A question that veterans often have is, "How do I figure out how much the payments on a VA loan would be for me?"
Easy….multiply this magic number we’ll call an “interest factor” by the amount of money you need to borrow. Then just add property taxes and insurance.
Disclaimer: If you’re a math professor and some of my math terminology isn’t completely accurate, do me the biggest favor. Shut your cakehole!! I’m not applying for a job to teach math. I’m just giving veterans a quick easy reference they can use to calculate their potential mortgage payment.
Guys....I’ve made this super easy for you. Technically the formula to calculate a mortgage payment is this algebra monstrosity shown below.
Payment = Principal x {[r(1+r)n] / [(l+r)n-1]}
Most guys I served with couldn’t solve that equation if their DD214 depended on it. I’m sure you’re the exception, but lucky for you I’ve done the work for you.
Listed below is two charts. One for 30 year loans, and one for 15 year loans. Believe it or not the payment for a 15 year loan is not double the payment of a 30 year. It’s actually a lot less than that. So you should do the calculation and compare the two.
Full disclosure, these are not set in stone. Rates fluctuate daily. In addition, you may not qualify for the advertised rate. In my experience, people with lower credit rankings don’t. So I suggest you calculate your potential payment at the advertised rate, and then at a rate ½% higher (just add .5 to today's interest rate). That should give you a solid range of where your payment is likely to fall.
Once you find your rate on the chart, you’ll see a number next to it. Multiply the amount you need to borrow to buy the home by this number. There are six numbers after the decimal point in each number, be sure to use them all. I didn’t use that many digits because I wanted you to round them off.
The product (or result of that multiplication…take that math nerds!!) is what your monthly loan payment would be. I suggest you write down a few of these rates and numbers on a small sheet of paper and stick them in your wallet (or take a pic with your phone…get with the times boomer!!).
Keep them handy so when you’re out looking at homes you can quickly calculate your payment.
But wait a minute…we aren’t done yet.
You’ll still have to pay property taxes and insurance. The annual cost of these is divided by the 12 months of the year. And tacked onto your payment. In most areas around the country, property taxes are easy to find.
Just go to Google and type in “x county property tax”. It’s incredibly rare that I come across a county in the United States that doesn’t have property tax data online. Generally all you need to do is type the property address into the search tool on the website, and you can literally pull up the most recent tax bill for the property.
Be sure to look at the itemized tax bill. If you don’t see city or school taxes, that property’s taxes may be split among two different counties. Likewise, if all you see on the tax bill you're looking at is just city and school taxes that's also indication the property receives two separate tax bills. Though it’s not typical, it's not uncommon for a property to receive a portion of their tax bill from one county, and the rest of the bill from another county.
Take the total property taxes and divide that by 12. Then add the quotient (the number that results from dividing one number by another…seriously dude, I’m crushing math terms right now) to the monthly payment.
The last thing we need to add is the cost of insurance. Most people in the country don’t require a separate flood insurance policy. But if the property is close to water, it may be required. So be sure to inquire about that.
Insurance will vary on a multitude of factors. I generally just use .85% (or .0085) for my estimate. So just multiply the price of the house by .0085. If the product of that multiplication is greater than $3,500 I usually cap it at $3,500. Here in the Dallas/Fort Worth area it’s rare that a standard homeowner’s insurance policy will exceed that.
I only expect to see insurance premiums higher than that when people are buying million dollar homes. For most people .0085 multiplied by the purchase price will get you pretty close. Divide that by 12 months and add that amount to the loan payment you calculated, along with the monthly property tax amount.
Now this is not going to be exact. Some of you will be required to pay the VA funding fee, which is added to the balance of your loan. That will change the monthly payment slightly. The funding fee can be as much as 3.6% of the loan amount (as of April 2020).
In addition, whoever owns the home now may or may not qualify for the same tax exemptions as you. So this too could fluctuate. Also, there could be something special about the property that could drive up the cost to insure it. For example things like ceramic tile roof shingles can be a nightmare for your insurance premiums.
The goal here is to have a quick tool you can use to calculate an approximate mortgage payment, and this absolutely does the trick. But looking at this chart leads us to the next big question, “Does VA offer the best interest rates?”
30 Year
Rate Factors
2.000% - 0.003696
2.125% - 0.003759
2.250% - 0.003822
2.375% - 0.003887
2.500% - 0.003951
2.625% - 0.004017
2.750% - 0.004082
2.875% - 0.004149
3.000% - 0.004216
3.125% - 0.004284
3.250% - 0.004352
3.375% - 0.004421
3.500% - 0.004490
3.625% - 0.004561
3.750% - 0.004631
3.875% - 0.004702
4.000% - 0.004774
4.125% - 0.004846
4.250% - 0.004919
4.375% - 0.004993
4.500% - 0.005067
4.625% - 0.005141
4.750% - 0.005216
4.875% - 0.005292
5.000% - 0.005368
15 Year
Rate Factors
1.500% - 0.006207
1.625% - 0.006264
1.750% - 0.006321
1.875% - 0.006378
2.000% - 0.006435
2.125% - 0.006493
2.250% - 0.006551
2.375% - 0.006609
2.500% - 0.006668
2.625% - 0.006727
2.750% - 0.006786
2.875% - 0.006846
3.000% - 0.006906
3.125% - 0.006966
3.250% - 0.007027
3.375% - 0.007088
3.500% - 0.007149
3.625% - 0.007210
3.750% - 0.007272
3.875% - 0.007334
4.000% - 0.007397
4.125% - 0.007460
4.250% - 0.007523
4.375% - 0.007586
4.500% - 0.007650
