What is included in a VA loan payment
Your full monthly payment has four or five parts, and the calculator above shows each one in the colored bar:
- Principal: the part that pays down what you owe. Early in the loan this is the smaller share, and it grows every month.
- Interest: what the lender charges on the balance. Your rate is the single biggest lever on the payment, which is why shopping two or three lenders is worth real money.
- Property taxes: set by your county, usually collected monthly into escrow. Rates range from about 0.3% of home value per year in Hawaii to over 2% in Illinois and New Jersey.
- Homeowners insurance: required by every lender. The national average runs roughly $150 to $200 per month and varies by state and roof age.
- HOA dues: only if the home is in an association. Not escrowed, but lenders count them when qualifying you.
What is missing from that list is the item that inflates everyone else's payment: mortgage insurance. FHA loans charge a monthly insurance premium for most of the life of the loan, and conventional loans charge PMI whenever the down payment is under 20%. The VA loan charges neither, at any down payment, ever.
How the VA funding fee changes your payment
The funding fee is a one-time charge paid to the VA that keeps the loan program running. Nearly every buyer finances it into the loan, so a $400,000 purchase at 2.15% first use becomes a $408,600 loan. That adds about $52 per month on a 30 year loan at 6%, which is a fraction of what monthly mortgage insurance would cost.
| Down payment | First use | After first use |
|---|---|---|
| Less than 5% | 2.15% | 3.30% |
| 5% to 9.99% | 1.50% | 1.50% |
| 10% or more | 1.25% | 1.25% |
You pay $0 funding fee if you receive VA disability compensation at any rating of 10% or higher, if you are a surviving spouse receiving Dependency and Indemnity Compensation, or if you are a Purple Heart recipient on active duty. Flip the disability switch in the calculator and watch the fee disappear from the payment.
A worked example
Take a $400,000 home in Texas, nothing down, 5.99% for 30 years, first VA loan use, no disability rating. The funding fee is $8,600, making the loan $408,600. Principal and interest come to about $2,447. Texas property taxes run high, about $560 per month on this home, plus roughly $167 insurance. Total payment: near $3,174. The same buyer with a 10% disability rating skips the $8,600 fee and pays about $52 less each month, roughly $3,122.
Now the FHA comparison. The same $400,000 home with FHA's minimum 3.5% down carries a 1.75% upfront premium plus about $180 per month in ongoing mortgage insurance. Even with a smaller loan after the down payment, the FHA buyer's payment lands about $150 to $200 higher every month, and they had to bring $14,000 to closing that the VA buyer kept in the bank.
How to lower a VA loan payment
- Shop the rate. A quarter point on $400,000 is about $65 per month. Get written quotes from at least three VA lenders and make them compete.
- Check your funding fee exemption. If you have any disability rating, the fee is $0. If you have a pending claim, ask your lender about a refund if it is granted after closing.
- Challenge the property tax assessment. Counties over-assess constantly, and a successful protest lowers the biggest tax line in the payment.
- Skip the temptation to skip escrow. Some lenders offer it, but budgeting taxes yourself rarely beats the discipline of escrow for most buyers.
- Consider a 20 year term. The payment rises, but total interest falls dramatically. The calculator shows lifetime interest for every term.
Frequently asked questions
Does a VA loan have PMI?
No. VA loans never charge monthly mortgage insurance at any down payment amount. That is the largest single monthly advantage over FHA and low-down conventional loans.
Is the funding fee paid monthly?
No, it is a one-time fee. Almost all buyers roll it into the loan amount, which nudges the monthly payment up slightly. Buyers with a 10% or higher disability rating pay no fee at all.
What credit score do I need for the rate in this calculator?
The VA sets no minimum score. Most lenders look for around 580 to 620, and better scores earn better rates. The rate field is yours to set, so enter the quote a lender actually gave you.
Why is my quoted payment different from this calculator?
Usually property taxes. Lenders estimate them from the exact address while we estimate from state averages. Enter your county's real figure in the property tax field to match a Loan Estimate.
Can the seller pay my closing costs?
Yes. On a VA purchase the seller may pay all of your loan-related closing costs plus concessions up to 4% of the price. Paired with zero down, some buyers close with almost no cash out of pocket.
Do VA loans have prepayment penalties?
No. You can pay extra principal any month or pay the loan off entirely at any time with no penalty, which shortens the loan and cuts total interest.
Does the payment change over time?
Principal and interest are fixed for the life of the loan. Taxes and insurance are not, so expect the escrow part of the payment to drift up over the years as counties reassess and premiums rise.
How much house does this payment buy me?
Flip the question around with our affordability calculator, which starts from your income, counts tax-free income 25% higher the way lenders do, and runs the VA residual income test.