 FICO score, to decide who is a worthy risk.

• Debt ratio — You will need to show that you have the income to make the mortgage payments. A lender will evaluate a borrower's debt-to-income ratio (DTI) when considering their ability to pay back the loan. Your DTI represents how much of your monthly income goes toward paying back debt. Notably, the VA doesn't mandate a maximum DTI ratio, but it does set a dividing line for prospective borrowers with an acceptable debt-to-income ratio of 41%. Lenders have different requirements for debt ratio. For VA loan qualification purposes, the VA debt ratio is calculated by dividing your total monthly debt payments, including student loan debt, credit card debts, utility bill payments, and housing payments (the principal, interest payment, one month's worth of property taxes and insurance, and any other homeowner's fees) by your gross monthly income. Check out the annual income calculator to estimate your gross monthly income.

VA Debt Ratio = Total Monthly Debt Payments + Housing Payments / Gross Monthly Income

You can estimate your debt ratio qualification by selecting the checkbox under the result section and filling in your calculated gross monthly income and total monthly debt payments.

3. You must meet the VA minimum property requirement (MPR) and occupancy requirements:

The property you want to purchase MUST meet the VA's structural, sanitary, safety standards, and building codes, and must be your primary residence within 60 days of purchase. You can't use a VA loan for an investment property or vacation home.

Before we get into the details of how to apply for a VA loan, let's learn how to use the VA loan calculator.

Estimating your monthly mortgage cost is a crucial step in determining what you can truly afford, and irrespective of the stage you are in the mortgage process, you need to plan within your financial capacity. The VA loan calculator takes into account all the different scenarios involved in buying a home with a VA loan. All you have to do is input your information, and you will get results that will help you make a sound financial judgment.

Here's a short step-by-step guide on how to use this VA loan calculator:

1. You can start anywhere — but the most crucial information is the home value amount. This is the cost of the home on the real estate market.

2. Indicate if this is your first VA loan mortgage. If it is your first VA loan, you automatically have full entitlement and can purchase any home, irrespective of the county loan limit. If it is not, you need to fill in the county loan limit and your used entitlement from the previous VA loan. The information will help determine your remaining entitlement.

3. Input your down payment. Making a down payment on the home value reduces the loan amount. It also increases your equity in the home and the amount you will be charged in funding fees.

4. Provide a loan amount. If you already provided the information above, the VA loan calculator will estimate the loan amount. If you didn't, you could provide the exact amount you are collecting as a VA loan: loan amount = home value – down payment.

5. Include the VA Loan term. The mortgage loan term can be 15 years or 30 years. You can provide this information in months if you want, or if you already have an active VA loan, you can use the VA loan calculator to estimate how much you have left to pay off by inputting how much longer you'll hold the mortgage.

6. Provide the VA loan interest rate you were offered on the loan. If you took out a good deal, the best VA loan rates should be between 2% - 3%. You can also get offers as much as 4% or 5%. Make sure you compare rates and contract terms when deciding on your VA mortgage lender.

7. Indicate if you are exempted from paying the funding fees. If you are exempted from fees, the calculator can find your loan cost with many inputs. If not, you will have a higher total loan cost.

8. At the end, you can find your total loan cost — Estimated with property tax cost (estimated at 0.1% of the loan amount) and homeowner insurance (estimated at 0.029% of the loan amount).

9. By selecting the checkbox beneath the results section, you can also calculate your DTI — Provide your estimated monthly gross income and monthly debt to get an estimate of your DTI, which indicates how affordable the home purchase is according to how much you earn.

Now the details…

Once you've ascertained you meet the VA loan requirements, the next steps:

Obtain your VA Certificate of Eligibility (COE)

You need to show your mortgage lender your VA loan Certificate of Eligibility, or COE, as proof that you're eligible for a VA loan. If your lender is VA-approved, it may be easier to ask them to obtain the COE for you. Otherwise, you can apply for the document yourself.

If you are applying to get a COE, you'll need to establish proof of service. The documents you need to submit as proof to obtain a COE vary based on your current status with the military – whether you're an active-duty military member, a veteran, or a surviving spouse.

• Active-Duty Service Members, National Guards, and Reservists: You'll need a statement of service signed by your superior officer or an adjunct or unit commander. The statement of service must include your:

  • Full legal name;
  • Social Security number;
  • Birthdate;
  • The date you entered the service;
  • Information on any breaks or discharges you took from service; and
  • The name of the commander providing the information.

• Veterans: You will need to submit DD Form 214. DD Form 214 is a certificate that verifies your military discharge. You can request your DD Form 214 online by using the eVetRecs filing system.

• Discharged National Guard Members: Unlike service members, members of the National Guards unit belong to states, so you will need to contact the National Guard Adjutant General's office in the state you served in to request documents you need to apply for a COE. These documents are as follows:

  • NGB Form 22;
  • NGB Form 23;
  • Report of Separation;
  • Record of Service for each period of National Guard service;
  • Retirement Points Accounting; and
  • Proof of the character of service.

• Discharged Reserve Members: You need to provide the following documents to request a COE:

  • Proof of honorable service and discharge; and
  • A copy of your annual Retirement Points Statement.

• Surviving Spouses: If you get dependency benefits as a surviving spouse, you need to print and complete VA form 26-1817 from the VA benefits website to request the COE. If you do not get dependency benefits, to request your spouse's COE, you will need to provide:

  • Your spouse's DD Form 214;
  • Your marriage license;
  • Your spouse's death certificate; and
  • Print and complete VA form 21P-534-ARE from the VA benefits website.

Once you've got all the necessary documents ready, you can:

• Apply online through the VA's eBenefits website; or
• Mail your documents and a completed VA Form 26-1880 to the VA.

Get Prequalified and obtain a Preapproval letter

The VA doesn't limit how much you can borrow, but there is a maximum amount that the VA will guarantee if you default on your loan. That is why you must assess how much you can afford to pay for a home. You can use the home affordability calculator for this assessment.

Mortgage prequalification is an evaluation of your creditworthiness, indicating whether you meet the minimum VA home loan requirements and how big that loan may be. Prequalification is an essential step for those who aren't sure whether they're financially ready for homeownership.

If you are unsure about your financial capability to pay off a mortgage, it may be a wiser decision to rent. Before using the VA loan calculator, you can use our rent calculator to determine what is affordable rent for you. But, if you're confident in your finances or have already been prequalified, then you want to get preapproved instead.

A mortgage preapproval letter is a letter from a lender indicating the type and amount of loan you can qualify for. The pre-approval letter is issued after the lender has evaluated your credit history. Getting pre-approved for a mortgage:

• Helps you shop for homes within your means, and it signals you're a serious buyer when you make offers with a preapproval letter; and
• Helps you find a mortgage lender that can work with you to select VA home loan rates and other terms suited to your needs if you decide to switch mortgage providers.

Although the preapproval letter is not necessary, it does make your home search significantly easier. When you find a home you like, you'll stand out against other competing bidders.

Find a house and make an offer

Finding a home within your price range is a great way to avoid any extra financial commitments. Sometimes, you may find a home over your budget that you love and decide that the extra cost is worth it. Situations like this make the VA loan calculator a handy tool in determining what percentage of the mortgage loan will be guaranteed by the VA and whether you will need to make a down payment.

Generally, VA loans are designed to allow eligible borrowers to finance a home purchase without a down payment. The VA guarantees more than the 20% required down payment for mortgage loans. However, there is a maximum amount that the VA will cover for a beneficiary. This maximum is a beneficiary's VA loan entitlement.

What is VA loan entitlement?

There are a few misconceptions about what the VA loan entitlement is. So, we'll start by clarifying what it isn't:

1. VA loan entitlement is NOT how much you can borrow in total. There is NO RESTRICTION on how much you can borrow with a VA loan.

2. VA loan entitlement is NOT limited to use on one VA loan. If you used only some of the entitlement in a VA loan, you could take another loan to use the remaining entitlement.

The VA loan entitlement is the amount of a home loan the VA will cover if you default on your loan. This is the amount the lender can recoup if you can't uphold your loan terms.

There are two types of VA loan entitlements – Basic and Bonus entitlements:

• Basic VA entitlement — 25% or $36,000 for loans worth less than $144,000.

  If you're buying a home in a relatively cheap city, then this basic entitlement may be sufficient to cover a good portion of the home value. Still, home loans have become very expensive in many states – averaging about $250,000 in some states, so the VA created the bonus entitlement to help veterans afford properties in these places.

• Bonus VA entitlement — 25% of the value of home loans over $144,000 if you're using your full entitlement.

If you're using your remaining entitlement because you already have an active VA loan, it's 25% of the Federal Housing Finance Agency (FHFA) conforming loan limit for the county you're looking to buy in, minus the basic entitlement you've used.

The remaining entitlement simply refers to the amount of "unused" entitlement you have left over after you've purchased a home using your VA benefits.

It's not complicated. Let's take a few examples to illustrate some situations involving VA loans. 🙂

Example 1: Full entitlement

A veteran is using a VA loan for the first time, with full entitlement available, and is purchasing a home for $250,000 where the county loan limit is $548,250. What is the VA loan guarantee?

For veterans with full entitlement, the maximum guaranty amount is 25% of any loan amount above $144,000, regardless of the county loan limit:

Maximum guaranty = 25% × $250,000 = $62,500

VA will guarantee $62,500 on the veteran's $250,000 loan.

NO down payment should be required.

Example 2: Partial entitlement

Supposing the same veteran who has used $62,500 of his entitlement on a prior VA loan (not restored) is purchasing another home for $200,000 where the county loan limit is $548,250. Determine the VA guarantee.

Since the veteran has an active VA loan, they're using their remaining entitlement. For veterans with partial entitlement, the maximum amount of guaranty for a loan above $144,000 is the lesser of 25% of the loan amount or 25% of the county loan limit minus the amount of entitlement previously used and not restored:

Possible guaranty = 25% × county conforming loan limit

= 25% × $548,250

= $137,062.50

Remaining entitlement = possible guaranty - used entitlement

= $137,062.50 - $62,500

= $74,562.50

Maximum loan amount they can take with 25% guaranty

= $74,562.50 × 4

= $298,250

Proposed loan amount = $200,000

The proposed loan amount, $200,000, is less than the maximum loan amount eligible for the full VA guaranty — $298,250. Consequently, the lender will receive a full VA guarantee.

Maximum guaranty = 25% × loan amount

Maximum guaranty = 25% × $200,000 = $50,000

NO down payment should be required.

Example 3: Partial entitlement and loan amount greater than the county loan limit

A veteran has used $45,000 of entitlement on a prior loan, which he may not restore, and is purchasing a home for $700,000, where the county loan limit is $678,500.

🧐 Issues to point out here:

• The veteran has partial entitlement. Therefore, the VA loan is limited to the county loan limit. VA loan limits determine how much a veteran with partial entitlement can borrow before needing to factor in a down payment. VA loan limits vary by county and currently range from $548,250 to $822,375.
• The proposed loan amount is more than the VA loan limit. Because the proposed loan surpasses the VA loan limit, it poses an additional risk to the lender since only 25% of the VA loan limit can be covered for this borrower. Therefore, a lender willing to offer this loan will require a down payment based on the difference in the VA loan limit and the home value.

Possible guaranty = 25% × $678,500 = $169,625

Remaining entitlement = $169,625 - $45,000 = $124,625

Maximum loan amount they can take with 25% guaranty

= $124,625 × 4

= $498,500

Maximum guaranty = $124,625

Maximum guaranty % on proposed loan = $124,625 / $700,000 × 100 = 17.80%

Since VA's guaranty will be less than 25%, a down payment will likely be required to meet the lender's VA home loan requirements.

We can determine the required down payment to cover the loan as follows:

Lender required VA guaranty = 25% × 700,000 = $175,000

Required down payment = required VA guaranty – maximum guaranty

= $175,000 - $124,625

= $50,375

The borrower will have to make a down payment of $50,375 on the loan.

Comparably, using a conventional mortgage loan, if the veteran wants to avoid paying the monthly PMI, he'll need to make a 20% down payment for this loan amount:

Down payment = 20% × loan amount

= 20% × 700,000

= $140,000.

The down payment in the case of a conventional mortgage is almost triple the required down payment.

Example 4: Full entitlement and loan amount greater than the county loan limit

The veteran has full entitlement and is purchasing a home for $800,000, where the county loan limit is $724,500. Determine a down payment.

The VA loan limits do not apply to qualified veterans with full entitlement.

Therefore, NO down payment is required.

Example 5: No entitlement

The Veteran has used $36,000 of entitlement on a prior loan, which the veteran may not restore, and is purchasing a home for $144,000 where the county loan limit is $548,250. Determine a down payment.

🧐 Issues to point out here:

• $36,000 is the basic entitlement, which means that the previous VA loan is $144,000. Hence, the veteran has used up the basic entitlement, with no remaining entitlement.

• The new loan is not over $144,000, which is the amount that triggers the bonus entitlement.

Therefore, the guaranty would be 0% — $0 / $120,000.

🤫 Hint: To avoid instances like this and maximize your VA benefits:

• Seek loans worth over $144,000 to use your bonus VA loan entitlement if you'll need to take a second VA loan. If you can afford it, a trick to turn the VA guidelines on their head and make no down payment for two high-worth loans is first to take out a loan above a county loan limit with your full entitlement before taking a second loan within the loan limits of a county.

• Restore your full VA loan entitlement before making a new home purchase.

But how do you restore your full entitlement?

Ways to restore your full VA loan entitlement

You can restore your full VA loan entitlement if you:

1. Pay off the loan on the current property in full. You can keep the property and seek a new VA loan with full entitlement as long as the new home becomes your new primary residence.

2. Sell the home to pay off the remaining loan balance.

3. Transfer the remaining loan balance to another VA-eligible borrower by selling the home.

4. Do a VA loan refinance — refinance the VA loan with a conventional mortgage loan.

So, where were we? Aha, making an offer for the home you like!

• You've got your COE.

• You've found a property you like.

• You've got your preapproval letter, which gives you an edge over other bidders.

• Now what? You need to make an offer. Making an offer for a home purchase can go three ways here – your offer can get accepted, rejected, or countered.

If you negotiated the offer successfully with the seller, the home will have to be appraised to meet the VA MPRs.

VA Appraisal

After you've qualified for the VA loan and an agreement has been reached with a home seller, a VA appraiser will need to inspect the property's quality if it meets the standards of the VA Minimum Property Requirements (MPRs).

For a property to qualify, it must satisfy sanitary and structural requirements. Also, the seller would have to finance any outstanding repairs, or you will be responsible for the minimal repairs. It all depends on how this is negotiated, but it's better to conclude it before the appraisal because VA appraisals are more thorough than conventional mortgages.

Conclude the mortgage process and move in

If the home passes the appraisal process, it's time to finalize the mortgage process by paying the VA loan closing costs. The VA has a guideline that limits lenders to charge no more than 1% of the loan as the VA loan closing cost. However, the most substantial cost that comes with the VA loan is the funding fee.

• Funding fee - Most people are required to pay a funding fee when getting a VA loan. Since the government backs the VA loans with taxpayers' money, the government instituted funding fees to help keep the VA program running and cover the foreclosing cost if a borrower defaults. Funding fees range from 1.4% – 3.6% of the loan amount.

The following factors determine the exact cost of the fee:

• The loan amount;
• If it's a first-time use of the VA loan or a subsequent use;
• If it's a home purchase or a refinance; and
• The size of your down payment.

If you make a down payment, you'll pay less in fees.

When all of the paperwork is concluded, make sure you review the final contract details carefully before signing. Once you've signed your mortgage agreement, you can move into your new home. Congratulations!

The following groups are exempted from paying the funding fee:

• Surviving spouses;
• Veterans with a service-connected disability; and
• Purple Heart recipients serving in an active-duty capacity.

If you are not in any of the exempted groups, you can choose to pay the fee upfront or fold it into the loan amount. Remember that if you fold the funding fee into the loan, you will have to pay more monthly mortgage payments.

Do you happen not to need the VA loan for a home purchase? Then, consider the other options from the VA loan program.

The VA loan program offers various options to help eligible borrowers buy and build, improve a home, or refinance a current home loan. The different types of VA loans you can use depending on your needs are:

1. VA purchase loan — For borrowers looking to buy a home with no down payment.

2. VA Interest Rate Reduction Refinance Loan (IRRRL), also known as the VA Streamline Refinance – To replace an existing VA-backed home loan with a lower VA loan rates or to refinance from adjustable-rate to fixed-rate mortgage.

3. VA cash-out refinances — Helps VA loan owners take cash out of their home equity to sort out other financial responsibilities. Also, it's an option for eligible borrowers who want to replace a conventional mortgage with a VA loan.

4. Native America Direct Loan (NADL) — For Native American veterans or veterans married to a Native American so they can buy, build, or improve a home on federal trust land.

Specifically designed for military families, the VA loan benefits make it a favorable option to conventional mortgages and even FHA loans. But there are drawbacks to all kinds of loans, including VA loans. It is always essential to have all the information before deciding to take a loan simply because it looks attractive. These pros and cons will help you in your decision-making.

Pros of VA loans:

• No required down payment. The zero-down buying power to veterans is the ultimate VA loan benefit. Only USDA loan offers a similar feature to its beneficiaries.

• No limit on the loan amount you can borrow using the VA loan program.

• No mortgage insurance. VA loan beneficiaries can save more money monthly because they don't need to pay the Mortgage Insurance Premium (MIP) required for an FHA loan or the Private Mortgage Insurance (PMI) that comes with conventional loans – it can cost an extra 0.5% - 2% of the loan amount each month.

• Low VA loan interest rates. Compared to conventional mortgages and FHA loans, VA home loan rates are among the best on the real estate market. Lenders offer the best rates to eligible VA loan borrowers because of the government guaranty.

• Lenient borrowing requirements. There is no minimum credit score for VA qualification. Although some lenders can have their VA loan credit score criteria, it is always less restrictive than other loan options. The VA loan also allows you to qualify with a higher DTI, up to 50% for a variable-rate mortgage and 60% for a fixed-rate mortgage with some lenders.

• Assistance with costs and payment negotiations from the VA. The VA places limits on the closing costs associated with a VA loan. For instance, origination fees cannot be more than 1% of the loan amount. And if you fall behind on payments, the VA can get involved to help negotiate with the lender before you default on the loan terms and risk foreclosure.

• No prepayment penalties. VA loan borrowers can pay off the loan early without being fined.

• Lifetime VA benefit. The VA loan is not a one-time option for veterans. You can use it again and again to make a home purchase as long as you pay off the loans. Even if you filed for bankruptcy or go through a foreclosure, you can still qualify to get a VA loan after two years.

• Purchase and cash-out refinance options. There are different types of VA loans for different mortgage situations that offer very favorable terms. For instance, with the VA loan cash-out refinance, you can access 100% of your equity in a cash-out refinance.

  Unique Benefits for Disabled Veterans:

• Exemption from paying the VA loan funding fees.

• Exemption from property tax. Depending on the state, a disabled veteran can qualify to pay lower property tax or be exempted entirely from paying.

• Access to Specially Adapted Housing (SAH) Grants to renovate or build a home that fits the unique needs of a disabled person. If you qualify for the SAH grant, you can get up to $100,896 in 2021 (you don't have to pay it back because it is a grant, not a loan).

• Access to Temporary Residence Adaptation (TRA) Grants to add modifications for easy navigation on your property if you live with a family member. You can get up to $40,637 through the TRA grant program in 2021 if you qualify.

Cons of VA loans:

• Paying no down payment means that you have less equity on the home from the start. And that leaves you vulnerable to the real estate market changes until you've paid off the loan.

• VA loan funding fees and closing costs can make the initiating loan expensive. You have to pay the lender's origination fees and the mandatory funding fee, ranging from 1.4% - 3.6% of the loan amount (up to $10,800 for a $300,000 loan) to cover the cost of foreclosing if you default on the loan.

• You must meet the minimum property requirements (MPRs) and occupancy requirements. This means that the VA appraiser must approve the property to meet the VA minimum standard before you can buy it. Some properties, like vacant land or a co-op, will not be eligible for a VA loan. And the home has to be your primary residence, so you cannot buy an investment property or a vacation home with a VA loan.

• A 30-year VA loan can cost more in the long-term than a 15-year conventional loan. Sometimes, you may even get a better deal when comparing the long-term benefits of a 15-year conventional loan or an FHA loan with its VA loan counterpart, despite the low VA loan rates.

• Using the remaining VA entitlement to take a second VA loan places a borrower with extra financial responsibilities of covering two mortgages.

• Not all lenders offer VA loans.

Borrowing money can help you achieve a lot financially when you use them strategically. Yet you may be better off using other mortgage alternatives than the VA loan if you have excellent credit history and enough money for a down payment. You can avoid paying the PMI for a conventional mortgage entirely if you make a 20% down payment, and you will own more equity to pay off the mortgage sooner than when you're stuck with a VA loan.

However, if your goal is to pay less money in originating the mortgage, and you're eligible for a VA loan, then go ahead. Make sure you use the most of your VA benefit by purchasing a home that costs over $144,000. That way, you can access your bonus entitlement and still use the remaining entitlement for other VA loan purchases if you wish. You've sacrificed for your country, and you deserve your VA benefits.