Buying a home in Tennessee can be an exciting but financially overwhelming experience, especially for first-time buyers. One of the most accessible paths to homeownership is through an FHA loan, backed by the Federal Housing Administration. Tennessee homebuyers often turn to FHA loans because of their flexible credit guidelines, lower down payment options, and favorable loan terms. Understanding the specific TN FHA loan requirements is essential for anyone planning to purchase a home in the Volunteer State using this government-insured mortgage product.
What Is an FHA Loan?
An FHA loan is a mortgage insured by the Federal Housing Administration. While private lenders issue the loans, the FHA provides insurance, reducing the risk for lenders. This allows borrowers with lower credit scores, minimal savings, or a limited credit history to qualify for financing they might otherwise not receive.
Why Choose an FHA Loan in Tennessee?
Many homebuyers in Tennessee find FHA loans attractive because they:
- Require a lower down payment (as little as 3.5%)
- Allow lower credit scores than conventional loans
- Offer competitive interest rates
- Can be used for various property types, including single-family homes, condos, and certain manufactured homes
TN FHA Loan Requirements Overview
Minimum Credit Score
To qualify for an FHA loan in Tennessee with the minimum 3.5% down payment, you typically need a credit score of at least 580. Borrowers with scores between 500 and 579 may still qualify, but a higher down payment of at least 10% is required. While these are FHA guidelines, individual lenders may impose stricter standards, known as lender overlays.
Down Payment Requirements
The minimum down payment for an FHA loan is 3.5% of the purchase price, provided your credit score is 580 or higher. These funds can come from:
- Personal savings
- Gift funds from family members
- Approved down payment assistance programs in Tennessee
Debt-to-Income Ratio (DTI)
Your debt-to-income ratio helps lenders determine how much of your income is used to pay existing debts. For TN FHA loans, the general DTI requirements are:
- Front-end ratio: 31% (housing expenses only)
- Back-end ratio: 43% (housing expenses plus all other debts)
In some cases, borrowers may be approved with higher ratios if they have compensating factors such as significant savings or a strong credit history.
Employment and Income Verification
Lenders require proof of stable and reliable income. Most will look for at least two years of steady employment. Acceptable documentation may include:
- W-2 forms
- Recent pay stubs
- Tax returns for self-employed borrowers
Property Requirements
The property you plan to purchase must meet FHA guidelines. The home must be:
- Your primary residence
- Structurally sound and safe for occupancy
- Appraised by an FHA-approved appraiser
The home must also fall within FHA loan limits for your county in Tennessee, which vary by location and property type.
FHA Loan Limits in Tennessee
Each year, the FHA sets loan limits for different counties across the country. These limits are based on the conforming loan limits set by the Federal Housing Finance Agency (FHFA) and reflect local housing costs.
For most areas of Tennessee in 2025, the FHA loan limits are:
- 1-unit property: $498,257
- 2-unit property: $637,950
- 3-unit property: $771,125
- 4-unit property: $958,350
In high-cost areas such as parts of Williamson and Davidson Counties, limits may be higher. Always check the latest limits for your specific county.
Mortgage Insurance Premium (MIP)
All FHA loans require mortgage insurance to protect lenders in case of default. This comes in two forms:
Upfront MIP
A one-time fee of 1.75% of the loan amount is due at closing. This can typically be rolled into the loan amount.
Annual MIP
This fee is paid monthly as part of your mortgage payment. The amount varies based on the loan amount, term, and loan-to-value ratio but generally ranges from 0.45% to 1.05% annually.
Eligible Property Types in Tennessee
FHA loans in Tennessee can be used to finance various types of properties, as long as they meet the FHA’s minimum property standards:
- Single-family homes
- Townhouses and FHA-approved condominiums
- Duplexes, triplexes, and fourplexes (if you occupy one unit)
- Manufactured homes (meeting HUD standards and permanently affixed)
First-Time Homebuyer Advantages
While FHA loans are not limited to first-time buyers, they are commonly used by individuals purchasing their first home. In Tennessee, several local programs complement FHA loans by offering:
- Down payment assistance
- Homebuyer education programs
- Grants and affordable loan options through THDA (Tennessee Housing Development Agency)
Steps to Apply for an FHA Loan in Tennessee
1. Check Your Credit
Start by reviewing your credit report and score. Take steps to improve your score if necessary, especially if you are below the 580 mark.
2. Save for Your Down Payment
Make a plan to set aside enough funds to meet the minimum 3.5% down payment requirement.
3. Get Pre-Approved
Contact an FHA-approved lender to begin the pre-approval process. This will help you understand how much you can borrow and what your monthly payments will look like.
4. Find an FHA-Eligible Property
Work with a real estate agent familiar with FHA loan requirements to help you find a home that meets both your needs and FHA standards.
5. Submit Your Application
Once you’ve found a property, complete the full application with your lender, provide documentation, and undergo the underwriting process.
6. Close on Your Home
After final approval, you’ll attend the closing to sign documents and receive the keys to your new home in Tennessee.
TN FHA loan requirements offer an excellent opportunity for many residents to achieve the dream of homeownership. With flexible credit guidelines, low down payment options, and support from both federal and local programs, FHA loans in Tennessee are ideal for first-time buyers and those with limited savings. Understanding the credit score minimums, income verification rules, property standards, and loan limits is essential when applying for this type of mortgage. By preparing in advance and working with experienced FHA lenders, Tennessee homebuyers can take full advantage of the benefits offered by this government-backed loan program.