If a new home in the Volunteer State has always been your dream, you might be trying to answer a difficult question: “How can I buy one?“
Rates have significantly climbed from all those record-low headlines you read during the pandemic peak, so buying a home in Tennessee seems much more expensive now.
But there are some positive signs for buyers like you. For example, according to Greater Nashville Realtors data, median sale prices in the Nashville area decreased by nearly $24,000 from May to August. In the meantime, the number of homes for sale in Tennessee is experiencing an increase.
If you’re committed to calling Tennessee home, this article is for you. Read on to find out how to buy a house in Tennessee.
7 Steps To Buy A Home in Tennessee
1. Check Your Credit Score
You’ll need a credit score of at least 620 to secure a home loan. Borrowers with lower credit scores will generally come with a higher interest rate.
Here are some options for building low credit:
- Review your credit reports and find errors and fraudulent transactions
- Pay bills on time
- Pay down other debts (student loans, personal or car loans, etc.)
- Work on your credit utilization ratio (compare your credit card balances to your limits)
- Keep older credit accounts open
- Avoid opening new accounts
2. Calculate Your DTI (debt-to-income) Ratio
Lenders will also look for your debt-to-income to be 36% or less. This ratio will compare your monthly payments with the gross monthly income.
For example, your average monthly salary is $3,000.
The calculation would be: $3,000 x 36% = $1,080. This computation means lenders expect your payments or debts to be less than $1,080/month.
3. Save For A Down Payment
Lenders often demand a down payment of 20% of the home’s total cost. For instance, if you want to buy a house for around $300,000, your down payment should be about $60,000.
If your credit score or the down payment prevents you from working with a conventional lender, consider other Tennessee home loans.
4. Prepare For Closing Costs And Other Fees
Closing costs are associated with the home-buying process. These are paid when you sign the mortgage. Sometimes, the seller and the buyer share these costs between them.
Closing costs often amount to 2-5% of the home’s total cost, which will most likely encompass you:
- Credit report fee
- Home appraisal fee
- Mortgage origination fee
- Mortgage insurance
- Home inspection fee
- Earnest money
- Property taxes
- Homeowners insurance
Closing costs will include the first year of property taxes. As a resident of Tennessee, you can stop paying property taxes when you turn 65.
5. Get Preapproved For A Mortgage
With mortgage preapproval, you’ll need to provide your lender income, credit, and employment verification. Then, they’ll give you a letter letting you know the exact amount they’re willing to lend you.
Once you get your preapproval, you’ll have 60-90 days to buy a home before the offer expires.
6. Look For A House
Now comes the fun part! After all the financials are in place, it’s time to find a home that gives you everything you need, from the perfect location to the right amount of space.
The vast majority of Tennessee has a humid subtropical climate. Still, the Smoky Mountains in the east and the Mississippi and Tennessee River Valleys in the west provide an excellent variation in the landscape.
If cost is your main concern, Manchester, Milan, and Lewisburg top the list of most affordable cities, while Nashville, Athens, and Cooksville are among the most expensive.
Once you’ve chosen an appropriate location, look for a real estate agent that gets you. Check out their past sales and portfolio to ensure they can deal in the type of home you’re seeking. Ensure to ask questions and tell them your specific requirements.
7. Make An Offer
Now it’s time to make an official offer. Your realtor will help you complete the needed paperwork.
You’ll need to draft a written offer that states the price you’re offering for the house and any contingencies you’re requesting. Besides, you’ll need to provide your preapproval letter and a copy of your earnest money.
The actual homebuying process can have some back-and-forth. It’s recommended not to get too attached to any single home, at least not before the sale is complete. Instead, keep your options open and prepare to make offers on multiple properties before your dream becomes a reality.
Buying a house in Tennessee requires many moving parts and complicated steps, but this guide – together with the professional expertise of your realtor and mortgage lender – can help you run the process smoothly.