What Is an FHA Loan?

An FHA loan is a mortgage issued by a private lender and guaranteed by the Federal Housing Administration (FHA). These loans are designed to help low-to-moderate-income individuals and those without substantial savings achieve homeownership. 

FHA Loan Requirements in TN

FHA loans in Tennessee follow certain standards set by the FHA. However, lenders may also set their own requirements. Here are some general FHA loan requirements in TN: 

  • Credit score: The minimum credit score required for an FHA loan is 550 when you apply with Griffin Funding. However, keep in mind that higher credit scores will lead to lower interest rates and more favorable loan terms.  
  • Down payment: Most borrowers make a 3.5% or 10% down payment, depending on their credit scores. However, buyers can choose to make a larger down payment to reduce their overall loan amount. 
  • Debt-to-income (DTI) ratio: The DTI ratio compares your monthly debt obligations to your monthly income. Most lenders typically like to see this figure be less than 43%, but some lenders might allow higher ratios depending on other factors. 
  • Property requirements: The purchased property must be the borrower’s primary residence and meet the FHA’s minimum property standards. This will involve an appraisal to determine the home’s condition and fair market value. 
  • Mortgage insurance: An upfront mortgage insurance premium (MIP) is required with every FHA loan in TN. This amount is typically 1.75% of the base loan amount. There’s also an annual MIP, and the rate will vary based on the loan terms and loan-to-value ratio. 
  • Loan limits: The FHA sets specific loan limits for each county. In Tennessee, these can vary depending on the county and housing costs in the area. 
  • Waiting periods after bankruptcy or foreclosure: If a potential borrower has undergone bankruptcy, foreclosure, or other major financial setbacks, there are waiting periods before they can qualify for an FHA loan. 

Considering an FHA loan in Tennessee? Download the Griffin Gold app today to get a comprehensive overview of your finances, determine what you can afford, and create sustainable financial habits that will help you prepare for homeownership.

Benefits of FHA Loans in Tennessee

Tennessee FHA loans offer several benefits, especially to first-time home buyers and those without substantial savings. When considering purchasing a home in Tennessee, here are the advantages of opting for an FHA loan: 

  • Lower down payment: FHA loans require a minimum down payment of 3.5% for some borrowers and 10% for others. This is significantly lower than some other loans, making homeownership more attainable in some cases. 
  • Flexible credit requirements: FHA loans cater to borrowers with lower credit scores for purchasing or refinancing a home. While conventional loans may have stricter credit requirements, FHA loans might be an option for those with a credit history that’s less than stellar. 
  • Protection for borrowers: FHA loans come with certain protections for borrowers. For instance, they offer a lower fee structure for assuming a loan, and there’s a streamlined refinancing option if interest rates drop. 
  • Variety of loan types: Beyond the standard FHA loan, borrowers in Tennessee can explore other FHA-backed options like the 203(k) for home improvements or the Energy Efficient Mortgage for green home upgrades. 

How to Apply for an FHA Loan in Tennessee

Applying for an FHA loan in Tennessee with Griffin Funding is a personalized and streamlined process. During the initial discovery meeting, a Griffin Funding mortgage strategist will evaluate your monthly income, credit score, and potential down payment to determine whether the FHA loan is the best option for you. 

If you proceed, you can receive a quote over the phone and get pre-approved for a mortgage. After you’ve made an offer on a home, you can begin the mortgage application process online. The process progresses with rate locking, document submissions, underwriting, appraisals, and final document signing. Every step is meticulously managed, ensuring you get the best terms and a smooth journey to homeownership. 

Read this checklist for first-time buyers for a full overview of the home-buying process.

Work With the Best FHA Lender in TN

FHA loans are an ideal choice for many aspiring homeowners. Griffin Funding is a premier FHA lender in TN. With our expertise, tailored solutions, and commitment to our borrowers, you’re not just getting a loan — you’re partnering with a trusted ally in your journey to owning a home. Choose Griffin Funding for a seamless and rewarding Tennessee FHA loan experience. 

Frequently Asked Questions

What is the FHA loan limit in Tennessee?

The FHA loan limit varies based on the county and its housing market. Most counties in Tennessee have a single-family home loan limit of $498,257. However, this limit can increase in certain areas, allowing borrowers to secure up to $943,000 for a single-family home. 

Do you have to be a first-time home buyer to get an FHA loan in TN?

While FHA loans for first-time buyers are popular due to their lenient requirements and lower down payments, they’re not exclusively for first-time buyers. If you’ve owned a home in the past, you can still qualify for an FHA loan in Tennessee. FHA loans can be a great option for individuals who are downsizing, relocating, or have relatively low credit, income, or savings. 

What is MIP?

The mortgage insurance premium (MIP) is a type of insurance associated with FHA loans. It’s designed to protect FHA lenders in TN from potential losses if a borrower defaults on the loan. Given the lower down payment and more lenient credit requirements of FHA loans, MIP is required to offset the higher risk to lenders. There are two types of MIP: 

  1. Upfront: Upfront MIP Is a one-time premium paid at closing. It’s calculated as a percentage of the loan amount. Borrowers can roll this upfront cost into their loan amount, spreading it over the life of the loan rather than paying it all at once. 
  2. Annual: Annual MIP is a recurring premium paid monthly. The rate is based on the loan’s size, term, and loan-to-value ratio. 

MIP differs from private mortgage insurance (PMI) associated with conventional loans. PMI can often be dropped once a borrower reaches 20% equity in their home, while MIP is typically required throughout the life of the loan regardless of the amount of equity you build.