Mortgage Rates Tennessee: Choosing The Best Loan Type
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The affordable living cost and relatively low median home value in Tennessee are attractive to many people. However, the high housing demand leads to a competitive real estate market, meaning you may face some competition for homes in the Volunteer State.
Knowledge of the current Tennessee mortgage rates may give you an edge and help you find the best home deals. This guide will cover all you need to know about mortgage rates in Tennessee! You’ll find insider access to the state’s current mortgage and refinance rates as well as a comprehensive guide on Tennessee’s homebuyer assistance programs.
Mortgage Options In Tennessee
You have the choice of three home loan types to fund your Tennessee home purchase. All these financial products feature different terms, so make sure you choose the one that best fits your financial situation and needs.
Conventional Home Loan
Most loans not backed by a government entity fall into conventional home loans. These loans are commonly offered by banks and private mortgage lenders, with loan amount limits set by the Federal Housing Finance Agency (FHFA). FHFA loan amount limits for Tennessee mostly sit at $548,250, but some counties have higher limits up to $586,500.
Conventional mortgages are split into three main loan types, each with unique advantages and disadvantages:
Fixed-rate mortgages feature a stable interest rate that stays the same for the entire loan term. This mortgage rate stability means your monthly payment amounts will be constant regardless of market conditions.
The predictability of fixed-rate mortgages makes them good for long-term financial planners. However, this stability comes with a higher mortgage rate compared to other loans.
30-year fixed mortgages feature the lowest monthly payment amounts. However, you can choose shorter loan terms to pay it off quicker at a lower rate.
Adjustable-Rate Mortgage (ARM)
Adjustable-rate mortgage interest rates shift periodically based on market index movements. These annual rate adjustments lead to your monthly payment amounts fluctuating each year.
To provide some rate stability, most ARMs feature a short introductory period with fixed interest rates. These introductory periods are good for short-term savings because their rates tend to be lower. However, adjustable-rate mortgages are unpredictable in the long term after this introductory period ends.
Your introductory period usually lasts between 3 and 10 years. The period is mentioned in the loan’s name – for instance, a 5/1 ARM has a five-year introductory period.
Mortgage lenders may offer jumbo loans that can exceed local lending limits for higher-valued properties. However, jumbo loans balance the increased loan amount with a higher rate and monthly payment amount.
Government-Backed Loan Programs
The federal government backs three major loan programs to help increase the homeownership rate among demographics like low-income borrowers and veterans. The three loan types are:
FHA loan: These loans are designed for people without good credit, featuring relaxed qualification requirements as well as lower monthly payments. However, FHA loans have lower amount limits and require mandatory mortgage insurance premiums.
VA loan: Only veterans and active military personnel can qualify for VA loans. While you don’t have to pay a down payment, you need to pay a VA funding fee worth 2.3% of the loan. However, putting more money down can drive down the VA funding fee.
USDA loan: These loans are geared toward building rural communities and have strict area limitations. USDA loans have zero down payment requirements and feature low mortgage insurance fees.
Refinances provide you with a new mortgage to pay off your current one. There are two types of refinancing that you can choose from:
Rate and term refinance: This type of refinance modifies your loan details – by extension adjusting its monthly payment amount. You can use it to shorten or lengthen your loan’s term as well as change its type from a fixed-rate to an ARM or vice versa.
Cash-out refinance: You can use this type of refinance to liquidate your home equity. Cash-out refinances provide you with a loan larger than your current mortgage balance, and any money left after paying off your mortgage can then be used for other purposes.
Compare Mortgage Rates In Tennessee
Historically, Tennessee mortgage rate trends have stayed close to national average mortgage rates. Check the table below for a look at the most current mortgage rates in Tennessee. All the mortgage and refinance rates listed here are taken from the nation’s top lenders.
Today’s Mortgage Rates In Tennessee
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These rates may change without prior notice. Your actual rate may vary depending on your financial circumstances and other factors.
Use the mortgage tools and rate calculator on this page to get Tennessee mortgage rate estimates based on your financial details.
First-Time Homebuyer Programs In Tennessee
While the average home price in Tennessee is relatively affordable, the state’s homebuyer assistance can help you find even better deals for your primary residence. The Tennessee Housing Development Agency (THDA) offers two prominent assistance programs, which are:
THDA Great Choice
THDA’s main homebuyer assistance program helps first-time and repeat homebuyers get conventional, FHA, VA, and USDA loans. To qualify for the Great Choice program, you need to fulfill these requirements:
Provide a 3-3.5% down payment
Have a credit score of at least 640
Complete a homebuyer education course
Meet THDA income and purchase price limits
THDA Great Choice Plus Down Payment & Closing Cost Assistance
THDA Great Choice borrowers can also qualify for down payment assistance (DPA) as a 15-year second loan. Your DPA loan features the same rate as your main mortgage and will be paid monthly alongside it.
The amount of this loan depends on your home’s purchase price. You’ll get $6,000 for homes priced under $150,000, while you’ll receive $7,500 for homes priced over $150,000.
THDA Homeownership For The Brave
The state also offers an extra benefit for homebuyers who are in the military. With the same requirements as the Great Choice program, active-duty service members, reservists, and veterans can take 1.5% off of their mortgage rate.
Buying A Home In Tennessee
Homes are a major financial commitment, and any mistakes in the home buying process can cost you a lot of money. To avoid any costly missteps, follow this guide to getting your dream home in six simple steps!
Step 1: Get Pre-Approved
First, start the mortgage process by applying with a lender. Once you pass their credit checks, you’ll receive a pre-approval letter. This letter contains key details about your loan, including your maximum amount, loan type, and interest rate. It also acts as a budget guide for your house hunt and a sign of financial readiness to buy property.
Step 2: Interview Real Estate Agents
Good real estate agents can show you the best home deals and provide key details about your neighborhood, like the area’s average home values and property taxes. Pay close attention to a real estate agent’s years of experience and the number of homes sold when making your choice.
Step 3: Search For Homes
Pick a neighborhood that fits your budget, then search local listings there. Try to find the most affordable home that still fits your needs. If you can’t find any homes within your price range, consider purchasing a fixer-upper and use the money saved from the cheaper purchase for home improvements.
Step 4: Put Down An Offer
You may face some competition when buying homes in Tennessee. Consider offering above the listed property value to catch the seller’s eye and increase your odds of landing the deal. Consult with your realtor about the offer beforehand to avoid overpaying.
Step 5: Schedule Inspections And Appraisals
Always examine your purchase before settling on a closing date. Hire home inspectors and appraisers to check your new house. If they find the house is overvalued or has severe property defects, you can still renegotiate a new deal.
Step 6: Close The Deal
Prepare your money to pay closing costs and origination fees before closing day. Have your realtor present during paperwork signing so they can answer any question you may have before finalizing the deal.
How To Get Better Tennessee Mortgage Rates
Taking a few points off your mortgage rate may not look like a lot of savings now. However, it may save you thousands down the line since your savings will add up over the years. Follow these tips to reduce your Tennessee mortgage rates!
Improve Your Credit Score
Your credit score is a primary point of consideration when lenders determine your rates. A higher credit score means you’re a more reliable borrower and makes you more likely to get lower rates.
Here are some steps you can take to improve your credit score:
Pay all your bills on time.
Keep a low credit card balance.
Report inconsistencies on your credit report.
Purchase Discount Points
Discount points reduce your mortgage rates in exchange for an upfront expense. These points are usually worth 1% of your loan amount and reduce your rate by 0.25%. So for example, if you buy two points on a $300,000 mortgage with a 4% rate, you’ll pay $6,000 to reduce your rates to 3.5%.
Since they’re a large upfront expense, get potential savings figures from the lender to see if discount points will pay off for you in the long run.
Compare Offers From Multiple Lenders
Mortgage lenders try to attract your business in different ways, from reducing your rates to providing closing cost discounts. Shopping around for loan offers can help you decide which one represents the best value for you – and even allow you to find deals that you otherwise couldn’t find!
Ask for loan estimates from each lender so you can compare them side-by-side. Then, choose the one that best fulfills your financial circumstances.
Additional Rate Reduction Steps
Here are some additional steps you can take to further reduce your rates:
Take shorter loan terms.
Pay more down payment.
Work with mortgage brokers.
Understanding the home buying process and knowing the current mortgage rates make your house hunt easier. It can help you spot the best home deals and act on them quicker.
If you’re looking for the best-valued Tennessee mortgages, Wesley LLC is here for you. Contact our team today for more mortgage resources and advice!