Tennessee Home Loans & Mortgage Rates

Tennessee continues to attract massive population growth from higher-cost states, and the housing market reflects it. Steady appreciation, no state income tax, and relatively affordable entry points make this one of the strongest buyer markets in the Southeast.

The statewide median home price is around $381,000, up about 2.8% year-over-year. Nashville’s Davidson County is the expensive outlier with a median pushing $450,000 and a conforming limit of $1,029,250. Surrounding Williamson County (Franklin, Brentwood) is even pricier with median values above $800,000. But outside the Nashville bubble, Tennessee is very affordable: Memphis/Shelby County sits around $230,000, Knoxville/Knox County around $340,000, Chattanooga/Hamilton County around $330,000, and Clarksville/Montgomery County around $290,000.

The loan limit picture is interesting. Nashville metro counties (Davidson, Williamson, Rutherford, Wilson, Sumner, Maury, Cheatham, Dickson, Robertson, Trousdale) have elevated FHA limits, with Davidson hitting $989,000 and the conforming limit at $1,029,250. This reflects just how much Nashville’s housing market has grown. Most other counties sit at or near the $541,287 FHA baseline.

THDA (Tennessee Housing Development Agency) runs the Great Choice program offering 30-year fixed-rate mortgages paired with Great Choice Plus DPA: either $6,000 forgivable over 30 years or up to 5% of the purchase price as a repayable second mortgage (max $15,000). The Homeownership for Heroes program adds a 0.5% rate reduction for military and first responders.

2026 Loan Limit Takeaways

The entire Nashville MSA (10 counties including Davidson, Williamson, Rutherford, Wilson, Sumner, Maury, Cheatham, Dickson, Robertson, Trousdale) shares a $989,000 FHA limit and $1,029,250 conforming limit. This is one of the highest FHA limits in the Southeast, reflecting Nashville’s explosive growth. Knoxville, Chattanooga, Memphis, Clarksville, and all other counties sit at the $541,287 FHA baseline with $832,750 conforming. The Nashville metro limits mean you can use FHA financing on a home up to approximately $1.02 million with 3.5% down.

Down Payment Assistance Notes

The Great Choice Plus deferred option ($6,000 at 0%) is the most popular because it requires no payments, but the full $6,000 is due if you sell or refinance before 30 years. The amortizing option goes up to $15,000 but requires monthly payments. Homeownership for Heroes is a strong program for military buyers near Fort Campbell (Clarksville) with the 0.5% rate reduction. THDA programs are available to repeat buyers purchasing in 43 “targeted” counties or designated census tracts in 15 additional counties.

Closing Costs in Tennessee

Tennessee closing costs are moderate, with a state transfer tax but no state income tax benefit to offset it.

Transfer Tax (Deed Tax): Tennessee charges a transfer tax of $0.37 per $100 of the sale price (0.37%). On a $381,000 home, that is approximately $1,410. This is paid by the seller in most transactions, though it is negotiable.

Mortgage Recording Tax: Tennessee charges a mortgage recording tax of $0.115 per $100 of the loan amount (0.115%). On a $367,000 mortgage, that is approximately $422. Paid by the buyer.

No State Income Tax: Tennessee has no state income tax on wages and salaries, which means no state-level mortgage interest deduction. But you still get the federal deduction. The lack of income tax is a major draw for buyers relocating from higher-tax states.

Attorney vs. Title Company: Tennessee allows both attorneys and title companies to handle closings. Practice varies by region. Attorney fees typically run $500-$1,200 where used.

Estimated Total Buyer Closing Costs: On a $381,000 purchase with a $367,000 mortgage, expect approximately $6,900-$13,300 in total buyer closing costs (1.8-3.5%). This includes the mortgage recording tax (~$422), lender fees, title insurance, appraisal, prepaid taxes and insurance, and recording fees. Tennessee closing costs are generally below the national average.

Property Taxes in Tennessee

Tennessee has relatively low property taxes, though they vary significantly by county and city. The state assesses residential property at 25% of appraised value, then applies local tax rates.

Statewide Average: Tennessee’s average effective property tax rate is approximately 0.49-0.64%, well below the national average. The state has no state-level property tax — all property taxes are local.

Metro Area Rates: Davidson County (Nashville) has an effective rate of about 0.57%, median bill around $2,150. Shelby County (Memphis) has the highest effective rate in the state at approximately 0.86-1.00%, making Memphis property taxes significantly higher than Nashville despite lower home values. Knox County (Knoxville) is relatively low at 0.37%. Hamilton County (Chattanooga) is about 0.60%. Williamson County (Franklin) has the highest median dollar amount at about $2,891, but that reflects very high home values rather than high rates (effective rate about 0.34%).

Assessment and Reappraisal: Residential property is assessed at 25% of market value (set by state constitution). Counties reappraise every 4-6 years. The “Certified Tax Rate” law prevents governments from getting a windfall from reappraisals by requiring rate adjustments to be revenue-neutral.

Exemptions: Tennessee offers a Tax Freeze program for low-income seniors (65+) to lock in their current tax amount. The Tax Relief program provides state reimbursement of a portion of property taxes for qualifying seniors, disabled homeowners, and disabled veterans. There is no general homestead exemption.

On a $381,000 home in the Nashville metro, expect roughly $1,700-$2,200 per year. In Memphis, expect $2,300-$3,800 on a similar value home due to Shelby County’s higher rates.

USDA Loan Eligibility in Tennessee

Tennessee has extensive USDA eligibility outside the Nashville, Memphis, Knoxville, and Chattanooga metro cores.

Eligible areas include most of Middle Tennessee outside the Nashville MSA (including many communities in the Cumberland Plateau), the entire Upper Cumberland region, West Tennessee outside Memphis (Jackson, Dyersburg, Union City, Martin), East Tennessee mountain communities (Sevierville outskirts, Newport, Greeneville, Morristown portions), and much of Southeast Tennessee.

Even within commuting distance of Nashville, outer counties like Smith, DeKalb, Macon, and Clay have USDA eligibility. The Clarksville/Fort Campbell area has qualifying sections in Montgomery County outskirts and Stewart County. Areas between Chattanooga and Knoxville (Rhea, Meigs, McMinn portions) also qualify. Tennessee’s rural character outside the four main metros creates widespread USDA opportunity. Check specific addresses at the USDA eligibility map.