FHA Loans
Tennessee
Tennessee continues to work toward more acceptance and equality, with some cities progressing faster than others. Nashville especially stands out as having a particularly strong approach to equality, scoring an admirable 77 out of 100 on Human Rights Campaign’s Municipal Equality Index in 2023. The city’s 2024 Pride Parade invited 125,000 participants, pushing back against the anti-LGBTQ+ legislation being pushed by the government.
The Volunteer State has also grown increasingly diverse in recent years, especially the Middle Tennessee area. BIPOC individuals are taking charge and creating a brighter future through initiatives like Campaign for Change, meant to help improve diversity, equity, and inclusion throughout the state. This optimistic attitude, combined with the beautiful weather and affordable housing, making Tennessee an excellent option for those looking to enjoy temperate climes and a rich culture.
FHA loans are a great way to set up roots in this beautiful state. A Tennessee FHA loan has less stringent eligibility requirements, making the dream of homeownership a reality for more buyers. Learn everything you need about FHA loans in Tennessee, including benefits, requirements, and how to begin your application.
What Are FHA Loans?
Federal Housing Administration, or FHA loans, are a lending option for those who want to buy a home in Tennessee. FHA loans are backed by the U.S. Department of Housing and Urban Development (HUD), which means better loan terms for Tennessee residents. With a government agency backing the home loan, borrowers who qualify for an FHA can enjoy substantial savings, including better interest rates and a lower down payment.
Government-backed products have long been a lifeline for marginalized borrowers, especially those in areas with a history of discrimination and inequity in housing opportunities. FHA approval rates for BIPOC borrowers are much higher than they are for conventional mortgage products, demonstrating the value that these products provide for those who may otherwise face significant hurdles due to mortgage discrimination.
Across all loan purpose types, Black borrowers have higher denial rates than any other group, but thankfully, a quarter of a million Black buyers have been able to access financing through HUD programs in the past three years.
These products are also helpful to LGBTQ+ borrowers thanks to HUD’s long history of advocacy for equality. In 2012, HUD required that every lender providing government-back products approve loans without discriminating against anyone for their actual or perceived gender identity or sexuality after years of research demonstrating a systemic issue of discrimination against LGBTQ+ individuals. In 2021, the department released a memorandum to reaffirm its strong focus on improving access to financing for gender-expansive and queer individuals.
This advocacy has continued, with HUD releasing the Fair Housing Toolkit in 2023 to help educating all mortgage professionals about the need for better equity in lending.
FHA loans represent the government at work for everyone, no matter their race, gender identity, sexuality, or other qualifier. We can help you access this special program, which is a partnership between private corporations and government agencies.
FHA loans in Tennessee are ideal for first-time home buyers or those seeking starter homes. It is also a good financing option for borrowers who may not meet conventional loan requirements.
Below, you’ll learn your approval odds for FHA funding in Tennessee. We’ll also review the general FHA loan requirements to determine your eligibility. If you have questions, contact Pride Lending today to take the first step toward acquiring your dream Tennessee property.
Benefits of Federal Housing Administration Loans for Tennessee Borrowers
FHA loans are an attractive choice for aspiring buyers in Tennessee because they are easier to qualify for. More lenient credit requirements and favorable loan terms make FHA loans a great choice for first-time homebuyers.
Here are a few of the top benefits of choosing an FHA loan in Tennessee.
Small Down Payment Options
FHA loans are available in Tennessee for as low as a 3.5% down payment. Down payment requirements on an FHA loan may go up to 10% for borrowers with lower credit scores.
Down payment assistance programs may also be available to certain buyers, including options from the Tennessee Housing Development Agency or The Housing Fund. These income-based programs often work in coordination with the FHA loan program to assist with the upfront costs.
Additionally, FHA permits gift funds to be applied to these expenses. This means you can apply gifted funds from family and friends to help cover the cost.
Competitive Interest Rates
If you are interested in an FHA loan in Texas, then you should understand the benefits of this option. Here are a few advantages Texas homebuyers will experience with FHA loans.
Flexible Underwriting Guidelines
Underwriting is the process of evaluating a borrower’s risk. Since these borrowers are in more precarious financial situations, most applications are underwritten manually. What loan officers look for during the underwriting process is usually more flexible with FHA loans, whereas a conventional product would have more strict requirements.
Assumable Mortgages (Buyer Can Take over Existing FHA Loan)
An FHA mortgage on a house in Texas may be eligible as an assumable mortgage for a new buyer. Essentially, instead of taking out a new loan to buy a house, you take over the debt and payments for an existing FHA mortgage and become the new owner of the house. This is an excellent option for people with spotty credit reports.
FHA Loan Requirements
Every lender will have their own requirements for the FHA program. However, the typical Texas FHA loan requirements are as follows.
Minimum Credit Score
To qualify for an FHA home loan, you should aim for a credit score of 580 or better, as they will allow you to access the best rates and lowest upfront expenses. Lenders approving FHA mortgages may allow for scores as low as 500 if they offer at least 10% upfront.
Down Payment Amount
As mentioned previously, the minimum down payment for an FHA mortgage is 3.5% for those with a score of 580 or greater; those with scores between 500 and 579 must make a minimum payment of 10%. Although this is a low down payment and makes homes more affordable, it also means you would pay a private mortgage insurance premium (MIP).
We understand that even 3.5% can feel like a challenge depending on your personal finances, but Pride Lending is here to assist. We’ll connect you with local, state, and nationwide down payment assistance programs that can provide you with grants or second liens.
Numerous organizations in Texas offer assistance for those who can’t afford their upfront costs. For example, you may choose DPA programs from the Texas State Affordable Housing Corporation (TSAHC) or the Texas Homebuyer Program from the Texas Department of Housing and Community Affairs.
Debt-To-Income Ratio (DTI)
DTI compares your monthly debt payments to your gross monthly income. You divide your debt total by the gross income each month and then multiply by 100 to get a percentage. The typical lender will require a maximum DTI of 43%. Lenders can make an exception to a maximum DTI of 57% if the borrower has a good credit profile and provides a larger down payment.
Property Standards
Since the government is backing this mortgage, approval for the property type is needed before the loan is given. An appraisal will ensure the property is safe to occupy and up to standards for liveable conditions.
Additionally, this home must become your primary residence to qualify. However, it is possible to purchase a property with up to 4 units and rent up to 3 units, as long as one is used as your permanent residence.
Mortgage Insurance Premiums (MIP)
Everyone, no matter how much they put down, needs to pay the upfront mortgage insurance premium, which is 1.75% of the loan amount. You’ll also have to pay ongoing annual mortgage insurance premiums, though this may not be for the entire length of the loan.
If you make a 10% down payment or more, the MIP will be removed after 11 years, but if you make less than this, you’ll have MIP for the entirety of the loan. It’s also possible to refinance into a conventional loan once you have 20% equity, which would remove mortgage insurance.
Tennessee FHA Loan Limits
Tennessee FHA Loan Limits
The FHA program limits the maximum value a buyer can borrow, also known as FHA loan limits. FHA loan limits vary depending on location and property types.
Tennessee loan limits range between $498,257 to $943,000 for a single-family home. The FHA loan limit is based on the current housing market, so higher loan limits are in more in-demand parts of Tennessee, including the Nashville area.
Duplex, tri-plex, and four-plex properties have higher home loan limits than single-family properties. It’s also important to note that the FHA loan limit changes annually, so always check with your lender on the current limits. The HUD interactive tool allows Tennessee buyers to review FHA loan limits based on county.
The FHA Loan Process
Are you considering buying a single-family home in Memphis or a condo in Nashville? If you meet the Tennessee FHA loan requirements, an FHA loan may be best.
See if you meet the requirements
Evaluate if you have a credit score of 580 or greater, a DTI of 43% or lower, and that you meet the down payment requirement of 3.5%. You may still qualify if you have a score as low as 500 or a DTI of 57%, but this may limit your choices.
Contact Pride Lending
When you reach out to us, we’ll begin your loan consultation by reviewing your options with you. FHA-approved lenders are qualified to give out these mortgages, and finding the right loan partner is the key to a positive homebuying experience.
Apply and get pre-approved
Pre-approval will prepare you for a smoother buying experience and help you understand what you can afford. You will need many documents for your application, including tax returns, paychecks, and bank statements.
Shop for the perfect home
Once you’ve been preapproved, we’ll discuss your budget with you and send your preapproval letter to your realtor. You can then begin shopping for the right property in your area.
Submit an offer
You and your realtor will decide on a competitive bid and submit the letter to the seller.
Complete the application
The application is called the Uniform Residential Loan Application and will include many of the same details you needed for preapproval; however, it will also include property details, which the lender will use to determine whether the property meets their standards.
Offer acceptance
The seller will decide if they find your offer acceptable. If they do, then you’ll sign a purchase contract that tentatively agrees to buying the home.
Inspection
While not strictly necessary for the program, the lender will likely require you to have the property inspected, ensuring that there are no significant issues.
Conditions
If you’re happy with the inspection results, then our team at Pride Lending will walk you through the sales contract and make sure everything is correct.
Underwriting
We will submit all the details that you have provided to the lender, whose underwriting team will now take over. They will carefully investigate each facet of the loan and ensure that there are no issues with you or the home.
Appraisal
An approved appraiser will evaluate the property to determine if it is a fair value, is safe to live in, and meets the property requirements for FHA home loans.
Loan approval
Once the appraisal is complete and the details of the loan have been reviewed, the lender will proceed with the final approval of your loan so that you can close on the transaction. We will schedule the closing date with you and the title company will send the information regarding how to pay the upfront expenses.
Close on the home
All the documents will be signed, the title will be transferred to you, the closing costs will be paid, and you will become the new owner of that house with the help of an FHA home loan.
Why Choose Pride Lending for Your Texas FHA Loan?
When you need the right team on your side to navigate the Texas FHA program, a loan officer from Pride Lending is ready to help. We serve all our clients with the same care, offering excellent customer service and a streamlined application process to make homeownership affordable and accessible.
Our team is composed of allies and members of minority communities, including LGBTQ+ and BIPOC individuals. We’re here to help everyone, no matter their identity, and serve as an advocate for those who may feel underserved by the mortgage industry.
First-time homebuyers and repeat buyers alike can work with Pride Lending whether they want to buy a single-family home or learn about an FHA reverse mortgage. Call us today at 725-231-0192 to learn more about Texas FHA loans.