What to know about buying a house in Tennessee
If you’re a first-time home buyer in Tennessee, you might be qualified for valuable assistance from your state, county, or city. That could include home buyer education, special mortgage programs, and even down payment assistance. Ready to take your first step toward becoming a homeowner? Here’s what to do.
In this article (Skip to...)
- TN home buyer overview
- Home loan options
- TN home buyer programs
- First-time buyer grants
- Buying in Tennessee’s cities
- TN mortgage rates
Tennessee home buyer overview
The median sales price in Tennessee was $353,300 in February 2023. That reflected a rise of 3.2% year over year, according to data from Redfin. With rising home prices, many first-time buyers are finding it increasingly difficult to enter the market as they try to save for a down payment.
But there is still hope. Many Tennessee first-time home buyers receive assistance from the state government and non-profit organizations through various programs and grants. These resources can help with money, education, and counseling, making buying a home easier and less expensive.
Tennessee home buyer stats
|Average Home Sale Price in TN1||$353,300|
|Minimum Down Payment in TN (3%)||$10,600|
|20% Down Payment in TN||$70,660|
|Average Credit Score in TN2||702|
|Maximum TN Home Buyer Grant3||6% of sale price statewide (THDA repayable loan)|
Down payment amounts are based on the state's most recently available average home sale price. “Minimum” down payment assumes 3% down on a conventional mortgage with a minimum credit score of 620.
If you're eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the U.S. Department of Agriculture), you may not need any down payment at all.
First-time home buyer loans in Tennessee
If you’re a first-time home buyer in Tennessee with a 20% down payment, you can get a conventional loan with a low interest rate and no private mortgage insurance (PMI).
Of course, few first-time buyers have saved up enough money for a 20% down payment. But the good news is that you don’t need that much. Not by a long shot. Borrowers can often get into a new home with as little as 3% or even 0% down using one of these low-down-payment mortgage programs:
- Conventional 97: From Freddie Mac or Fannie Mae. 3% down payment and 620 minimum FICO score. You can usually stop paying mortgage insurance after a few years once you reach 20% home equity
- FHA loan: Backed by the Federal Housing Administration. 3.5% down and a 580 minimum credit score. But you’re on the hook for mortgage insurance premiums (MIP) until you refinance to a different loan type, move, or pay off your mortgage
- VA loan: Only for veterans and active-duty service members. Zero down payment is required. Minimum credit score varies by lender but often 620. No ongoing mortgage insurance premiums after closing. These are arguably the best mortgages available, so apply if you’re eligible
- USDA loan: For those on low–to–moderate incomes buying in designated rural areas. Zero down payment required. Credit score requirements vary by lender but often 640. Low mortgage insurance rates
- Tennessee Housing Development Agency loans: May include access to competitive interest rates and down payment assistance. More information below
Note that government loan programs (including the FHA, VA, and USDA home loans) require you to buy a primary residence. That means you can’t use these loans for a vacation home or investment property.
Most loan programs even let you use gifted money or down payment assistance (DPA) to cover the down payment and closing costs. So if you’re eligible, you could potentially get into your new house with minimal cash out of pocket.
If you’re not sure which program to choose for your first mortgage loan, your lender or real estate agent can help you find the right match based on your finances and home-buying goals.
Tennessee first-time home buyer programs
First-time homebuyers in Tennessee can receive a variety of support from the Tennessee Housing Development Agency (THDA). That includes home buyer education, a range of mortgage loans, and down payment assistance.
THDA Great Choice Home Loan program
Tennessee’s Great Choice Home Loan program offers home buyers a 30-year fixed-rate loan option, mostly based on FHA or USDA loans.
The Great Choice home loan program is for people with low or moderate incomes who want to buy homes that are priced reasonably. To qualify, you’ll need to:
- Pick your lender from a THDA-approved list
- Have a credit score of 640 or higher
- Undergo a home buyer education course ($99)
- Meet household income and purchase price limits, which vary by county
THDA Homeownership for the Brave program
Homeownership for the Brave is a specialty loan program that can be used with a VA loan and requires zero down payment. Of course, these are only for veterans, qualifying reservists, active-duty service members, or their surviving spouses.
If you’re interested in one of these loan types, your next step is to download the THDA’s Handbook for Homebuyers.
Next, contact an approved lender from the THDA list (linked above). Tell the agent that you’re interested in a Great Choice home loan, and they should quickly establish whether or not you’re a qualified buyer. If you are, your lender will walk you through the entire process.
Tennessee first-time home buyer grants
There are several down payment assistance programs available to first-time home buyers in Tennessee. It’s worth noting that eligibility requirements and program availability can vary by location and may change over time. It’s recommended to contact a local housing counseling agency or a lender to learn more about the programs that are available in your area.
THDA Great Choice Plus
THDA offers a down payment assistance program called Great Choice Plus. This second mortgage comes in two varieties: a deferred loan or an amortizing loan. These Great Choice Plus DPAs must be used with a Great Choice home loan.
- Deferred DPA option: Offers loan amounts of up to $6,000 toward your down payment and/or closing costs. This loan requires no monthly payments and charges 0% interest. At the end of 30 years, your loan is forgiven in full. However, if you sell your home or refinance your mortgage before the 30 years are up, you’ll have to repay the whole amount
- Amortizing DPA option: With this DPA loan, you can borrow up to 6% of the sales price. But you have to pay down the loan each month over 15 years. And you’ll pay the same interest rate that your first mortgage charges
The DPA you choose will likely depend on how much you need to borrow to cover your down payment and closing costs. It may also depend on how long you plan to remain in your next home.
Or you may choose neither. Before you decide, check out other down payment assistance programs that might cover your city or county. Pick the one that meets your needs best.
Other Tennessee first-time home buyer assistance programs
If you’re looking for a home in certain areas of Tennessee, consider other first-time homebuyer assistance programs in addition to one of the THDA programs.
For qualified buyers in Chattanooga, for example, the Chattanooga Neighborhood Enterprise provides up to $15,000 in down payment assistance. It is a second loan with an interest rate that is half a percentage point lower than your first mortgage.
Your real estate agent or Realtor can help you identify down payment and closing cost assistance programs in your area. We’ve also provided useful links to Tennessee home buying assistance below.
Buying a home in Tennessee’s major cities
Home prices in Tennessee’s biggest cities vary quite a bit. On average, market conditions in Memphis are slightly more friendly to first-time home buyers than those in Nashville and Knoxville.
Nashville first-time home buyers
In February 2023, the median list price of homes in Nashville was $480,000, an increase of 13.5% year-over-year, according to Realtor.com.
If you want to buy a home at that median price, your down payment options might fall between:
- $14,400 for 3% down payment
- $96,000 for 20% down payment
The Metropolitan Development and Housing Agency in Nashville seems to help with down payments, but its website doesn’t say much about it. So contact the agency for more information.
Affordable Housing Resources (AHR) helps people in Nashville with their down payments by giving them up to $15,000. That’s part of the NeighborhoodLift nationwide program, and there are caps on the household income allowed. However, it says, “Income limits are higher for military service members, veterans, law enforcement officers, pre-K–12 teachers, firefighters, and emergency medical technicians.”
Unfortunately, it doesn’t specify whether the funds take the form of a second mortgage loan or grant. But you can call (615) 251-0025 to find out.
Memphis first-time home buyers
In February 2023, the median list price of homes in Memphis was $195,000, which was an increase of 21.9% year-over-year, according to Realtor.com.
If you want to buy a home at that median sales price, your down payment options might fall between:
- $5,850 for 3% down payment
- $39,000 for 20% down payment
The City of Memphis Division of Housing and Community Development (HCD) can provide down payment assistance of up to $10,000 to eligible borrowers. There are various conditions, including income limits and home price caps. There are no income caps for teachers or those working in the police or fire departments.
Unfortunately, the HCD doesn’t reveal whether the assistance takes the form of a grant or loan. So contact the department for clarification at firstname.lastname@example.org or call (901) 636-7474.
Knoxville first-time home buyers
In February 2023, the median list price of homes in Knoxville was $375,000, which was an increase of 17.2% year-over-year, according to Realtor.com.
If you want to buy a home at that median price, your down payment options might fall between:
- $11,250 for 3% down payment
- $75,000 for 20% down payment
The City of Knoxville does offer a down payment assistance program. However, at the time this was written, the City of Knoxville’s website said, “APPLICATIONS ARE CLOSED FOR THIS PROGRAM,” except for those wishing to purchase a home that’s developed by Home Source East Tennessee, Neighborhood Housing Inc., and East Tennessee Housing Development Corporation.
That may have changed by the time you read this, so it’s worth checking whether the program is up and running when you want to buy. If you wish to know more, call (865) 215-2865.
Where to find home buying help in Tennessee
All the organizations we’ve listed above should provide free advice to any first–time home buyer in the state of Tennessee or within their areas.
In addition to our selection, the U.S. Department of Housing and Urban Development (HUD) provides a few lists for statewide, regional, and local resources.
Statewide first-time home buyer resources in Tennessee
- Tennessee Housing Development Agency (THDA): THDA maintains a list of approved home buyer education classes. You’ll also find participating lenders, income and purchase price limits by county, and a downloadable Handbook for Homebuyers
- Homeownership Programs: THDA’s Homeownership programs are designed for low- and moderate-income borrowers. Some programs include down payment assistance.
- THDA Homeownership Voucher Program: THDA offers a Housing Voucher (Section 8) to Homeownership Program covering most counties in Tennessee. People who meet the guidelines may be able to use their Housing Vouchers to buy homes
- Housing Assistance Council NeighborWorks: Lists member organizations in Tennessee that provide down payment and closing cost assistance to homebuyers and homeowners
- Other local homeownership assistance programs: Additional home buyer assistance programs serving specific local areas in Tennessee
- Tennessee Association of Community Action: Contact your local Community Action Agency for assistance programs that may help you attain housing goals, obtain counseling, seek weather-proofing assistance and emergency funding
You can also find a list of resources by county and city on HUD’s website for Tennessee first-time home buyers, including:
- Nashville Metropolitan Development and Housing Agency: Down payment and closing cost assistance
- Affordable Housing Resources (AHR): Homeownership assistance programs in and around Nashville
- City of Memphis Division of Housing and Community Development (HCD) Housing assistance and downloadable fact sheet
- City of Knoxville: Down payment and closing cost assistance
- Chattanooga Neighborhood Enterprise (CNE): Help for Tennessee first-time home buyers
What are today’s mortgage rates in Tennessee?
You can see today’s live mortgage rates in Tennessee here. Experiment with a mortgage affordability calculator to see how a down payment, interest rates, homeowners insurance, and property taxes will affect your monthly mortgage payment.
When you’re ready to start the home buying process, get personalized rate quotes from at least three mortgage lenders. Don’t just look at advertised rates online. Apply for preapproval and compare the interest rates and fees. That’s the only way to get the best deal possible on your new home loan.
1Source: Redfin’s Tennessee Housing Market report
2Source: Experian.com study of 2022 and 2021 data
3Based on a review of the state's available DPA grants at the time this was written