Tennessee Mortgage Guide 2026

Buying a Home in Tennessee

Tennessee sits in a comfortable spot for buyers on a budget. Property taxes rank among the lowest in the country. The state collects no income tax on wages — the Hall Income Tax on investment income was fully repealed in 2021 — which frees up cash that buyers elsewhere send to their state tax authority every April. What you will face at the closing table are two specific taxes that trip up out-of-state buyers: a real estate transfer tax and a mortgage indebtedness tax. Both are manageable, but you need to know how to calculate them.

The statewide median home sale price hit $353,000 in 2024, the thirteenth consecutive annual record, according to THDA's home sales data. Nashville runs notably higher — around $475,000 as of early 2026 per Redfin — while markets like Knoxville, Chattanooga, and Jackson remain considerably more affordable. Whether you are buying in a suburban Nashville zip code or a rural county, the mechanics of your mortgage work the same way. The numbers just shift.

Tennessee Property Taxes

Tennessee's average effective property tax rate on owner-occupied housing is 0.52%, according to the Tax Foundation — less than half the national average of roughly 1.1%. That translates to real savings on a monthly basis. On a $353,000 home, the statewide average annual bill runs around $1,836, or about $153 per month added to your escrow. Compare that to the same home in New Jersey at the national high-water mark: $8,790 per year.

County rates vary enough to matter when you are deciding between markets:

All figures are estimates based on Tax Foundation and Tennessee Comptroller rate data. Actual assessed values and millage rates vary. Verify with your county assessor before budgeting.

Closing Costs & Transfer Taxes in Tennessee

Tennessee buyers typically spend between 2% and 5% of the purchase price at closing, covering lender fees, title services, prepaid items, and state-level taxes. On the median $353,000 sale, budget $7,000–$17,650 in total closing costs. Two Tennessee-specific line items require careful calculation.

Real Estate Transfer Tax

Tennessee charges $0.37 per $100 of the sales price. On a $353,000 purchase that comes to $1,306. Statute places this tax on the buyer (grantee), but local custom frequently shifts it to the seller through contract negotiation. Read your purchase agreement — do not assume.

Mortgage Indebtedness Tax

This tax applies to the loan itself, not the purchase price. The rate is $0.115 per $100 of loan amount, with the first $2,000 of debt exempt. On a $280,000 loan (20% down on a $350,000 home): ($280,000 − $2,000) × 0.00115 = $319.70. On a $335,000 loan (5% down on a $353,000 home): ($335,000 − $2,000) × 0.00115 = $382.95. This is a buyer cost, paid at closing.

First-Time Buyer & Down Payment Assistance Programs

The Tennessee Housing Development Agency (THDA) runs the state's primary homeownership programs. These are real, funded programs — not marketing language. Here is what each one actually provides.

Great Choice Home Loan

THDA's flagship product: a 30-year fixed-rate mortgage available to first-time buyers (defined as no ownership in the past three years) and to qualifying repeat buyers in certain targeted counties. Credit score minimum is 640 for all borrowers on the application. Income limits and purchase price caps apply by county — they are updated periodically, so pull the current limits at thda.org before budgeting. Loans are originated through THDA-approved lenders, not directly through the agency.

Great Choice Plus (Down Payment Assistance)

Paired with the Great Choice Home Loan, this program covers down payment and closing cost help in one of two forms: up to 5% of the purchase price (maximum $15,000) as a 30-year second mortgage at the same rate as the first, or a $6,000 deferred option with no monthly payments — repaid only when you sell or refinance before the 30-year term ends. For buyers short on cash reserves, the deferred structure keeps monthly obligations lower while still covering the upfront gap.

Homeownership for Heroes

This program extends Great Choice loan access to a broader group than military alone. Eligible borrowers include veterans and active-duty military, state and local law enforcement, firefighters, EMTs, paramedics, and K–12 classroom teachers. The benefit beyond standard Great Choice: a 0.5 percentage point discount on the mortgage rate. On a $280,000 loan, half a point shaves roughly $80 off the monthly payment and saves over $28,000 in interest across a 30-year term.

Sample Monthly Payment

The table below shows estimated total monthly housing costs at two price points. Assumptions: 30-year fixed mortgage at 6.875% (a reasonable mid-2026 benchmark), 5% down, PMI at 0.85% annually, homeowners insurance at $1,400/year ($117/month), and the statewide average property tax rate of 0.52%.

These are estimates for illustration. Actual payments depend on your credit score, lender, specific county tax rate, insurance quotes, and closing date. Run the numbers with our calculator for a personalized figure.

The Nashville column reflects why buyers priced out of Davidson County increasingly look at Williamson, Rutherford, and Wilson counties. Property tax rates in those suburban markets are closer to the statewide average, and the same mortgage rate applies statewide regardless of county.