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The amount that a veteran can borrow through a VA loan is based on his/her "entitlement." While that is a floating figure, the VA will allow additional entitlement up to one quarter of the amount that Fannie Mae has defined as a conforming loan. According to the VA, most lenders will loan up to four times a veteran's entitlement with no down payment. That means the conforming loan figure can be the amount available through the VA loan program. For 2007 that figure is $417,000.

The advantages of a VA loan extend beyond the lack of down payment. The mortgage will not require mortgage insurance, and will be assumable. The rates on the loan must be competitive. There is no prepayment penalty allowed on a VA loan. There is, however, a funding fee payable to the VA that can be substantial.

Some analysts warn that loan applicants carrying a VA certification for a no-down loan are often charged higher fees by the banks. VA loans may carry higher interest rates or points fees than conventional loans. Some banks take advantage of the veteran who might be less likely to shop a loan because of the certification from the VA. Some banks will take advantage of that fact and offer a more expensive loan than would be available to a customer who is actively shopping for the best deal.

The VA loan is no longer as popular an option as it once was. Many banks offer 100% financing on homes today and without the restrictions on amount that the borrower finds with loans insured by the VA. For the moment, however, the mortgage business remains a buyer's market. There is intense competition for new loans and a potential customer with a VA certification AND the willingness to shop around may do quite well in securing a loan with no down payment.

Conventional loans with no down payment carry an interest rate that is often three quarters of a percent higher than a loan to the same customer who is making a down payment. Shopping the market for conventional vs. VA loans is a manageable task for anyone who acquaints himself/herself with current market norms. The details of the VA program are well laid out at their website: http://www.homeloans.va.gov/index.htm.

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