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Compare mortgage rates in Tennessee.
Key Points
• Mortgage rates in Tennessee are slightly higher than the national averages but lower than rates in the early 2000s.
• Mortgage rates are influenced by economic factors like the federal funds rate, inflation, and the housing market.
• Higher interest rates mean higher monthly mortgage payments for homebuyers, while lower interest rates mean lower monthly payments.
• Your credit history and financial habits also affect the mortgage rate you’re offered in Tennessee.
• Tennessee offers various mortgage types, including fixed-rate mortgages, adjustable-rate mortgages, FHA loans, VA loans, and USDA loans.
Introduction to Mortgage Interest Rates
Mortgage interest rates are the fees charged by lenders for borrowing money to purchase a home. These rates are calculated using a complex combination of factors that can be broadly categorized into two buckets: the state of the economy and the borrower’s financial status.
This comprehensive guide provides an analysis of mortgage rates in Tennessee, including the factors affecting rates, types of mortgages available, and strategies for securing a competitive mortgage rate.
How Interest Rates Affect Home Affordability
Mortgage rates have a bigger impact on home affordability than people realize. Even small interest rate changes can put homeownership out of reach for middle-income Americans. For instance, a 1.00% increase in the interest rate on a $400,000 mortgage can add over $250 to the monthly payment, requiring families to stretch their dollars even farther.
Should Homebuyers Wait for Interest Rates to Drop?
Many first-time homebuyers wonder if they should buy now or wait for interest rates to come down. While it’s true that rates fluctuate, there’s no guarantee that they will drop in the near future. And each year that goes by requires padding your down payment savings to keep up with rising home prices.
It’s important to note that homeowners can always refinance their mortgage after rates come down, potentially lowering their monthly payments. A mortgage refinance may allow homeowners to secure a lower interest rate, potentially reducing their monthly payments and overall borrowing costs.
Tennessee Mortgage Rate Trends
Understanding historical mortgage rates can provide valuable insight into where rates are headed. While rates in Tennessee have risen in recent years, they remain below historical highs. Indeed, they are currently around the 50-year average. This suggests that while rates may fluctuate, they are unlikely to experience a significant spike in the near future.
Note: The FHFA stopped reporting state interest rates in 2018.
| Year | Tennessee Rate | U.S. Rate |
|---|---|---|
| 2000 | 7.99 | 8.14 |
| 2001 | 6.95 | 7.03 |
| 2002 | 6.55 | 6.62 |
| 2003 | 5.80 | 5.83 |
| 2004 | 5.85 | 5.95 |
| 2005 | 5.96 | 6.00 |
| 2006 | 6.58 | 6.60 |
| 2007 | 6.34 | 6.44 |
| 2008 | 6.03 | 6.09 |
| 2009 | 4.95 | 5.06 |
| 2010 | 4.70 | 4.84 |
| 2011 | 4.50 | 4.66 |
| 2012 | 3.63 | 3.74 |
| 2013 | 3.82 | 3.92 |
| 2014 | 4.11 | 4.24 |
| 2015 | 3.83 | 3.91 |
| 2016 | 3.65 | 3.72 |
| 2017 | 4.01 | 4.03 |
| 2018 | 4.56 | 4.57 |
Historical U.S. Mortgage Rates
For context, here’s a brief overview of historical U.S. mortgage rates:
• 1980s: Mortgage rates reached their peak in the early 1980s, with an average fixed rate over 18.00%.
• 1990s: Rates declined significantly in the 1990s, reaching an average fixed rate of around 7.00% by the end of the decade.
• 2000s: The early 2000s saw a period of relatively low rates, with an average fixed rate of around 6.00%.
• 2010s: Rates remained low throughout most of the 2010s, with an average fixed rate of around 4.00%.
• 2020s: Rates began to rise in the early 2020s, with an average fixed rate of around 6.00% in 2023.
Factors Affecting Mortgage Rates in Tennessee
Understanding the factors that influence mortgage rates is essential for homebuyers on a tight budget. These factors include:
Economic Factors
• The Fed: The federal funds rate serves as a benchmark for other interest rates, including mortgage rates.
• Inflation: When inflation rises, the purchasing power of money decreases, making it more expensive for lenders to lend money. As a result, they may increase interest rates to compensate.
• Unemploment rate: Lower unemployment can result in higher mortgage rates. A low unemployment rate indicates a strong economy, which typically leads to increased demand for housing. This increased demand puts upward pressure on home prices and, not surprisingly, mortgage interest rates.
Consumer Factors
• Credit score: A higher credit score generally results in a lower mortgage interest rate.
• Down payment: Increasing the down payment can reduce the mortgage interest rate.
• Income and assets: A steady income is important to lenders, who will check your employment history as well as your salary. Assets like investments and emergency savings also reassure lenders that you could still pay your mortgage in the case of a job loss or other financial setback.
• Type of mortgage loan: Certain types of mortgages tend to have lower rates. For instance, adjustable rate mortgages (ARMs) typically offer lower initial rates than fixed-rate mortgages. Some government-backed loans, like VA mortgages, can also have lower rates. And a shorter loan term usually comes with a lower rate than longer terms.
Types of Mortgages Available in Tennessee
Various home loan types — including fixed-rate, adjustable-rate, FHA, VA, and USDA loans — are available to meet the needs of different homebuyers. Which one do you have your eye on?
Conventional Loans
Conventional loans are not backed by the government and are offered by banks, credit unions, and online lenders. They can be fixed-rate or adjustable-rate, and have a maximum allowable amount of $766,550 in most areas of Tennessee; in higher priced counties, the limit is $943,000. There are two main types of conventional loan:
• Fixed-rate mortgages maintain the same interest rate throughout the life of the loan, ensuring that the principal and interest payments remain constant. Fixed-rate mortgages are available in terms of 10, 15, 20, or 30 years.
• Adjustable rate mortgage (ARM) ARMs initially offer a lower rate than fixed-rate loans. However, after an introductory period, typically 5 or 10 years, the interest rate can adjust periodically based on a specified index. ARMs can be beneficial for borrowers who plan to sell their home before the fixed-rate period ends.
FHA Loan
FHA loans are insured by the Federal Housing Administration and are designed for borrowers with less-than-perfect credit or a smaller down payment. FHA loans typically have more lenient eligibility requirements than conventional loans and allow for down payments as low as 3.5%.
VA Loans
VA loans are available to veterans, active-duty military members, and some Reserve and National Guard members. VA loans do not require a down payment and offer competitive interest rates. If you think your service record might entitle you to a VA loan, the next step is to apply for a .
USDA Loans
USDA loans are designed for low-income borrowers looking to purchase a home in a rural area. USDA loans are backed by the U.S. Department of Agriculture (USDA) and do not require a down payment.
Jumbo Loans
Jumbo loans are conventional loans that exceed the conforming loan limit set by the Federal Housing Finance Agency (FHFA). As noted above, the conforming loan limits in Tennessee are $766,550 or $943,000, depending on the area. For mortgages above that amount, you need a jumbo loan, which typically requires a larger down payment and may have higher interest rates than conforming loans.
Popular Places to Get a Mortgage in Tennessee
Securing a mortgage often depends on choosing the right location, where home prices and the cost of living are affordable.
When you compare Tennessee’s costs to the cost of living in the U.S. as a whole, the Volunteer State is 10% lower than the national average, which should make it a relatively affordable place to purchase a home. Tennessee homeowners save on property taxes too, paying about half the national average.
Here are some popular places to shop for a home in Tennessee:
• Nashville: Nashville is the capital and largest city of Tennessee. It offers a diverse economy, a strong job market, and a variety of housing options. The average home value in Nashville is around $433,000.
• Memphis: Memphis is the second-largest city in Tennessee and is known for its music, culture, and history. The average home value in Memphis is around $149,000.
• Knoxville: Knoxville is the third-largest city in Tennessee and is home to the University of Tennessee. The average home value in Knoxville is around $353,000.
• Chattanooga: Chattanooga is a city in southeastern Tennessee and is known for its outdoor activities, scenery, and history. The average home value in Chattanooga is around $304,000.
Least Expensive Locations
If you’re researching the best affordable places in the U.S., make sure to look up the cost of living by city. The following towns in Tennessee have some of the lowest average home values and cost of living scores (COLI):
• Dyersburg: $160,000; COLI 71.1
• Martin: $206,000; COLI 70.9
• Union City: $151,000; COLI 71.2
Most Expensive Locations
Generally an affordable state, Tennessee still has its pricier enclaves, where home values and the average monthly expenses for one person or a family are higher. The following cities in Tennessee have some of the highest average home values and COLI scores:
• Franklin: $800,000; COLI 139.4
• Brentwood: $1,277,000; COLI 139.4
• Nashville: $433,000; COLI 104.7
Tips for Securing a Competitive Mortgage Rate in Tennessee
Whether you’re buying your first home or downsizing for retirement, a competitive mortgage rate is a common goal. Even half a percentage point can translate to many thousands of dollars. That’s why taking your time to go through the mortgage preapproval process is generally worth it.
Here are some tips for securing a competitive mortgage rate in Tennessee:
Compare Interest Rates and Fees
Take the time to compare interest rates from multiple lenders. Be sure to ask about any upfront costs and closing fees associated with the loan.
Get Preapproved
Getting preapproved for a mortgage strengthens your position as a buyer and allows you to move quickly when you find the right property. If you’re worried about interest rates rising, you can pay a fee to the lender to lock in your rate for up to 90 days.
Tennessee Mortgage Resources
Tennessee offers various resources and programs to assist homebuyers, particularly first-time buyers, military, and those with limited financial resources.
First-Time Homebuyer Programs
As in many states, to qualify as a first-time homebuuyer in Tennessee, you must not have owned a primary residence in the past three years. The Tennessee Housing Development Agency offers a variety of programs to help first-time homebuyers, including low-interest loans and help with closing costs.
Down Payment Assistance
Several programs in Tennessee provide down payment assistance to eligible homebuyers. These programs can help borrowers overcome the challenge of saving for a down payment and make homeownership more affordable.
Tennessee Housing has two options. One is a no-payment, forgivable, 0% interest second mortgage for $6,000 to be used for the down payment or closing costs. The other option provides 6% of the sales price to be used for the down payment or closing costs, via a second mortgage that is repaid over 30 years.
Tools & Calculators
The SoFi website offers a variety of tools and calculators to help homebuyers estimate their monthly mortgage payments, determine their budget, and compare different loan options.
Run the numbers on your home loan.
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Mortgage calculator
Punch in your home loan amount and a new interest rate, and we’ll estimate your payoff date.
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Down payment calculator
Enter a few details about your home loan and we’ll provide your monthly mortgage payment.
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Home affordability calculator
Provide us with a few details and see how much you can afford to spend on a home purchase.
Using the free calculators is for informational purposes only, does not constitute an offer to receive a loan, and will not solicit a loan offer. Any payments shown depend on the accuracy of the information provided.
Refinancing Options in Tennessee
Refinancing your mortgage can be a smart way to lower your interest rate, reduce your monthly payments, or cash out some of your home equity. Here are a two refinancing options available in Tennessee:
FHA Streamline Refinance
The FHA Streamline Refinance allows FHA-insured homeowners to refinance into current mortgage rates with minimal hassle. This program is available to borrowers who have an existing FHA loan and are current on their payments.
Interest-Rate Reduction Refinance Loan
An Interest-Rate Reduction Refinance Loan (IRRRL) can reduce the monthly payments on VA loans by adjusting the APR. This program is available to veterans, active-duty military members, and some Reserve and National Guard members who have an existing VA loan.
Closing Costs, Taxes, and Fees in Tennessee
Buyers in Tennessee can expect to pay between 2% and 5% of the home’s purchase price in closing costs. These costs include the loan origination fee, appraisal fee, title insurance, and other administrative fees. Factors influencing closing costs in Tennessee include the property value, location, and type of loan. A higher-priced home will typically have higher closing costs than a lower-priced home. Additionally, closing costs may be higher in pricier areas of the state due to variations in local taxes and fees.
The Takeaway
From Memphis in the west to Knoxville in the east, Tennessee offers a range of homes and mortgage options for homebuyers. By staying informed about current mortgage rates, exploring assistance programs, and carefully considering refinancing options, individuals can make strategic decisions that align with their financial goals and achieve successful homeownership in the Volunteer State.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.FAQ
Will mortgage rates drop in Tennessee?
It is difficult to predict future mortgage rate trends with certainty. However, several economic factors, such as inflation, unemployment, and Federal Reserve policy, can influence mortgage rates. Homebuyers should stay informed about current market conditions and consult with a mortgage lender to get the most up-to-date information on mortgage rates in Tennessee.
Will mortgage rates ever go back to normal?
The definition of “normal” mortgage rates is a moving target. Mortgage rates fluctuate over time, influenced by various economic factors. While rates may not return to a specific historical level, they may stabilize or trend within a certain acceptable range, as they are now. Homebuyers should focus on making informed decisions based on current market conditions and their financial situation.
Will Tennessee home prices ever drop?
It’s hard to make a blanket statement about home prices that applies statewide, since there’s so much variation from town to town. Your best bet is to consult with real estate professionals in the area you hope to buy in.
Is it a good time to buy a house in Tennessee?
Determining the right time to buy a house involves considering various factors such as personal financial readiness, market conditions, and long-term goals. There is no one-size-fits-all answer, and the decision to buy a house is highly individualized. Homebuyers should assess their financial situation, evaluate current market conditions, and consult with real estate professionals to make informed decisions about purchasing a home in Tennessee.
How to lock in a mortgage rate?
Locking in a mortgage rate involves securing a specific interest rate for a certain period of time. This can provide peace of mind and protect against potential rate increases. To lock in a mortgage rate, homebuyers typically pay a fee to the lender. The length of the rate lock period can vary.
How do mortgage interest rates work?
Mortgage interest rates represent the cost of borrowing money from a lender to purchase a home. These rates are influenced by various economic factors, including the Federal Reserve’s monetary policy, inflation, and market demand. Mortgage interest rates are expressed as a percentage and are applied to the principal loan amount. Homebuyers pay interest on the outstanding loan balance over the life of the mortgage, which determines the total cost of borrowing.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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More home loan resources.
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First-Time Homebuyer Guide
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First-Time Homebuyer Programs and Loans
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Mortgage Preapproval Process