FHA Loan Requirements TN (Tennessee)

Purchasing your first home can be exciting but also intimidating, especially when you consider that big down payment. But the Federal Housing Administration (FHA) has loan options and assistance to help turn your home owning dream into reality. Even with a low credit score, limited budget, and minimal down payment resources, being in the know about FHA loan requirements in TN (Tennessee) can really help. Learn more about FHA loans for a first-time home buyer.

Since the federal government insures FHA loan options, creditors and mortgage companies can lend risk-free to qualified buyers, making it easy for you to pre-qualify for a Tennessee FHA loan. And, unlike conventional home loan programs, the FHA doesn’t necessarily require any cash reserves.

Here’s what to know about FHA loan requirements for TN:

Credit score expectations

Start building good credit immediately after you strike out on your own. Even if you haven’t, you may still qualify for an FHA loan in Tennessee. As of 2022, you can borrow up to 96.5% of your home’s value with a FICO score of at least 580.

Down payment savings of 3.5%

A solid credit score coupled with the FHA’s insurance of all loans means you’re only required to pay a modest 3.5% down payment in most cases. However, if your credit score is between 500 and 579, your mortgage lender may ask for a 10% down payment.

Debt-to-income ratio requirements

Borrowers typically require a debt-to-income ratio of less than 43%; however, this can vary among lenders. Keep in mind — this information isn’t only for your lending institution. To ensure a strong and sustainable budget, carefully calculate your expenses versus your income, so you can comfortably afford that long-term mortgage payment. (You’ll want to factor in future expenses, such as starting a family, too.)

Income and employment stability

Be sure you have two years of continuous employment with no questionable gaps in job history. That will pair nicely with that shining debt-to-income ratio.

If you are a recent graduate, the two-year history of continuous employment may be reconsidered if you’re working a full-time job in your field. Talk to your loan officer about your work history to see if this exception to the rule applies.

MIP (mortgage insurance premium) is needed

One FHA loan requirement that you may not be familiar with is the mortgage insurance premium, or MIP, an additional expense required to secure the loan. It includes an initial payment of 1.75% of your total loan. However, this upfront cost is financed into the loan, and you will not be required to pay for it separately.

Tennessee FHA loan caps

FHA mortgage lending limits vary, depending on the type of home you purchase and the local housing market. In general, loan caps in Tennessee are $420,680 for a single, one-unit property topping out at $694,600 around Nashville.

To further benefit new homebuyers, the FHA provides 15- to 30-year loans with fixed and adjustable interest rates. FHA loans also allow the seller to cover closing costs up to 6%.

Most homes and condos, including short sales and foreclosures, in good, move-in condition are eligible for FHA financing. So if you’re ready to own your first home, let the experts at OVM Financial put you on the right track. Give us a call, or start your application online. You can also check out other articles about FHA loan requirements in GA and FHA loan requirements in PA.