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Now that the housing market is finally calming down after the pandemic, buyers are facing a new challenge: Soaring mortgage rates.
In Tennessee, the average 30-year fixed mortgage rate is 5.56% — up from 2021's historic lows. This raises the average monthly mortgage payment to $1,415 (assuming a 20% down payment at the median home value).
But buying a home in Tennessee is still possible, even for first-time home buyers. Many markets are seeing frequent price drops and fewer offers, giving motivated buyers the upper hand in negotiating for the best price.
In this guide, you’ll learn how to buy a house in Tennessee with confidence no matter what the market brings. Learn why you can trust our advice.
Whether you're actively house hunting or just starting to browse homes on Zillow, it's never too early to find a great local realtor to guide you on your search. An experienced agent can help you navigate a tricky housing market, explore your financial options, and negotiate the best deal possible.
Best of all, hiring a real estate agent comes at no extra cost to you — since the seller typically pays both their listing agent and your buyer's agent.
Ready to find a great local realtor, but not sure where to start? The best (and easiest!) option is to try a free agent matching service like Clever Real Estate. Answer a few simple questions about your home buying goals, and Clever will match you with hand-picked agents from Keller Williams, RE/MAX, and other top brokerages in your area. Find a top local agent and make your home buying dreams a reality today!
Step 1: Save for a down payment
🔑 Key takeaway:
Your down payment can be less than 20% of the purchase price — $61,892 for the typical home in Tennessee — but you'll have to purchase mortgage insurance and pay more interest over the life of your loan.
Your down payment is the first part of your home's purchase price that you pay at closing. Your mortgage lender will pay the remaining balance.
Typically, mortgage lenders in Tennessee want you to contribute 20% of the purchase price as a down payment. That would be $61,892 for a $309,460 home — the typical home value in Tennessee.
However, you have options to lower your down payment amount.
Government backed loans, like VA and FHA loans, allow you to contribute 0% and 3.5% of your home's purchase price respectively. Even conventional loans allow for down payments as low as 3-5% (though the minimum varies by lender).
Minimum down payment (%)
Down payment ($)
Based on typical home values from Zillow (August 2022)
But making a down payment of less than 20% comes with some risks.
First, because you're borrowing more money, you'll have a higher monthly payment and pay more in interest over the life of your loan.
Based on home values from Zillow (August 2022) and a 5.56% interest rate for a 30-year loan.
Second, you may have to purchase mortgage insurance.
Conventional loans require private mortgage insurance (PMI) until your loan balance reaches 80% of the purchase price. FHA loans, on the other hand, require a mortgage insurance premium (MIP) for the life of your loans.
Mortgage insurance costs around 1% of your mortgage balance annually. However, rates vary based on your down payment and credit score. Typically, your mortgage insurance payment is added to your mortgage payment each month.
VA loans don't charge mortgage insurance. Instead, you'll pay a VA loan funding fee at closing, which can range from 1.4% to 3.6% of the purchase price.
» READ MORE: Everything you need to know about low-income home loans
Tennessee down payment assistance programs
If you're having trouble affording a home on your own, there are several down payment assistance (DPA) programs available to first-time and low-income buyers throughout the state of Tennessee. These programs provide eligible homebuyers with a grant or second mortgage to help cover closing costs or a down payment.
Here are a few DPA resources in Tennessee that you might be eligible for:
THDA Great Choice Plus
The Tennessee Housing Development Agency’s Great Choice Plus program offers financial assistance through a deferred option or an amortizing option.
The deferred option can provide you with a forgivable 30-year second mortgage of $6,000. This mortgage accrues no interest and payments are forgiven at the end of the 30-year term.
The amortizing option gives you a second mortgage of up to 6% of the home purchase price. This mortgage interest rate will be equal to the first mortgage rate, and it's to be paid monthly over a 15-year period.
The Housing Fund DPA Program
The Housing Fund offers DPA loans of up to $35,000 for eligible buyers throughout the state of Tennessee.
Participants must contribute at least 1% of the sales price, have a first mortgage from an FHA-approved lender, and complete a homebuyer education course. Household income and home purchase price limits apply and vary by county.
U.S. Department of Housing and Urban Development
HUD’s list of alternative DPA programs in Tennessee can be found here.
Step 2: Find a great real estate agent in Tennessee
🔑 Key takeaway:
Interview multiple agents to find one who knows your target neighborhoods, has experience in your price range, and communicates well.
Your real estate agent will be your main ally during the home buying process. Besides finding and showing you properties, your agent will help you make offers, negotiate contracts, and navigate the closing process. Plus, they can recommend other service providers like title companies and inspectors to help you buy your home in Tennessee.
Don't rush into choosing an agent. Instead, take the time to research and interview multiple real estate agents who have experience in the neighborhoods you're interested in. You should pay attention to a realtor's:
- Years of experience
- Number of transactions in the last year (the more the better!)
- Experience in your price range
- Overall review score
- Individual reviews and complaints
Step 3: Get preapproved for a mortgage
🔑 Key takeaway:
Once you're preapproved for a mortgage, it's imperative that your financial situation doesn't change. If your credit drops, it can derail the process and keep you from closing on your house.
Here are some easy ways to ensure your credit doesn't change after you receive your preapproval letter:
- Avoid opening new credit accounts
- Don't close any accounts that have been open for a long time
- Make all of your credit card payments on time
» LEARN MORE: What factors do mortgage lenders consider?
A mortgage preapproval letter is an offer to lend you up to a certain amount of money to purchase a home. It shows sellers that you are a serious buyer who is financially qualified to make an offer on a home.
Most sellers in Tennessee will require preapproval before showing you their home.
You don't have to decide on one lender right now. In fact, you should compare interest rates and preapproval amounts from several lenders to make sure you're getting the absolute best terms when you buy your Tennessee home.
Step 4: Choose the right location
🔑 Key takeaway:
Search for neighborhoods where:
- Home prices are within your price range
- Home values are on the rise
- The local amenities support your lifestyle
Currently, the typical home value in Tennessee is $309,460, but don't worry if that doesn't perfectly match your budget. Home prices vary dramatically from city to city and even from neighborhood to neighborhood!
Also, look at past home value trends. This will give you an idea of how much your home's value could go up over the next few years.
To give you an idea of how appreciation could impact what your house is worth in the future, consider these examples from three neighborhoods in Memphis:
Home value appreciation in Memphis
White Haven-Coro Lake
Step 5: Start house hunting in Tennessee
🔑 Key takeaway:
Tennessee’s housing inventory has shot up in the past year, so there may be a lot of options in your market. But with the increasing listing prices, you may have to review your priorities, especially if you’re on a tight budget. Your realtor will come in handy here — they can find listings that will check most of your boxes while still keeping things within a reasonable price range.
Searching for homes in Tennessee is the fun part of the home buying process! You'll get to look at a variety of homes and discover what you really want in a home.
Make a list of everything you want in a home and prioritize them. At the top of the list should be the items that are most important to you. This will help you separate your "must-haves" from your "nice-to-haves."
Your agent can help you understand if your wants are realistic for your budget and favorite neighborhoods or if you need to rethink what you're looking for.
Look at current housing inventory
The timing of your house hunt in Tennessee can have a big impact on your number of options. For example, in Tennessee, June has historically seen the most homes for sale. Searching in this season could give you more options and a greater likelihood of finding your dream home.
On the other hand, December gives you the fewest choices in Tennessee. Historically, there are 37.9% fewer homes for sale than during Tennessee's peak season.
Housing inventory in Tennessee by season
New listings per month
Based on data from Realtor.com (October 2022)
Step 6: Make an offer
🔑 Key takeaway:
Despite the increasing prices, Tennessee’s market is active. Houses are flying off the market, especially in desirable areas. If you find a house that you like, you may have to put in a strong offer quickly — probably even on the same day of viewing — just to get ahead of the competition. Listen to your agent’s advice when writing an offer, as they can help ensure that you put forward something that’s competitive but fair.
Once you find a Tennessee house you love, it's time to make an offer. Your real estate agent will help you write a compelling offer that gives you the best shot of convincing the homeowner to sell to you.
Currently, in Tennessee, homes stay on the market for 59 days before going under contract. However, every market goes through seasonal changes. During busier months, homes get snatched up more quickly than others.
Historically, Tennessee homes sell fastest in June, where the average property is only on the market for 50 days. If your home search falls around this time, you should be prepared to move quickly and potentially make offers on several homes before yours is accepted.
On the other hand, if you buy in January, you have a bit more time to search. Homes typically stay on the market 15 days longer than Tennessee's annual average.
Average time homes spend on market in Tennessee
Based on data from Realtor.com (October 2022)
» LEARN MORE: What should an offer include?
Step 7: Inspections and appraisals
Inspections and appraisals are an opportunity for you to better evaluate the home's condition and value before officially purchasing it. You may have an opportunity after this step to renegotiate the terms of your contract with the seller if something unexpected pops up.
🔑 Key takeaway:
- Inspections: A licensed professional checks the house for any unseen, unexpected, or potential issues.
- Appraisals: An appraiser hired by your lender examines the house to determine how much it's worth.
Home inspections in Tennessee
Having your Tennessee home inspected by a licensed inspector gives you peace of mind about the condition of the property before you commit thousands of dollars to purchase it.
Your inspector should check out the following parts of the property:
- Electrical system
- HVAC system
If the home has a septic system, you should also pay for a septic inspection to make sure it doesn't have any problems that wouldn't be covered in a typical home inspection.
Tennessee law requires sellers to inform buyers of all known issues with a property, but some problems can go undetected. To protect yourself from expensive repairs in the future, it's highly recommended to perform a few additional tests after the general home inspection to uncover all potential hazards.
Here are a few tests that you should consider doing before closing on a home:
- Radon testing: It's generally recommended to test homes regularly for elevated radon levels, so consider doing a test if the seller hasn't performed one within the past year. You can order a free radon test kit from the Tennessee Department of Environment and Conservation each January.
- Pest inspection: Pest inspections aren't required, but having one done now can save you from serious infestations and structural damage later. Termites and other pests can invade a home and go undetected by residents until they cause extensive damage. Get a thorough check from a professional to put your mind at ease.
Appraisals determine the value of the property. If you're using a mortgage to buy your new home, your lender will order an appraisal to make sure the home is worth the money that it's loaning you.
» LEARN: 3 options for buyers after a low appraisal
Step 8: Close on your new home!
🔑 Key takeaway:
Before you close on your new home, you and your agent will do a final walkthrough of the property to ensure that it's still in the expected condition.
Before you can become a Tennessee homeowner, you'll need to meet at the title company on closing day to complete your paperwork and settle your closing costs.
Prepare to spend about an hour reading and signing several legal documents, including:
- Your final loan application
- The deed
- The mortgage promissory note
- The disclosure statements
This paperwork needs to be completed accurately in order to transfer the title to your name. Take your time to make sure that all of the information is correct before signing anything. If you have any questions, your agent can help you out.
After you're done signing the documentation, you’ll pay the total amount you owe in closing costs to the title company. The company will take care of distributing the funds to the right recipients.
As a homebuyer, your closing costs can be separated into four general categories:
- Lender fees: Fees paid to your lender for preparing your loan. Other fees related to your loan, like appraisal fees or survey fees, may be added here as well.
- Title and escrow charges: Fees the title company charges for conducting the title search and facilitating the closing process. Buyers and sellers often split this cost.
- Prepaid costs: Ongoing costs of homeownership. Most mortgage lenders require buyers to pay for certain home expenses up front, such as property taxes and homeowners insurance.
- Other closing costs: Miscellaneous expenses that vary from buyer to buyer. A few common miscellaneous costs include natural disaster certification fees and real estate attorney fees.
Buyers in Tennessee typically pay 3–5% of the purchase price in closing costs. For a $309,500 home — the typical home value in Tennessee — that's between $9,285 and $15,475!
Frequently asked questions
Tennessee does not require you to hire a real estate attorney to buy a home. However, depending on your circumstances, you might consider hiring one anyways. If you do, treat the process similarly to hiring an agent. Interview multiple attorneys and proceed with the one that best meets your needs.
- Save for down payment
- Get pre-approved for a mortgage
- Choose your preferred Tennessee neighborhoods
- Partner with the right real estate agent in Tennessee
- Go house hunting
- Make a strong offer
- Inspections and appraisals
- Do a final walkthrough and close
Yes, but it's open to first-time and repeat buyers. The Great Choice Home Loan offers a 30-year loan with a fixed interest rate and an option to apply for its down payment assistance program.
The Tennessee Housing Development Agency sets the household income and home purchase price limits for this program. Eligible participants can't exceed the limits for their county, and they must have a credit score of at least 640.
Why trust us?
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We’ve earned buyers’ trust with a rating of 4.9 out of 5 starts on Trustpilot and over 1,800 customer reviews.
Our team of industry-leading researchers are committed to making homeownership more accessible by educating buyers through guides like this one. We've spent thousands of hours analyzing publicly available data, surveying consumers, and interviewing industry experts. Our research has been featured in The New York Times, Business Insider, Inman, Housing Wire, and many more.
Federal Reserve. "Housing Market Tightness During COVID-19: Increased Demand or Reduced Supply?." Accessed October 11, 2022. Updated July 08, 2021.
Consumer Protection Financial Bureau. "The Fed is raising interest rates. What does that mean for borrowers and savers?." Accessed October 11, 2022. Updated March 17, 2022.