I have VA benefits but when we were looking for our house we found out that many sellers don't want to deal with buyers planning on using a VA loan. It means extra inspections and probably repairs for the sellers before the VA will give it's stamp of approval. Since we knew our home would be of the fixer upper variety it cut a lot of red tape going with a traditional mortgage and allowed us to drive the price down after the inspection due to all the repairs that would be needed.
Quite true as well. There are only (if I remember correctly) 6 buildings in the downtown chicago area that are "VA" certified. A bit more that are FHA but not much.
I personally wanted to avoid the down payments (to ditch the PMI as you mentioned, is great advice) because I wanted to keep that money invested rather than put it into the house. To counteract that, I make an additional 3 payments a year (although i realize that is not is not a standard in everyone's budget).
The real issue I suppose is to buy within your means and protection. I mean, it took me literally until the age of 35 to be able to afford a place in a city I wanted to live in. But because of that, I feel confident in the purchase, it fits right in the budget, and I have ample protection should something happen.