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What Types of Mortgage Loans Are Available in Tennessee?

Home Mortgages | Miranda Marquit | April 21, 2022

When buying a home, most people need a mortgage. Getting a mortgage in Tennessee doesn’t need to be difficult, however. There are several different types of home loans in Tennessee.

Let’s look at the types of mortgage loans available and the mortgage type requirements for different options.


Types of home loans in Tennessee

As you start looking into the types of mortgage loans available, you can find a program most likely to help you reach your homeownership goals. Knowledgeable professionals at SouthEast Bank can help you understand the home loan options and the mortgage type requirements involved.


Conventional home loans

Many people think of these traditional home loans when they get a loan. Check with a mortgage broker to determine the criteria for these types of mortgages. In general, though, you likely need to have a credit score of at least 620 and might need a down payment of 5% to 10%. However, your best mortgage rates will come with a higher credit score and larger down payment. Some lenders might even require a 680 credit score to qualify. Check the mortgage type requirements ahead of time.

FHA loans

One of the most accessible types of home loans in Tennessee is the FHA loan. These loans are guaranteed by the federal government, although they are made by lenders like SouthEast Bank. Credit requirements are usually a little looser, allowing you to potentially get a loan even if your score is below 600. It’s also possible to get an FHA loan with as little as 3.5% down.

VA loans

Among the types of mortgage loans guaranteed by the government are VA loans. For this mortgage type, the requirements start with being a veteran or active service member or close qualifying family member. 

There are no stated credit score criteria or down payment requirements for VA loans. However, there are different paperwork requirements, and a borrower must pay the VA funding fee for the loan. How much you pay depends on the amount of the down payment and other factors. 

USDA loans

For those who live in areas that are classified as rural, the USDA loan can provide a way to get a home loan without a down payment. As with other government-backed loans, the lender provides the funds, but the government guarantees them. A knowledgeable mortgage professional at SouthEast Bank can help you review your options and determine if you meet the various requirements for a USDA loan — or some other loan program.

Home construction loans

Another option for home loans in Tennessee is a home construction loan. You must submit a timeline for the home construction and share information about the contractor. Depending on the type of construction loan, you might have to pay off the loan with a conventional mortgage later. Other programs convert the construction loan into a more traditional mortgage for 30 years.

Home construction loans can come with their own criteria, including credit score requirements and higher down payments. They can also be complicated, depending on what the lender expects. A good mortgage professional can walk you through what you need to get the right loan.

Tennessee Housing Development Agency (THDA) loans

It’s not just the federal government that offers help for borrowers. Other mortgage loans available in Tennessee are those offered through the THDA. These home buying assistance programs include:

  • Homeownership for the Brave:  These plans have lower interest rates and down payment requirements and are designed for service members and veterans. Before choosing this program, compare it to VA loans to see what is most likely to provide you with the best long-term benefit. 
  • Great Choice Home Loans: The THDA encourages those with moderate incomes and credit scores of 640 or above into homeownership with this special program. You can get a 30-year fixed-rate mortgage at terms that allow you to buy a home.
  • Great Choice Plus: For those who need down payment assistance, the THDA offers a second loan that can be used for the down payment or housing costs. This can be an option for homebuyers struggling to cover the upfront costs of getting a mortgage.

Mortgage requirements in Tennessee

While there might be different mortgage type requirements based on the home loan program you use, you need to be aware of certain criteria to get a home loan in Tennessee.

Most Tennessee lenders will consider the following items when evaluating your mortgage application:

  • Credit score: This is a numeric representation of your ability to handle credit. While some programs, like VA loans, don’t have a minimum, some other loans might have a minimum score requirement. Additionally, you can expect to get the best mortgage rates when you have a higher score, usually above 720.
  • Income: You need to show that you are capable of making your monthly home mortgage payments. Lenders will look at your regular income and like to see that you’ve had a stable job for at least a few months.
  • Debt-to-income (DTI) ratio: This represents how much you make in debt payments compared to your income. For example, if your debt payments add up to $1,000 per month and you have an income of $4,000 per month, your DTI is 25%.
  • Assets: Lenders also look at your savings account balances, investment accounts, and other assets that might be used to help you cover your home payment in the event of an unexpected financial issue.

If you want to buy a home, it’s a good idea to plan ahead. Speak with a professional at SouthEast Bank to learn about credit requirements and work to keep a high credit score, as well as pay down other debts and create a stable income so that you can afford a Tennessee home loan.



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Information contained in this blog is for educational and informational purposes only. Nothing contained in this blog should be construed as legal or tax advice. An attorney or tax advisor should be consulted for advice on specific issues.


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