How to Buy a House in Tennessee: A Homebuyer’s Guide
Updated: December 15, 2023
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Buying a property in Tennessee comes with perks like southern charm, low cost of living and tax benefits. Additionally, homes in this state are relatively cheaper, costing an average of $309,460. The price has increased by 22.7% in one year. Despite this, it is still on the affordable side of property prices in the U.S.
According to studies, homeownership is in steady decline, but it is still possible to find a place to call your own and reap its many benefits. MoneyGeek covers the basics of homeownership in Tennessee, from choosing a location, mortgage and required documentation to increase your chances of owning a home.
Choose an Ideal Location
The real estate market is a complex balance of many factors. Location affects the cost of homes the most. But neighborhood culture, cost of living, crime rate, amenities and more also play a role in determining their overall prices. Locating a home that meets your needs can be challenging if you need to gain knowledge of each area's unique characteristics.
Calculate Mortgage Rates
You can ensure you get the best mortgage rates by understanding your options. Different mortgage products have different rates. The one that is right for you will depend on your income, credit history, debt-to-income ratio and more. Asking lenders to quote you on several different types of loans can help you find the most competitive rates.
Prepare Down Payment Requirements
Down payment is a major factor in determining your loan's total cost. Generally, the more cash you can put down, the less you'll pay each month. A typical mortgage company will ask for at least 20% of the home's purchase price upfront, though it varies from lender to lender.
Get Pre-Approved for a Mortgage
Whether you're a first-time homebuyer or just looking to move up to a bigger place, it's always good to know if you could get approved for a loan on the property you're interested in.
Pre-approval means that your lender has thoroughly reviewed your financial information and agreed to give you a mortgage of a certain amount at a particular interest rate. Pre-approval may seem synonymous with prequalification. However, prequalification only means that a lender has looked at your finances and decided that you are eligible to apply. Therefore, there's yet to be a commitment.
Conduct a Home Inspection
Buying a home is a huge investment, so it's not surprising that you might feel anxious about the purchase and want to ensure things are as they seem.
However, you need to know just how many potential issues can come with a house and its systems. A professional home inspection can give you the peace of mind that you're getting exactly what you expect, and it's worth it. The last thing you want is to move into your new home only for something serious to go wrong later.
Close Your Mortgage Loan
Closing on a mortgage loan is the last step in buying a home. This is when you and your lender sign the final documents that make you the owner of your new home.
Before you sign, however, you should be prepared with all of the information you will need to make sure everything goes smoothly and that you understand all of the mortgage loan terms. Note that there are also costs involved in the closing phase.
Tennessee Homebuying Details
While there are general steps you should take beforehand, the process will vary based on your state of residence. Before you jump into buying a home, it's wise to research state-specific regulations regarding purchasing a property.
Expect the following things when buying a home in Tennessee.
Enjoy lower taxes
Tennessee's property tax rate of 0.68% is low compared to other states. There is an opportunity for homeowners to save more in the long run, should they choose to settle down in this state.
Buyers get protection from unexpected house conditions
The Residential Property Disclosure Act requires sellers of residential real estate in Tennessee to complete a disclosure statement. It provides information on the condition of amenities, house age and hazards that affect the home.
Bask in the mild southern climate
Although Tennessee's weather is known for its variability, the general climate in the state is one that most people find comfortable. It presents warm summers and subdued winters, which is a welcome change for people coming from states with harsh weather. However, below-freezing temperatures still occur less often than in other states.
Frequently Asked Questions About Buying a Home in Tennessee
Homebuying is exciting, but it can also be overwhelming. There are many questions that homebuyers seem to ask quite often. Some of these questions arise before starting the homebuying process, during a house hunt, while writing a contract or closing the deal.
MoneyGeek answered the most frequently asked questions on how to buy a house in Tennessee.
Before buying a home, it helps to answer any questions about the house's condition, history and location. Doing so will help you make a good offer and gather the information you need to estimate other property-related expenses like insurance. Below are some examples:
- How long has the property been up for sale?
- Is the property in a flood or earthquake-prone zone?
- What are the repairs and renovations done in the house?
Tennessee is a great place to buy a house because of the lower cost of living, less expensive housing and is a bargain compared to many other states.
Even though property prices have increased in the state, it still offers great advantages to homeowners. However, you can hold off on buying a property in Tennessee until the market has recovered from the inventory shortage.
Before buying a home, it helps to check your housing-expense-to-income ratio. Doing this will help you understand your financial capacity to put money down and pay interest, insurance and related expenses. Studies have found that the average property buyer in Tennessee needs to make at least $79,618, as the median price for its property is $430K.
The average effective property tax rate in the state is 0.68%.
The cheapest Tennessee city to buy a home is Beechgrove, with a Median Zillow Home Value Index of $295,051.
sources
- Department of Commerce and Insurance. "TDCI: Educate Yourself on Home Inspectors' Roles Before Buying, Selling a Home." Accessed October 20, 2022.
- Department of Health. "Healthy Homes - Owners & Buyers." Accessed October 20, 2022.
- East Tennessee State University. "Tennessee Climatology." Accessed October 20, 2022.
- Statista. "Homeownership Rate in the United States From 1990 to 2021." Accessed October 20, 2022.
- Tax Foundation. "Taxes in Tennessee." Accessed October 20, 2022.
- Tennessee Housing Development Agency. "THDA Programs." Accessed October 20, 2022.
- U.S. Department of Agriculture. "Single Family Housing Direct Home Loans in Tennessee." Accessed October 20, 2022.
- Zillow. "Compare Today's Mortgage Rates in Tennessee." Accessed October 22, 2022.
- Zillow. "Tennessee Home Values." Accessed October 20, 2022.