Tennessee Mortgage Guide

$340,000 median—19% below the national average—but here's what matters more: Nashville's pushing $450K while Chattanooga sits around $310K and you can still find places in Knoxville for $280K. The price spread inside this state is wild, and it's widening fast as people flood in from higher-cost states.

The no state income tax thing is real and it adds up differently than you'd think. If you're making $80K, that's roughly $4,000 a year you're not sending to the state. Combined with property taxes at 0.71% (you'd pay around $2,400/year on that median-priced home), your carrying costs end up noticeably lower than most places. But insurance is climbing—not California wildfire rates, but tornado coverage isn't cheap and some counties are in flood zones that'll surprise you.

Nashville's traffic is legitimately bad now. Not LA bad, but worse than you'd expect for a mid-size Southern city, and it's getting harder to find affordable homes within reasonable commuting distance. A lot of people end up in Murfreesboro or Franklin and realize they're spending an hour each way.

The Tennessee Housing Development Agency runs the Great Choice Plus loan—3% down, and they'll give you up to $15,000 in down payment assistance if you're a first-timer. Income limits apply but they're pretty generous in most counties outside Nashville.

The Tennessee Housing Development Agency (THDA) runs the Great Choice program, and it's probably better than you think—but you need to understand how the down payment assistance actually works before you get too excited.

Here's what you get: up to $15,000 in down payment and closing cost assistance. The catch everyone misses is that it comes as a second mortgage at 0% interest. You don't make payments on it, but you have to repay it when you sell, refinance, or pay off your first mortgage. So it's not free money—it's an interest-free loan that sits there until one of those things happens.

The first mortgage part is competitive though. THDA offers 30-year fixed rates that are usually pretty close to market, sometimes better depending on timing. You can use this with FHA, VA, USDA, or conventional loans, which gives you flexibility most state programs don't offer.

Income limits apply based on county and household size, and in places like Nashville or Knoxville, they're stricter than you'd expect. You also need to take a homebuyer education course—it's online, takes maybe 6-8 hours, costs around $75. Most people find it annoying but not terrible.

If you're military or a veteran, Homeownership for the Brave stacks on top of the Great Choice program and can waive that second mortgage repayment requirement entirely after 15 years of staying in the home. That's the best deal Tennessee offers if you qualify.

THDA-participating lenders are the only way to access these programs. Not every mortgage broker works with them, so ask upfront. Check THDA's website for current rates and participating lenders—programs change funding levels throughout the year.

Here's the thing that catches people off guard: Tennessee doesn't have a state income tax, but they make up for it with a transfer tax that's split between state and county. You're looking at $0.37 per $100 in value at the state level, then most counties (like Davidson or Shelby) tack on another $0.37 per $100. On a $350,000 home, that's around $2,590 just in transfer taxes at closing. It's not California-level crazy, but it's higher than what you'd pay in neighboring states like Kentucky or Alabama.

The other piece worth knowing: Tennessee is a non-judicial foreclosure state, which means if you default, lenders don't have to go through court. They can move faster than in judicial states. There's no redemption period after the sale either—once your home is foreclosed and sold, it's done. You don't get a window to buy it back.

One more thing specific to Tennessee—the Tennessee Housing Development Agency (THDA) runs first-time buyer programs that are actually pretty solid if you qualify. The Great Choice loan program offers down payment assistance as a second loan, and income limits are reasonable depending on where you're buying. In rural areas outside Nashville or Memphis, those limits are higher.

Consult an attorney for your specific situation, especially around title issues.

Here's what nobody tells you: Tennessee has a reappraisal cycle that'll catch you off guard if you're not ready for it. Most counties reassess property values every 4-5 years (some like Davidson County just moved to 4-year cycles). Your property taxes can jump significantly after reappraisal even though the rate stays low at 0.71%. I've seen people budget based on the seller's old tax bill, then get hit with a 30-40% increase a year later because the assessment was based on pre-sale values.

Apply for the homestead exemption immediately after closing. In most counties it's around $25,000-$75,000 off your assessed value (varies by county), but you have to file by the deadline or you're waiting another year. Davidson and Shelby counties have different amounts than the rural areas.

The other thing – if you're buying in Nashville, Chattanooga, or anywhere along the I-40 corridor, get serious about tornado insurance and make sure you understand your wind/hail deductibles. Standard homeowner's policies here often have percentage-based wind deductibles (1-5% of your home's value), which means on a $400,000 house you might be covering the first $4,000-$20,000 of storm damage yourself. That's not theoretical – we get severe storms every spring.