Mortgage Guide for Tennessee
Tennessee combines low property tax rates with affordable housing across most of the state, creating favorable conditions for mortgage borrowers. The Tennessee Housing Development Agency (THDA) offers several programs for first-time and qualifying homebuyers, including below-market-rate mortgages and down payment assistance.
Mortgage Numbers for Tennessee
| Median Home Price | $360,000 |
|---|---|
| Baseline Conforming Limit | $806,500 |
| Conforming Limit Ceiling | $806,500 (standard) |
| FHA Loan Limit (Baseline) | $524,225 |
| Avg. Property Tax Rate | 0.71% |
| Avg. Homeowners Insurance | ~0.35% of home value (avg. annual premium) |
| Transfer Tax | 0.37% (Deed transfer tax applied statewide at a flat rate on the sale price) |
| High-Cost Counties | No |
Data sources: FHFA (conforming limits), HUD (FHA limits), U.S. Census (home values), State Department of Revenue (property tax). Updated annually unless noted. Data as of 2026-02-26.
What This Means for Your Mortgage
Property Tax Advantage and DTI Impact
Tennessee's effective property tax rate of approximately 0.71% is well below the national average of roughly 1.1%. For a home valued at $360,000, this translates to an estimated $2,556 per year, or about $213 per month. Lower property taxes reduce your total monthly housing payment, which directly improves your debt-to-income (DTI) ratio. A lower DTI can help you qualify for a larger loan amount or strengthen your approval odds at a given price point. This advantage is particularly meaningful for borrowers near qualification thresholds.
Transfer Tax at Closing
Tennessee imposes a deed transfer tax at a flat rate of 0.37% of the sale price, applied statewide with no county variation. On a $360,000 purchase, this amounts to approximately $1,332. The transfer tax is typically paid by the seller in Tennessee, though this is negotiable and should be addressed in the purchase agreement. For a detailed breakdown of how transfer taxes and recording fees factor into your closing costs, review the relevant knowledge page.
Insurance Considerations
Homeowners insurance in Tennessee averages roughly 0.35% of the home's value annually. For a $360,000 home, this comes to approximately $1,260 per year, or $105 per month. Tennessee is subject to severe weather events including tornadoes, hail, and occasional flooding, which can affect premiums in certain regions. Borrowers purchasing in flood-prone areas near the Mississippi River, Tennessee River, or Cumberland River watersheds may need separate flood insurance. Lenders require proof of adequate coverage before closing, and borrowers using less than 20% down will also carry private mortgage insurance (PMI) until sufficient equity is established.
THDA Homebuyer Programs
The Tennessee Housing Development Agency (THDA) administers the Great Choice loan program, which provides below-market interest rate mortgages to eligible borrowers. The program includes options for down payment assistance through a second mortgage. Income and purchase price limits apply and vary by county. THDA requires completion of a homebuyer education course as a condition of program participation. These programs can be combined with FHA, VA, or USDA first mortgages, broadening accessibility for borrowers who meet both THDA and federal program requirements. Tennessee's substantial rural geography makes USDA eligibility particularly relevant outside the Nashville, Memphis, Knoxville, and Chattanooga metropolitan areas.
Monthly Payment Breakdown Example
For a $360,000 home purchase with 10% down ($36,000), the base loan amount would be $324,000. At a 6.75% interest rate on a 30-year fixed mortgage, the principal and interest payment would be approximately $2,102 per month. Adding property taxes ($213/month), homeowners insurance ($105/month), and estimated PMI ($135/month) brings the total estimated monthly payment to roughly $2,555. With 20% down ($72,000), the loan amount drops to $288,000, eliminating PMI and reducing the total monthly payment to approximately $2,186. These figures illustrate how Tennessee's lower property tax rate contributes to more manageable monthly obligations compared to higher-tax states at equivalent home prices.
Conforming Loan Limits
Tennessee uses the baseline conforming loan limit of $806,500 for 2025 across all counties. There are no high-cost designations in the state. The FHA loan limit floor of $524,225 applies statewide. Borrowers needing financing above the conforming limit will need a jumbo loan, which typically requires stronger credit profiles, larger down payments, and may carry different rate structures. For the majority of Tennessee purchases, conventional conforming financing is available given the state's median home price of approximately $360,000 .