Tennessee residents have a lot of reasons to love their home state, including its low cost of living and zero state income tax. The Volunteer State is also admired for its breathtaking sights, thriving music scene and recreational opportunities.
If you’re searching for a home in Tennessee, remember to shop around and compare mortgage rates. What may seem like a small difference could add up to thousands over the course of a 15-year or 30-year mortgage.
- Mortgage debt in Tennessee
- Types of home loans
- Conforming loan limits in Tennessee
- First-time homebuyer programs in Tennessee
- Mortgage refinancing rates in Tennessee
Mortgage debt in Tennessee
Credit Karma members with mortgages in Tennessee had average mortgage debt of $163,658 in 2020 and average monthly mortgage payments of $1,100.
That puts Tennessee slightly below average for both mortgage debt and average monthly mortgage payments compared to Credit Karma members across the U.S in 2020.
Types of home loans
If you choose to finance your dream home, you might be overwhelmed with the number of mortgage loan options out there. Here are some of the more common mortgage types Tennessee homeowners may consider.
Conventional loans in Tennessee
Conventional loans are mortgages that aren’t part of government programs. These loans tend to be good for people with solid credit and a down payment of at least 3% to 5%.
Tennessee FHA loans
FHA loans are a good option for first-time homebuyers to explore — particularly if your credit is less than perfect. That’s because you may be able to qualify with credit scores as low as 580 with a 3.5% down payment or 500 with a down payment of 10%. This FICO® score requirement is the FHA minimum standard. In general, additional lender credit score requirements may apply.
The FHA loan limit in 2023 is generally $472,030 for a one-unit property, but it can reach as high as $1,089,300 depending on where you live.
One area in Tennessee has higher limits.
- Nashville-Davidson-Murfreesboro-Franklin
You can find the exact limit by county on the U.S. Department of Housing and Urban Development website.
VA loans in Tennessee
If you’re an eligible veteran or service member comparing mortgage rates in Tennessee, a VA loan can be attractive since down payments and mortgage insurance aren’t typically required and you may be able to qualify even if you don’t have great credit.
Similar to FHA loans, VA loans are insured by the federal government but issued by private lenders.
Conforming loan limits in Tennessee
Conforming loans are a type of home loan that meets certain loan limits set by the Federal Housing Finance Agency. This means they can be bought by Fannie Mae and Freddie Mac, federal-government-sponsored enterprises that guarantee mortgages.
Loans that exceed conforming loan limits are known as jumbo loans. Lenders often consider these loans riskier than conforming loans.
Many counties in Tennessee have a conforming loan limit of $548,250 in 2021. Thirteen, however, have a conforming loan limit that’s higher than normal. These include Cannon, Cheatham, Davidson, Dickson, Macon, Maury, Robertson, Rutherford, Smith, Sumner, Trousdale, Williamson and Wilson counties.
First-time homebuyer programs in Tennessee
If you’re hoping to buy your first home, there may be some assistance programs available to you in Tennessee.
- THDA Great Choice Loan Program: Offered by the Tennessee Housing Development Agency, or THDA, the Great Choice Loan Program is for first-time and certain repeat homebuyers as well as military veterans. It offers conventional and government-backed 30-year loans with fixed interest rates. To take advantage of it, you must have a minimum FICO® score of 640, complete an approved homebuyer education course and meet certain income and purchase price limits.
- THDA Great Choice Plus: With THDA Great Choice Plus, you can receive up to $7,500 to cover your down payment and closing costs. This program offers a 15-year second mortgage with the same interest rate as your first mortgage. You must get a Great Choice loan to qualify for the cash assistance.
- THDA Homeownership for the Brave: The THDA Veterans Homeownership for the Brave is designed for qualified military members and some spouses. It provides a reduced interest rate on an approved THDA Great Choice mortgage. It also waives the first-time homeowner requirement and allows you to borrow up to 100% of the purchase price with a VA loan or 96.5% with an FHA or USDA loan.
Mortgage refinancing rates in Tennessee
If you’re thinking about refinancing your mortgage, keep a few things in mind.
- Break-even cost — Once you know the closing costs for your refinance, you can use any savings on your monthly mortgage payment to calculate how long it will take you to recoup that investment and “break even.”
- Cash-out refinance — Have you accumulated equity in your home that you’d like to convert to cash? A cash-out refinance lets you refinance your home for more than what you owe and get cash in return. But remember that you’ll owe the full amount plus interest and the equity in your home will be less if you sell in the future.
- Loan term — You also may want to either shorten or extend your loan term. For instance, if you have a 30-year mortgage, you may want to convert it to a 15-year loan. Keep in mind that reducing your term likely means you’re paying more each month — but less in interest over time. Lengthening your loan term may mean you pay less each month, but more interest over the course of the mortgage.