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How to Buy a House in Tennessee

Wondering how to buy a house in Tennessee? You’re in luck. The housing market is beginning to stabilize, according to local Nashville news report. The number of available houses seems to be rising as demand has returned to pre-pandemic levels.

This means now could be a great opportunity to purchase a new home in one of the Volunteer State’s great cities or towns. In this short guide, we’ll walk you through the process and show you how to buy a house in Tennessee.

Step One: Choose from the Best Cities in Tennessee

Tennessee has much to offer for those relocating here: the urban lifestyle found in major cities like Nashville and Memphis, as well as the more tranquil escapes found among the state’s rolling hills and forested beauty.

If your move is based around your work, you might have already narrowed down your location based on your expected commute. If you’re not limited by your job, you might consider relocating to one of the following areas, depending on whether you’re looking for urban convenience or rural charm:

Nashville

Come for the music, stay for the scenery. Nashville is the most populous city in Tennessee, offering a little something for everyone.

Living within the metro area might be your best bet for finding a job, but you might also be surprised to find affordable housing in one of the city’s many suburbs and residential neighborhoods.

Nolensville, for example, lies between Nashville and Murfreesboro. With prices that tend to be a little more affordable, it’s a great place to start your search.

Townsend

Those who prefer a small-town vibe might consider Townsend. Counted among the three “gateways” to the Smoky Mountains, it offers a picturesque and peaceful setting for those who are looking for a close-knit community and plenty of opportunities for outdoor adventure.

Townsend is only 45 minutes from Knoxville, which means you can enjoy this smaller community without sacrificing access to a major urban center.

Kingsport

Kingsport is only 10 miles south of the Virginia border, where it is part of Tennessee’s growing Sullivan County. You’ll find plenty of outdoor activities, thanks to easy access to national and state parks, along with stunning lakes.

But what secures Kingsport a place on our list is the relatively low cost of living, which is helping to attract a growing number of residents to this Tennessee city.

Step Two: Determine Your Housing Needs

Once you narrow down your prospective destination, you’ll want to think about what you’re looking for in a house. Critical questions about the house and its location include:

  • How many bedrooms do I need?
  • How large of a yard do I want?
  • What is the neighborhood like?
  • How far is the house from my job?
  • Are there good schools in the area?
  • Can I buy a fixer-upper and make my own improvements?
  • What sort of amenities are nearby?

With these basic considerations in mind, you can venture on to step three.

Step Three: Assess Your Finances

Next, you’ll want to assess your finances. You’ll want to have answers to some basic questions, like:

  • How much can I put toward a down payment?
  • What is my current credit score?
  • How much debt do I have?
  • How much can I reasonably afford to pay for a mortgage each month?

Your mortgage lender will ask these same questions when they’re evaluating your eligibility for a loan, so it’s wise to be prepared before you even begin this process.

Keep in mind that even if you’re not in the greatest shape financially, it’s not necessarily a dealbreaker. However, you may need to think more carefully about your housing needs or your available financing options.

Step Four: Consider Your Financing Options

Tennessee homebuyers have several financing options to choose from. While a conventional mortgage is usually your best choice, you might also consider one of the government-backed loan options if your credit score is on the low side. These programs can also be helpful if you’re struggling to come up with a 20% down payment.

Conventional Mortgages

A conventional (or traditional) mortgage refers to any home loan that’s not insured by the federal government.

You may already be familiar with the lending rules established by the two primary agencies in the mortgage market:

  • The Federal National Mortgage Association (Fannie Mae)
  • The Federal Home Loan Mortgage Corporation (Freddie Mac)

Conforming loans adhere to the rules established by Fannie Mae and Freddie Mac. These are easier to get than non-conforming loans, which deviate from these rules while offering greater flexibility for well-qualified buyers.

Conventional mortgages offer the best interest rates. USBank.com reports that Tennessee’s average interest rates are between an APR of 2.5-4.5% though based on recent performance, you might imagine that range fluctuating by roughly a point as the housing market continues to stabilize.

The drawback? To qualify for a conventional mortgage, you’ll need to be in tip-top financial health.

Typically, these loans are best for homebuyers who:

  • Hold a credit score of 620 or higher
  • Maintain stable income
  • Carry few outstanding debts
  • Use 3–20% for a down payment

In some cases, the most favorable mortgage rates go to home buyers who have a credit score of 740 or higher.

If the 20% down payment sounds intimidating, it may be possible to purchase a home with as little as 3%, depending on your mortgage lender. But when you don’t make a 20% down payment, your lender will likely require you to purchase private mortgage insurance (PMI). Those additional payments can add to your monthly costs.

Loans for First-Time Homebuyers

Is this your first house? If so, you’re likely wondering how to buy a house in Tennessee if you have limited savings or a less-than-stellar credit history.  The U.S. government offers different loan programs that can put your dream home within reach.

If your credit score is 500 or above, you may be eligible for an FHA loan. With an FHA loan, you can make a down payment of only 10%. If your credit score is 580 or better, you’re only required to make a 3.5% down payment.

However, with a down payment of less than 20%, you’ll have to purchase FHA mortgage insurance. This figure can be rolled into your monthly payments.

Is your new home located in a suburban or rural area? If so, you might look into a USDA loan. USDA loans are reserved for homes located in specific areas, but if you qualify, you can purchase a home with no down payment.

Have you or your spouse ever served in the military? If so, you may be eligible for a VA loan. VA loans don’t require any down payment, nor will you find yourself paying mortgage insurance, making this a great option for former or active military members and their families.

The flip side to all of these loan programs is that they generally exclude fixer-upper homes. If you’re looking into a home that needs a lot of upgrades or improvements, the current owner may have to make repairs before you could qualify for one of these programs. Keep this in mind during your home search.

Step Five: Get a Realtor in Tennessee

Once you’re ready to start the search for your home, you’ll want to connect with a real estate agent. A licensed realtor can help you navigate the confusing process of negotiating an offer and juggling administrative details that go into buying a home. Plus, it’s always good to have an advocate on your side who will make your needs a priority.

Your realtor will help you find homes that fit your needs and budget while teaching you the basics of how to buy a home. While you can do some of the searching beforehand, realtors often have more knowledge of the local housing market than what you can find on your own online.

Step Six: Find a House in Tennessee

Now that your financial ducks are in a row, it’s time to go shopping. Finding a house in Tennessee is more focused once you’ve narrowed down your needs, price range and geographic area. Most homebuyers spend time using online search tools to find houses that meet their budgets. These online tools often allow you to view photographs of the home’s interior to give you a better idea of what to expect inside.

Of course, you don’t have to rely solely on your laptop or smartphone to do your searching. If it’s geographically possible, take a quick drive around some of your prospective neighborhoods. Even if you don’t spot any “For Sale” signs, you’ll be better able to match an online listing with its real-world setting.

Your realtor can also be your greatest resource during this process. While every home is different, their years of experience can provide insight into property values and housing trends in the local area. They may be able to give you practical advice on how to find the best prices.

A realtor will be your initial tour guide while you find a house that fits your needs and budget, but they’ll also be your advocate throughout the homebuying process, walking you through inspections, appraisals and more until you get to the closing table.

Step Seven: Make an Offer

Before long, you’ll likely find a house that you love. Your realtor will help you put together an offer and present it to the seller’s real estate agent. The seller can accept your offer, counter it or reject it.

This means the actual purchasing process can have some back-and-forth before the sale is complete. In some cases, the seller might be unwilling to budge on their sale price. If you can’t come to an agreement, you may need to walk away and pursue other properties.

For this reason, it’s best not to get too attached to any single house, at least not before the sale is closed. Otherwise, the negotiating process can be frustrating and even demoralizing. Keep your options open and be prepared to make offers on multiple properties before your dream home becomes a reality.

Step Seven: Close the Sale

Eventually, you’ll hear the magic words that the seller has accepted your offer. Keep in mind, there are still some administrative fees that go into the sale process independent of the mortgage or down payment.

These “closing costs” are typically between 2% and 5% of the home’s total value. They include costs such as:

  • Real estate commissions and fees
  • Taxes
  • Filings
  • Insurance payments
  • Mortgage fees

If you’re lucky, your seller might agree to cover these costs as part of your purchase agreement. Otherwise, you’ll be responsible to pay them at the time of your sale.

With the final paperwork signed, it’s time to celebrate buying your new home!

Ready to Buy a House in Tennessee?

At Agave Home Loans, we want your next move to be as stress-free as possible. When you’re ready to purchase a new home in Tennessee, reach out to our team to learn more about your options for financing.

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Marshall Gottlieb - Co-Owner and CEO
Marshall spent seven years in hospitality and the restaurant industry prior to beginning a career in real estate and lending. After obtaining a finance degree with an emphasis in investments from Northern Arizona University, he began working at Quicken Loans. He spent seven years there as a banker and then Senior Director prior to co-founding Agave Home Loans. (NMLS ID: #1107208)

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