VA loans' Pros and Cons

Pros: Conventional mortgages generally pose fewer bureaucratic hurdles than FHA or VA mortgages, which may take longer to process because of the red tape.

And because these mortgages generally require higher down payments than the others, home equity can build up faster.

Cons: You'll need excellent credit to qualify for the best interest rates. Also, many lenders require higher down payments than for government-backed loans. In declining markets such as this one, borrowers may only qualify for 90 percent loan-to-value and have to come up with the rest out of pocket. Some lenders may require as much as 20 percent down, particularly for condominiums in markets where it's difficult to get mortgage insurance.

Who they're good for:

Conventional loans are ideal for borrowers with excellent credit who can afford a down payment of 5 percent or more.

The main purpose of the VA home loan program is to help veterans finance the purchase of homes with favorable loan terms and at a rate of interest which is competitive with the rate charged on other type of mortgage loans.

For VA housing loan purposes, the term "veteran" includes certain members of the Selected Reserve, active duty service personnel and certain categories of spouses.

This article should help you to understand what VA can and cannot do for the home purchaser. However, it is not a legal document and should not be interpreted as one. Nothing should be taken as a change of law or regulations. The article does not attempt to go into detail or into unusual problems. Information about VA loans is given in a narrative format followed by questions and answers in those areas of the greatest concern.

It is suggested that the article be read in its entirety. Please pay particular attention to the information about:

Your responsibility to determine the condition of the property you purchase, and assumption of your VA loan and obtaining a release of liability.

Any questions you have which are not answered here should be referred to the Loan Guaranty Division at the nearest VA regional office, or to your lender who will take them up with VA if necessary. A list of VA offices may be found in the Help section.