FHA Loan Requirements – Tennessee FHA Approved Lenders

FHA loans are a good option for a variety of borrowers in Tennessee.  This includes those who want to place a low down payment, as well as those that struggle with some credit issues.  Some think of FHA loans as subprime mortgages, but they technically are not.  However, they do serve borrowers that can not qualify for a prime mortgage or conventional loan.

You can get approved for an FHA loan in Tennessee with just 3.5% down even if your credit scores are not the best.

Tennessee FHA Loan Requirements for 2023

You may view the primary FHA loan requirements for Tennessee below.  Each individual FHA approved lender may have some of their own loan requirements in addition to these.

Credit – Most Tennessee FHA lenders will require that you have at least a 580 credit score.  However, we work with a few lenders that will go down to a 500 credit score.

Down Payment – The standard down payment requirements for a FHA loan is 3.5% of the purchase price.  So on a $200,000 loan, the down payment would need to be $7,000.  If your credit score is below a 580, you may need to place as much as 10% down in order to qualify.

FHA Loan Limits – The FHA loan limits are the maximum loan amount available in a particular county.  You can view the 2023 FHA loan limits for Tennessee, on this page.

Employment – FHA loans require that you prove 2 years of consistent employment.  You will need to provide at 2 years tax returns, and most lenders want to see your 2 most recent bank statements as well.

Property – The FHA has property requirements, which includes what are known as “minimum property standards”.  The home you want to purchase must undergo an appraisal and meet these guidelines, which relate to the condition of the home.  The appraisal must also verify the value of the property.

Mortgage Insurance – There are two types of mortgage insurance premiums (MIP) required for all FHA loans.  The first type is upfront mortgage insurance premiums (UPMIP), which is 1.75% of the total loan amount.  This fee can be included in the loan, and does not need to be paid out of pocket.  The second type of mortgage insurance premiums is paid monthly, which is 0.85% of the loan amount (calculated annually, but paid monthly as part of the monthly mortgage payment).

These are the standard requirements for a FHA loan.  When you apply, if you are approved, you will be provided a checklist of requirements known as “loan conditions”, which will outline what you must provide in order for the loan to close.

Click here to see if you qualify for an FHA loan

Best FHA lenders in Tennessee 

Below are our top picks for the best FHA lenders in Tennessee. We know which lender is the best fit for you based upon your specific scenario. Complete this short form and we will provide you with the information or a quote.

1.) Quicken Loans

2.) Guaranteed Rate

3.) U.S. Bank

4.) Bank of Tennessee

5.) First Tennessee Bank

6.) Fountain City Finance

7.) Mortgage Investors Group

Please note:  We are not affiliated with all mortgage lenders that are featured on our website.  We include who we consider to be the best lenders for various mortgage programs.  If you would like some help getting connected with an excellent FHA lender in Tennessee, please fill out this form.

Tennessee FHA Loan Programs

You have a choice of various FHA loan programs for purchasing or refinancing a home. We will take you through the most common versions of the FHA loan and a few not so popular FHA programs. Keep in mind these are not available through every lender. If you would like to speak with someone about one of these great programs, just contact us here.

FHA Purchase Loan

This is the standard FHA loan used to purchase a home and virtually ever lender offers FHA loans but the credit scores they accept may vary.

FHA 203k Rehab Loan

The 203k rehab loan allows you to purchase a home while also borrowing the funds needed to rehab or update things in the home that you would like to change. This means you can borrow more than what the home is worth to get the home you really want.

FHA One Time Close Construction Loan

With the FHA OTC program, you can purchase a lot, pay for the construction, and all costs and fees rolled up into just one mortgage. The down payment requirement for this FHA program is also just 3.5% down.

One of the challenges with the FHA One time Close Construction loan is the fact that very few lenders offer the program.

FHA Streamline Refinance

The FHA streamline refinance program is for people who currently have an FHA loan and would like to refinance to get a lower rate, lower payment, or change their loan term.

The huge advantage with this program is there is no income or credit check. You still have to pay for closing costs, but there is minimal documentation. The only true stipulation is you must have been current on your mortgage payments for the past 12 months.

FHA Cash Out Refinance

FHA guidelines permit you to cash out equity up to 80% of the appraised value of the home. This would require a full application with all of the required documentation. The lender will check your income, credit, and will evaluate the debt to income ratio just like they would if you were purchasing a home.

This program is available to anyone who wishes to cash out equity in their primary residence even if their current mortgage is not an FHA loan.

*with all of these FHA refinance programs, you do not have to refinance with the same lender.

Tennessee FHA Loan Limits

The FHA has established maximum loan amounts for every county in the US. Most counties have the same loan limits, but there are a few high cost counties that will allow for larger loan amounts. There are four counties in TN that have higher loan limits (Cannon, Cheatham, Davidson and Dickson).

The loan limits increase for homes that are multi unit. There are set limits for a 2 family, a 3 family, and a 4 family property.

Bad Credit Mortgage in Tennessee

Individuals looking to purchase a home in Tennessee with bad credit may still qualify with credit scores down to 500 using FHA financing. The down payment will be 10% if your credit scores are from 500-579.

The lender will look at more than just your scores. You may have some items such as disputes that may need to be resolved or removed before the lender can proceed.  Just remember to be flexible and stay positive and you can buy a home even with bad credit.

Tennessee FHA Loan with a Recent Bankruptcy

FHA guidelines have specific waiting periods for people who want to buy or refinance a home with a recent bankruptcy. If you had a chapter 7 bankruptcy, you will need to wait two years after your discharge date.

If you had a chapter 13 bankruptcy, you can get a mortgage before the discharge date but after you have made at least 12 on time chapter 13 bankruptcy payments.

Read [mortgage with a recent bankruptcy]

Frequently Asked Questions – FHA Loans in Tennessee

Are FHA loans only for Tennessee first time home buyers?

FHA loans are not restricted to first time home buyers. If you have owned a home before, you may still get a FHA loan. However, you may only have one FHA loan, and they are only available for primary residences.

How do I apply for an FHA loan in Tennessee?

It is very easy to get pre-qualified or to apply for a FHA loan.  We recommend having us match you with a FHA lender in Tennessee based on your personal needs (such as estimated credit and loan amount).  To be matched with a FHA lender, please fill out this form.

Is down payment assistance available on FHA loans?

Yes, if you qualify for down payment assistance, it can be used with a FHA loan.  There are many programs available that provide funds to use for down payment assistance.  We can help you find out if you qualify for any of them.

What are the options to refinance a FHA loan?

The FHA offers two different programs for refinancing a FHA loan. This includes the FHA streamline refinance, which allows you to easily lower your interest rate and mortgage payment (and does not require a credit check, income documentation, or a new appraisal). The other option for refinancing an existing FHA loan, is the FHA cash out refinance, which allows you to pull out money from the equity in your home.

Are cosigners allowed on FHA loans?

Yes, cosigners are allowed on FHA loans. At least one of the borrowers must occupy the property. Non-occupying co-borrowers are allowed though, which means the person cosigning does not need to live at the property that is financed using a FHA loan.

How long after a bankruptcy can you get an FHA loan?

The FHA rules state that you must wait at least 2 years after filing a chapter 7 bankruptcy. For a chapter 13, you only need to wait until you have successfully made 12 months of payments. Additionally, you will need to provide the court trustee’s written approval. Also, keep in mind that the clock doesn’t start upon filing, but rather once the bankruptcy has been discharged.

How long after a foreclosure can you get a FHA loan?

The FHA rules state that you must wait at least 3 years before you are eligible for a FHA loan. However, there is an exception to this rule if there were “extenuating circumstances”, such as a job loss. You would also have to show some improvements to your credit since the foreclosure. In the event that the circumstances and credit improvements are satisfactory, you would only have to wait until after 1 year before you can apply for a FHA loan.