Buying a house in Tennessee is an exciting milestone, but the process can take some time. Several factors, like your financial situation, market conditions, and the local economy can affect both how long it takes you to find a home and how much it costs you.
For example, homes in Lewisburg are hitting the market at $325,000 and selling within 18 days — 15 days faster than the state average! — so you'll need to move quickly if you want to beat out the competition.
However, homes typically stay on the market longer in Dayton, so you'll be able to take your time and potentially find a better deal.
The more you know about the steps to buying a house and Tennessee's current real estate trends, the more prepared you'll be to navigate this complicated process as quickly and smoothly as possible.
No matter where you are in your home buying journey, Clever's concierge team can connect you with local real estate pros who will help you purchase your Tennessee dream home!
The best part? Clever's service is 100% free! You can meet local lenders and real estate agents with no obligation. If you don't find the perfect match, you can walk away at any time.
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Step 1: Save for a down payment
Your down payment is the initial portion 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 $59,914 for a $299,571 home — the typical home value in Tennessee.
However, you have options to lower your down payment amount.
Government backed loans, like VA and FHA loans, allow you to contribute 0% and 3.5% of your home's purchase price respectively. Even conventional loans allow for down payments as low as 3-5% (though the minimum varies by lender).
Minimum Down Payment (%)
Down Payment ($)
Based on typical home values from Zillow (June 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 a $299,571 home, the typical home value in Tennessee (Zillow, June 2022) with a 5.50% 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.
Tennessee down payment assistance programs
Are you having difficulty saving enough money for a down payment?
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: Get pre-approved for a mortgage
A mortgage pre-approval 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 pre-approval before showing you their home.
You don't have to decide on one lender right now. In fact, you should compare interest rates and pre-approval amounts from several lenders to make sure you're getting the absolute best terms when you buy your Tennessee home.
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Get matched with a lender who can tell you how much house you can afford. To get started, where do you plan on buying?
To get a pre-approved for a mortgage, you'll fill out a mortgage application and provide details about your financial situation. They'll look at the following information to determine your mortgage pre-approval amount:
Lenders need to know that you earn enough to make your mortgage payments each month. Most lenders want your monthly housing costs to be less than 28% of your monthly income.
Lenders also consider your other debts, including credit cards, student loans, auto loans, and personal loans. They use this information to calculate your debt to income ratio (DTI) — or your total debt (including future mortgage) divided by your total income.
While some lenders will approve mortgages for buyers with DTI as high as 43%, it's best to keep your DTI under 36%.
Because of this, you might consider paying off some of your other debts before applying for a mortgage in Tennessee.
Mortgage lenders in Tennessee want to see that you have enough cash in the bank to cover your down payment and closing costs without completely draining your cash reserves.
While this requirement varies by lender, most want you to keep at least enough to cover two mortgage payments including insurance and taxes.
Step 3: Choose the right location
A house's neighborhood can be just as important as its layout and features. In general, you should consider the following factors when deciding which neighborhood is best for you:
What's your home buying budget?
Once you know your budget (a pre-approval letter will tell you the most you can expect to borrow), you can narrow your search to neighborhoods where homes are selling within your price range.
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. You want to choose a neighborhood that's in your budget, but could also lead to a big return when you decide to sell.
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
Once you have a list of neighborhoods with homes in your budget, you should evaluate how well each one meets your personal needs and preferences. To finalize your list of target areas, consider factors like:
- School districts
- Your daily commute
- Crime rates
- Restaurants and amenities
- Transportation options
Step 4: Find a great real estate agent in Tennessee
Your real estate agent will be your main ally during the home buying process. Besides finding and showing you properties, your agent should be an expert on buying a home in Tennessee.
They'll 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
Ask each of them questions about your target neighborhoods, how they prefer to communicate, and their strategy for helping you find and close on your new home. You should feel comfortable with the agent's knowledge, experience, and process before committing to an agent.
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Step 5: Start house hunting in Tennessee
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.
Prioritize your needs vs. wants when buying a home in Tennessee
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, January gives you the fewest choices in Tennessee. Historically, there are 30.9%) fewer homes for sale than during Tennessee's peak season.
Housing inventory in Tennessee by season
New Listings per Month
Based on June 2022 data from Realtor.com
Step 6: Make an offer
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. 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 June 2022 data from Realtor.com
What should your offer include?
Your real estate agent can help you decide which of these common options you should include in your offer:
- Seller concessions: You'll have to pay for most of your closing costs out of pocket when you buy a home, but you may be able to ask the seller to cover some of those costs for you. This option may allow you to offer a higher purchase price and essentially include your closing costs in your mortgage.
- Repair credits: If the home is in need of repair, you could ask for credits instead of having the seller make and pay for the repairs. The seller avoids the hassle of waiting for contractors to complete the job, and you get to oversee the repairs in the future to make sure they meet your expectations.
- Inspection contingencies: Most purchase agreements have inspection contingencies that allow you to change your offer (or back out all together) if the inspection turns up major problems. If you have a high degree of certainty about the house's condition (like if the seller can show you a recent inspection report), you can forgo this contingency to give the seller a higher sense of confidence.
- Letter to the seller: Many sellers have a personal attachment to the home. They've lived there for years and want to know the next owner will take care of the property. Writing a letter to the seller can show them how you picture your life in the house and appeal to their sentimental side.
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.
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 kitfrom 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.
Step 8: Close on your new home!
Once you finish your inspections and your lender approves your financing, you'll be ready for closing! Closing is the process of finalizing your mortgage and transferring ownership of the property.
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 $299,600 home — the typical home value in Tennessee — that's between $8,988 and $14,980!
Frequently asked questions
- 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.