VA Loans

What is a VA loan?

A VA loan is a mortgage guaranteed by the U.S. Department of Veterans Affairs. Like FHA, the VA doesn't lend directly — it guarantees a portion of the loan, allowing approved private lenders to offer favorable terms to eligible borrowers. The program was established in 1944 as part of the GI Bill and has helped millions of veterans and service members purchase homes.

Tennessee has a significant military and veteran population, particularly around Fort Campbell (Clarksville), Arnold Air Force Base (Tullahoma), and the many veterans who've settled in Nashville, Knoxville, and Chattanooga. VA loans are widely used across the state.

Key VA loan benefits

• No down payment required — eligible borrowers can finance 100% of the purchase price with no down payment
• No private mortgage insurance — unlike conventional and FHA loans, VA loans have no monthly PMI regardless of loan-to-value
• Competitive interest rates — VA loans typically carry rates below conventional market rates due to the government guarantee
• Flexible credit requirements — the VA has no minimum credit score requirement, though most lenders set overlays at 580–620
• Limits on closing costs — the VA restricts which fees lenders can charge, reducing out-of-pocket costs at closing
• No prepayment penalty — you can pay off your VA loan early without penalty
• Reusable benefit — you can use your VA entitlement multiple times throughout your life

Eligibility requirements

VA loan eligibility is based on military service. You may be eligible if you are:

• A veteran who served the minimum active duty period (generally 90 days during wartime or 181 days during peacetime)
• Currently on active duty with at least 90 days of continuous service
• A National Guard or Reserve member with at least 6 years of service, or 90 days of active duty under Title 10 or Title 32
• The surviving spouse of a service member who died in the line of duty or from a service-connected disability

To use your benefit, you'll need a Certificate of Eligibility (COE). Morgan Hardy can help you obtain your COE through the VA's automated system — in most cases it takes minutes.

VA funding fee

VA loans don't require monthly mortgage insurance, but they do carry a one-time funding fee paid at closing or rolled into the loan. The fee varies based on your down payment, whether it's your first or subsequent use of the benefit, your service category, and whether you are a Regular Military or Reserves/National Guard member. Funding fee rates are set by Congress and are subject to change — verify the current rate schedule with Morgan Hardy or at VA.gov before closing.

As a general reference: for Regular Military borrowers using VA for the first time with no down payment, the funding fee has been 2.15% of the loan amount in recent years. Subsequent uses without a down payment have carried a higher fee. Putting down 5% or more reduces the fee; 10% or more reduces it further. These figures are illustrative — confirm the current schedule before relying on them.

Veterans with a service-connected disability rating of 10% or more are exempt from the funding fee entirely, as are surviving spouses of veterans who died in service or from a service-connected disability. If a disability rating is pending at closing, a refund may be available once the rating is approved.

VA loan limits and entitlement

Since 2020, there are no VA loan limits for eligible borrowers with full entitlement — meaning you can borrow as much as a lender will approve with no down payment required. This is a major advantage in higher-priced markets like Nashville and Brentwood.

If you have remaining entitlement from a prior VA loan that hasn't been paid off, county loan limits may apply to determine how much you can borrow without a down payment. Morgan Hardy can review your entitlement situation and explain your options.

Property requirements

VA loans can only be used for primary residences — not investment properties or second homes. The property must meet VA Minimum Property Requirements (MPRs), which ensure the home is safe, structurally sound, and sanitary. A VA appraisal is required and will flag any MPR issues that must be resolved before closing.