Best Mortgage Lenders for First Time Home Buyers in TN

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Tennessee’s southern charm, gorgeous mountains and legendary music scene make the Volunteer State a great place to call home. Tennessee offers lower-than-average home prices which can be a major attraction for first-time home buyers. Here’s everything you need to know about buying a home in Tennessee. 

Get a Mortgage in Tennessee
Tip: compare 2-3 lenders

The Best Mortgage Lenders for First Time Home Buyers in TN:

The Housing Market in Tennessee: An Overview

Before you start your housing search, it helps to know what’s going on in the housing market. Here’s an overview of the housing market facts and figures you’ll find in Tennessee:

Total households: 2,547,194

Median list price: $229,900

3 most expensive cities in Tennessee to buy a house:

  • Chattanooga
  • Knoxville
  • Nashville

3 most affordable cities in Tennessee to buy a house:

  • Frankewing
  • Lavinia
  • Hollow Rock

Preparing for a Mortgage

How do you get ready for a mortgage? What does the process look like? Let’s take a closer look at what’s involved in getting a mortgage. 

Get Ready

Here are 2 important steps you’ll need to take when as you get ready to apply for a mortgage:

  • Check your credit. Your credit doesn’t have to be perfect to get a mortgage, but take the time to check your credit report for errors. You can get 1 free credit report from each of the 3 credit bureaus each year through annualcreditreport.com. Report any errors to the credit bureau. 
  • Prepare an application packet. Gather your financial documents and store them in a secure but easy-to-find place. Here are some of the documents you’ll need to apply for a mortgage. Your lender may ask for additional documents, but these will get you off to a good start:
  • A copy of your identification
  • Pay stubs from the last month
  • Your 2 most recent tax returns
  • Your W-2s from the past 2 years
  • Your 2 most recent bank statements
  • Documentation of your down payment source
  • Proof of any other income
  • Documentation of any name changes

Neither of these steps is required, but it’s a good idea to get organized so you help the mortgage process go more smoothly. 

Next Mortgage Steps

Next, contact at least 3 lenders and get a purchase quote. Review your quotes and choose a lender and apply for preapproval. A preapproval makes you more appealing to home sellers. 

Start home shopping once you have a preapproval letter. A knowledgeable real estate agent can be a big help. A real estate agent can sort through listings and help you narrow down your options. Put in an offer when you’ve found a promising home. If the seller accepts, it’s time to make a final decision on a lender and mortgage. 

Complete a full application with your lender of choice. Your credit score is an essential part of the whole process — and lenders have specific credit score minimums. Your credit score is a computer-generated number that gives lenders an at-a-glance understanding of your credit history. Here are the minimum credit scores for some Tennessee lenders.

LenderMinimum Credit Score Required
Bank of America620
BBVA620
Citibank620
Freedom Mortgage620
Keller Mortgage600

Mortgage Options

There are a lot of mortgage types on the market, which can lead to some confusion. But here’s a quick overview of the types of loans you may be able to find. Reading through the list may help demystify some of your options:

  • FHA loan: Many first-time home buyers opt for an FHA mortgage. Why? These mortgages are backed by the Federal Housing Administration. This means they have low down payment requirements and low minimum credit score requirements. If your credit score is 580 or higher, you can make a down payment as low as 3.5%. The FHA also allows borrowers with credit scores of 500–579 to qualify with a down payment of 10% or more. 
  • USDA loan: USDA mortgages help borrowers with limited means obtain a mortgage. You can only use these mortgages in rural areas. If you meet the income criteria, you may not have to make a down payment. The Department of Agriculture oversees this program. 
  • VA loan: VA mortgages help current and retired service members buy homes. The Department of Veterans Affairs supports and governs this program. Qualified service members may be able to get a mortgage with no down payment. These mortgages have limited fees and no mortgage insurance, which means you’ll be able to make a lower monthly payment. 
  • Conventional loan: A conventional mortgage is a home loan that isn’t directly supported by a government program. You’ll see 2 types of conventional loans: conforming and non-conforming. Conforming mortgages meet Freddie Mac and Fannie Mae’s requirements. These 2 companies back conforming mortgages and help stabilize the housing market. They have a mortgage price limit, which varies depending on where you live. Non-conforming mortgages don’t meet Freddie Mac or Fannie Mae requirements. 
  • Jumbo loan: A jumbo mortgage is a mortgage that exceeds Freddie Mac and Fannie Mae’s price limits. These mortgages can be $1-2 million or more. 

Private lenders offer these mortgages, including the government-sponsored ones. The backing government agency must approve lenders that offer FHA, USDA and VA mortgages. 

First Time Home Buyer Programs in Tennessee

Looking for some extra help? The Tennessee Housing Development Agency offers assistance programs. 

  • Great Choice Home Loans: These mortgages offer a fixed interest rate and a 30-year term. This means the interest rate will never change for the life of the loan. The program has income limits. All applicants must have a credit score of 640 or higher. 
  • Great Choice Plus second loan: Borrowers who qualify for a Great Choice Home Loan can also apply for a second loan. This loan provides up to 5% of your home’s purchase price to help with your down payment and closing costs. This is a no-interest second loan. You don’t have to make any payments on the loan until you sell or refinance the home. 

Contact a participating lender if you’re interested in Tennessee’s home buyer programs. 

Current Mortgage Rates in TN

Your mortgage rate is what you pay your lender to borrower money. Mortgage rates can be fixed or adjustable. An adjustable-rate mortgage (ARM) usually starts with an introductory fixed rate. After that, the lender changes your rate based on market conditions. This could increase or decrease your monthly payment. 

When you’re mortgage shopping, you might notice that rates change daily. Lenders change rates in response to what’s going on with the economy. At Benzinga, we update our rates frequently to reflect these changes. Here are the current mortgage rates in Tennessee:

Loan TypeCurrent Mortgage Rate
30-year fixed3.74%
15-year fixed3.22%
5/1 ARM (adjustable rate)3.94%

Closing a Mortgage

Closing occurs at the end of the mortgage process. After your lender reviews and underwrites your mortgage, it lets you know whether you’re approved. If the mortgage is approved, the next step is closing. When you officially close on your mortgage, you meet with your lender and other parties. You do a lot of paperwork and pay your closing costs and down payment. 

Legally, your lender must have your documents ready 3 days before your closing meeting. If anything is confusing or unexpected, contact your lender. 

The underwriting process can be lengthy. Here are the average days to close for several Tennessee lenders: 

LenderAverage Days to Close Loan
Bank of America45
BBVA40
Citibank30
Homebridge Financial Services30
Quicken Loans30

5 Best Mortgage Lenders in TN for First Time Home Buyers

Ready to find your lender? Here are the best mortgage companies for first time home buyers in Tennessee.

1. Best Overall: Rocket Mortgage

The mortgage process is complicated, so Rocket Mortgage simplifies it.

The lender offers an online, easy-to-complete application. It also offers top-notch customer service before and after you qualify for a mortgage. Rocket Mortgage doesn’t have branches, but you can easily reach a loan expert by phone or chat.

You can apply for conventional, jumbo, FHA, VA and USDA mortgages. 

2. Best for Low Credit Score: New American Funding

New American Funding ranks among the best lenders for first-time buyers due to its options for those with challenging credit.

It offers multiple proprietary mortgage products that use alternative income verification methods. It also offers conventional loans with low down payments as well as USDA, FHA and VA mortgages.

New American Funding is a good starting point if you’re uncertain about qualifying for a mortgage. 

3. Best for Mobile Guaranteed Rate

Guaranteed Rate offers a completely online mortgage experience and an easy-to-use mobile app.

You can apply for a mortgage on your phone.

Guaranteed Rate offers high levels of customer satisfaction as well as conventional, jumbo, FHA and VA mortgages. 

4. Best for In-Person Service: Bank of America

Many first-time buyers like working with someone in person. Bank of America has branches throughout Tennessee.

You can easily meet with a loan officer and talk about your mortgage options. Bank of America also offers an online application. You can view its rates to make comparison shopping easier.

Bank of America offers conventional, jumbo, FHA and VA mortgages. 

5. Best for Service Members: Veterans United

If you’ve logged some time in the military, Veterans United’s loans will likely be the best deal. Unlike other veteran-marketed loan programs, Veterans United only accepts active duty and veteran military members.

In addition to no-down-payment loans, you’ll also eliminate the private mortgage insurance you’ll have to pay with other mortgages.

Veterans United is also more forgiving of lower credit scores. Interest rates are lower than average.

Choosing Your Tennessee Lender

Choosing a lender is a big decision. Sure, you can get a refinance quote down the road, but you want to start with the best terms possible. Take the time to get multiple quotes and review them carefully. Ask questions and trust your instincts. You’ll be in the right home — and have the right mortgage — in no time. 

Frequently Asked Questions

1) Q: How much should I save for a down payment?

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1) Q: How much should I save for a down payment?
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Most lenders will recommend that you save at least 20% of the cost of the home for a down payment. It is wise to save at least 20% because the more you put down, the lower your monthly payment will be and ultimately you will save on interest costs as well. In the event that you are unable to save 20% there are several home buyer programs and assistance, especially for first-time buyers. Check out the lenders that specialize in making the home buying experience a breeze.

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2) Q: How much interest will I pay?

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2) Q: How much interest will I pay?
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Interest that you will pay is based on the interest rate that you received at the time of loan origination, how much you borrowed and the term of the loan. If you borrow $208,800 at 3.62% then over the course of a 30-year loan you will pay $133,793.14 in interest, assuming you make the monthly payment of $951.65. For a purchase mortgage rate get a quote here. If you are looking to refinance you can get started quickly here.

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3) Q: How do I get pre-approved?

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3) Q: How do I get pre-approved?
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First, you need to fill out an application and submit it to the lender of your choice. For the application you need 2 previous years of tax returns including your W-2’s, your pay stub for past month, 2 months worth of bank statements and the lender will run your credit report. Once the application is submitted and processed it takes anywhere from 2-7 days to be approved or denied. Check out our top lenders and lock in your rate today!

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