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One of the biggest stumbling blocks many people face while traveling the road from renter to homeowner is coming up with a down payment. That's not a problem for qualifying veterans, or for men and women on active military duty.

Although there have been changes to the home-loan program from the Department of Veterans Affairs since it was introduced after World War II, it is still a widely used no-down-payment loan. Unlike other zero-down loans, there are no hurdles to jump in terms of income, debt ratios, savings or credit scores. You will likely have to come up with closing costs, but that's a lot easier than coming up with both closing costs and a down payment. With a VA loan, a seller can pay all closing costs, but that is between the buyer and the seller.

There are more than 2.3 million VA-backed loans across the country worth about $234 billion, according to Keith Pedigo, the VA's director of loan guarantee services in Washington, D.C. The agency backed more than 165,000 loans worth more than $25 billion for veterans in fiscal 2005, their surviving family members and active duty personnel, he adds, most of them first-time buyers.

The VA does not loan money to buy homes. Instead, like the Federal Housing Administration, it guarantees loans. Unlike FHA loans, however, VA loan limits are the same as those Fannie Mae and Freddie Mac set for conforming, conventional loans. This year the loan limit is $417,000 in the contiguous 48 states and $625,000 in Hawaii, Alaska, Guam and the U.S. Virgin Islands. Pedigo points out, "Lenders can make any size VA loan that they wish, but there are virtually no lenders who would go over the limit."

That's because VA does not guarantee the full amount of the loan. Pedigo explains that VA guarantees 25 percent of the loan up to the loan limit. When a home is foreclosed on, "we buy the property back from the lender and we resell it in an effort to recover our loss." The lender gets whatever the home is sold for. If it is sold for less than the amount of the loan, VA makes up the difference for up to 25 percent of the total loan.

Instead of the private mortgage insurance many borrowers have to pay when taking out a conventional loan with less than a 20 percent down payment, VA borrowers pay a "funding fee." Pedigo explains that a veteran using his VA loan for the first time pays a funding fee equal to 2.15 percent of the total amount borrowed. That's $21.50 for every thousand borrowed, which works out to $2,150 per $100,000 borrowed.

If the borrower takes out a second VA loan, the funding fee would be 3.3 percent of the amount borrowed.

While some buyers pay the funding fee upfront, in cash, the fee is usually rolled into the loan. Pedigo adds that in recent years, because of the economy and the growth in home values, VA has not had to ask Congress for any money to cover losses on foreclosures.

If you are a veteran, or you are on active duty, and you want to find out if you qualify for a VA loan, click here or call 1-866-572-6004. If you do qualify, the VA will provide a certificate to give to your lender showing that VA will guarantee your loan.

Millions of veterans have bought homes with VA-backed mortgages since the VA home loan program was introduced more than 50 years ago.

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