You have served our country and you want to buy a house. Home loans from the Department of Veterans Affairs, known as VA Loans (VAHL), were created to help veterans and their families achieve the dream of homeownership. The program has benefited more than 18 million veterans and dependents. VAHL, which is available to certain veterans, active duty military personnel, and reservists, offers many advantages, although there are also some drawbacks.

The advantages

One of the main benefits of VAHL is that they do not require a down payment. Additionally, there are limitations on closing costs, origination fees, and appraisal fees. Another great advantage of VAHL is that there is no private mortgage insurance. The VA also prohibits lenders from requiring private mortgage insurance, since they provide collateral on the loan. Not having to pay for private mortgage insurance can save borrowers tens of thousands of dollars. Generally speaking, VAHLs are a more affordable alternative to conventional home loans.

Applying for a VAHL is much like applying for any conventional home loan, except that you must also obtain a certificate of eligibility from the VA. The VAHL process takes two to six weeks, which is about the same time as the conventional loan process. Almost any lender that offers conventional loans or FHA loans also handles VA loans, so it’s not hard to find a lender to help you.

The disadvantages

Despite the many advantages that VAHL offers, there are also some drawbacks. One drawback to VA loans is that the maximum guaranteed loan amount is $240,000. While this could buy you a decent home in most of the country, in California’s high-priced markets, it may not be enough. Also, not all vets are eligible for a $240,000 loan. The actual amount of the loan varies based on the borrower’s income, assets, credit history and debt.

In some ways, VA loans are not that different from conventional mortgages. For example, VAHLs are no easier to qualify for than conventional home loans. If you have low income or bad credit, don’t count on getting approved for a VAHL. Also, it’s a common misconception that VAHLs have better interest rates than conventional home loans. The reality is that VAHL interest rates are in line with those of conventional home loans. The main advantage of VAHL is the fact that you do not have to make a down payment.

There is also a one-time financing fee for VAHL. Congress has charged this fee on VA loans since 1982. The fee ranges from 1 1/4 percent to 3 percent, depending on various factors, such as the veteran’s service and whether it is an initial or subsequent loan. However, this fee can be reduced if you make a down payment of at least 5 percent. For VA refinance loans, the fee can range from 1/2 percent to 3 percent. Many buyers finance the fee along with their home, but doing so can be quite expensive in the long run, amounting to tens of thousands of dollars over the entire term of the loan.

Ultimately, the choice between a VAHL loan and a conventional loan will depend on your individual circumstances. For most veterans and service members, VAHLs are a great deal, but in some cases, opting for a conventional home loan or an FHA loan may be a better option.