Intending homeowners checking Tennessee FHA loan requirements

If you’re in the market for a new home in Tennessee, you might wonder if a federal housing administration loan is right for you. FHA loans are popular amongst buyers because they offer several advantages over other types of mortgages. 

But before you apply for an FHA loan, it’s crucial to understand the requirements and expectations that come with them. This article explains everything you need to know about FHA loan requirements in Tennessee. 

We’ll cover how to qualify for an FHA loan, the down payment requirements, and more! So if you’re ready to learn about the FHA loan requirements in TN, keep reading!

Tennessee FHA Loan Guidelines and Requirements

Tennessee is one state you’ll love to own a home. From Nashville (the Music City) to the Great Smoky Mountains, there are many beautiful towns to call home in Tennessee. 

Knowing the home loans requirement will help you make your dream of becoming a homeowner in Tennessee a reality. While the following are the general FHA loan requirements in Tennessee, lenders might have their own eligibility criteria. 

1. Mortgage Insurance 

FHA loans come with two types of mortgage insurance premiums (MIP). The first MIP is the upfront mortgage insurance premium (UPMIP), about 1.75% of the loan amount. However, you don’t have to pay the UPMIP from your pocket; it’s part of the loan. 

The second MIP is paid monthly, about 0.85% of the total loan amount. While calculated annually, you get to pay it as part of your monthly mortgage payment. 

  • Credit

Most TN FHA lenders prefer a 580 or more credit score. However, some might accept buyers with less than 580 credit scores. 

  • Employment

You’ll need two years of proof of consistent employment to qualify for an FHA loan. Also, you’ll be required to furnish a two years tax return and possibly two recent bank statements. 

  • Property

As part of the FHA loan requirements in TN, you’ll need to meet the FHA property conditions to become eligible for a home loan. One of the property requirements includes the “minimum property standards”. 

Your intended property will have to undergo an appraisal to meet the guidelines relating to the home condition. The assessment helps to verify the property value. 

2. Down Payment 

The standard FHA loan down payment requirement is 3.5% of the home purchase price. For instance, if you’re considering a $400,000 loan, you’ll need a $14,000 down payment. Your down payment becomes higher if your credit score is below 580.

After meeting these loan application requirements and applying for the FHA loan, you’ll be given a requirement checklist (loan conditions) after being approved, outlining all you need to provide to close the loan. 

Tennessee FHA Loan Limits

Tennessee FHA loans come with some limits. Depending on where you want to own a property in the state, you can get a maximum of $356,362. However, if you’re looking toward being a Nashville homeowner, your loan amount can be up to $586,500.

Ensure you're pre-qualified for an FHA loan before starting your home search

FHA Loan Application Process in Tennessee 

Although Tennessee FHA loans come with diverse borrowing limits, the application requirements are the same. 

The following are steps to applying for the Tennessee FHA loan:

  • Collect a pre-qualification letter from a mortgage lender
  • Find an FHA-approved home in your preferred county
  • Submit your required documentation and application to your lender

Although getting a pre-qualification letter is optional, it’s one way to distinguish yourself from other buyers when bidding for a house. It also shows home sellers that you’re serious about purchasing their home with an FHA loan. 

FHA Loan Pre-Approval Process in Tennessee 

When searching for FHA loans, you’ve got to follow some processes to get pre-approved. Firstly, ensure you have the down payment necessary for your qualification. You might want to check your credit score to ensure it’s good. 

The FHA loan approval process includes:

  • Getting a copy of your two years tax return
  • Providing copies of your last month’s pay stubs
  • Getting copies of your bank statements for the previous two months
  • Speaking to an FHA lender 

It’s best to speak to an FHA lender months before starting your home search to enable them to discover opportunities that will help your loan approval. 

FHA First-time Buyer Assistance Program in Tennessee 

The Tennessee Housing Development Agency (THDA) offers a Great Choice Home Loan FHA assistance program for first-time homebuyers in Tennessee. While the program comes with down payment assistance, you must attend a buyer education class and have the minimum credit score to qualify. 

The FHA down payment assistance programs can help increase your chances of becoming a homeowner in Tennessee for many reasons. For instance, in 2020, the average home value in Tennessee was $200,257. Therefore, a home buyer will need about $7,000 as a down payment which is lots of cash. 

In cases like this, especially if the home buyer is short on cash, the FHA down payment assistance scheme will come in handy. 

Getting an FHA Streamline Refinance

Homeowners looking to utilize their home equity can access the Tennessee FHA cash-out refinance. Refinancing your mortgage through FHA cash-out refinance enables you to borrow money to:

  • Remodel your home
  • Buy a new home
  • Upgrade appliances
  • Handle other home improvements

Finding FHA Properties for Sale in Tennessee 

Finding an FHA property for sale in Tennessee isn’t entirely difficult. Consider checking real estate sites like Trulia or Zillow or talk to an experienced local real estate broker from top real estate companies like Homes By Ardor. 

Whether you’re considering a single-family property or a condo in Tennessee, your real estate agent will help you make the find quicker. However, ensure you determine your FHA maximum loan amount and the type of house you qualify for before beginning your home search. 

Finding a Good FHA Lender

You’ll need to consider some things when searching for the best FHA lenders to work with. 

The best FHA lender should:

  • Work with at least 500 credit score
  • Offer competitive fees and rates
  • Provide FHA 203k loans
  • Have a good underwriting and processing team
  • Communicate effectively and give you updates about the loan process
  • Work with you throughout the whole process

Finding top FHA lenders is one of the steps to getting home purchase assistance

Top Tennessee FHA Lenders

Some lenders to consider for an FHA loan in Tennessee are:

  • Bank of Tennessee
  • U.S. Bank
  • First Tennessee Bank
  • Bank of England Tennessee
  • Guaranteed Rate
  • Mad River Valley Tennessee Lenders
  • Quicken Loans
  • Mortgage Investors Group
  • Fountain City Finance
  • Carrington Mortgage Services
  • Heritage Family Credit Union
  • Flagstar Bank

Tennessee FHA Loan Benefits

The FHA loan program in Tennessee has several benefits compared to a conventional loan, such as:

  • Increased debt to income ratio allowed
  • Lower credit scores permitted
  • Interest rates lower than conventional mortgage rates
  • Lower down payment requirement
  • Gift funds allowed
  • Co-signers allowed
  • Sellers can contribute to closing costs

Why Become a Homeowner in Tennessee

Tennessee is amongst the top five places people are moving to. Like New Jersey, Colorado, and Pennsylvania, home buyers enjoy many home buying assistance programs, making it one of home buyers’ preferred choices.  

Are you planning to relocate to Tennessee? The following are benefits to enjoy:

  • Low property taxes
  • No state income tax
  • Great music culture
  • Great weather
  • Lots of outdoor activities
  • Lovely restaurants


Do all FHA Lenders Offer the Same Program?

All FHA mortgage lenders aren’t the same and don’t offer the same FHA programs. Also, their fees and rates might differ. However, the people handling your loan processing and underwriting will hugely impact your loan experience. 

Can Gift Funds Be Used for FHA Loans?

You can use gift funds to pay for down payments under the FHA loan in TN. However, the gift funds should be from a close friend or relative and approved by the mortgage lender. Remember to ask the donor to sign a gift letter which you’ll present to the lender for approval. 

Does FHA Loans Require Appraisal?

You’ll need an inspection and appraisal before your FHA loan can be approved. There’s a specified FHA inspection guideline on what should be repaired before closing your loan. 

That way, home buyers will only move into an operational and safe home.  

Can I Use FHA Loans to Buy Investment Properties?

Unfortunately, FHA loans are only for primary residences. Therefore, you can’t use the loan to buy investment properties. However, you can move from an FHA-financed home to a new property and retain the old one as an investment. 

Can I Get Home Improvement or Construction Loans Through the FHA Program?

You can get an FHA construction loan to build and customize a new home in Tennessee. The program allows you to add your home building cost to your FHA loan. 

You can also upgrade or remodel an existing home with the FHA home improvement loan. There’s also the FHA 203(k) rehabilitation loan for recently bought properties requiring renovation.

Final Thoughts

If you’re looking for a bit of help in making your homeownership dreams a reality, the FHA program in Tennessee may be able to offer you some assistance. 

With access to down payment assistance and a range of loan programs designed especially for intending Tennessee home buyers, there’s no reason not to explore your FHA loan options. 

So what are you waiting for? Talk to an experienced local real estate agent today about finding your dream home within your budget. Don’t forget to check the FHA loan requirements TN to ensure you qualify for a loan.

The FHA loan in Tennessee comes with many eligibility requirements, including finding an FHA home for sale. That’s where Homes By Ardor’s team of experienced local real estate agents come in. 

Our licensed real estate brokers are always available to help you find the best FHA home for sale in the shortest time. Reach out to us today to get started finding your ideal property.