If you want to determine the amount of your monthly payment for your Veteran’s Administration (VA) mortgage you can follow the easy steps listed below. All you need to do is calculate the standard amount for mortgage and interest payments and include the calculation you will learn for the funding fee that is charged by the VA. Before you can begin you need to gather up the following items:
• Funding fee
• Real estate tax total
• Homeowner’s insurance total
If you don’t know what the amounts are then you may need to find the closing papers or make a couple of phone calls. The amount of the real estate taxes can be obtained from on line data published by the assessor of your county. You will need the name of the former owner of the property to find the amount of taxes paid in the last tax year. To get the amount of the funding fee charged by the VA you can find the amount listed in your closing papers. To get the amount for your homeowner’s insurance either look at the bill that came with your policy or call your agent for the premium total.
Step 1: Let’s start with the funding fee. The mortgage payments to the VA are like other lenders except for the funding fee. The VA Funding Fee is required by law for all military persons who are qualified for VA loans. The only exception is the fee is not applicable to a disabled veteran. The fee is determined at a rate of between 0% and 3% of your total loan amount. Remember 0% is for the disabled vet so we’ll use an example with a 2% funding fee. You want to finance $100,000. $100,000 x 2% (.02) = $2,000. Your total loan amount financed then would be $100,000 + $2,000 = $102,000. You would calculate your monthly payment on the loan amount plus the fee amount.
Step 2: Find the property tax amount that you gathered and the homeowner’s insurance amount that you gathered. If you have a VA note you will be required to pay these amounts monthly and VA will hold them in your escrow account. Let’s say your annual taxes are $2,000. $2,000/12 = $166.67. The monthly amount for property taxes is $166.67. Your hypothetical insurance amount if $450 per year. $450/12 = $37.50. Both of these monthly figures will be added to your monthly premium.
Step 3: In the preceding steps we determined that you would finance $102,000. I have listed the calculation steps that you will do using a business or financial calculator. The formula is known as basic time value of money as is shown below:
Base loan amount = $102,000
Interest rate eqauls 6%
Term is for 30 years or 360 months
Monthly principal and interest payment (PI) = $611.54
Monthly real estate taxes = $166.67
Monthly insurance equals $37.50
Total monthly payment will equal $811.71
102,000 is the Present Value (PV)
360 is the Number of Months (N)
6 – Interest per year (I/Y)
Compute Payment – (CPT PMT)
You now have all the numbers that you need for your calculation. This is the formula you will use and the above figures are simply ‘plugged in’.
M = P [ i(1 + i)n ] / [ (1 + i)n – 1].
You just have to solve for M. When you find M you have your monthly payment.
If you don’t have a financial calculator you can still do the calculation by following the formula and standard mathematical processes. If you need help, your local high school math teacher would be the one to call!