As of May 31, 2026, the average 30-year fixed mortgage rate in Tennessee is 6.63%, and the average 15-year fixed mortgage rate is 5.91%. 
What Affects Your Mortgage Rate in Tennessee?
Although the statewide average is useful as a starting point, it won’t tell you what you will qualify for, only giving a ballpark. Your personal profile does most of the work. Here is what lenders typically look at:
- Credit score: A credit score above 700 means you’re in good shape, unlocking the best rates. Drop below 620, and your choices get limited fast, and the ones available will cost more.
- Down payment: The more you put down, the less risk the lender takes, which usually shows up in your rate.
- Loan type: Conventional loans, FHA, VA, and USDA each have their unique rate structure. The best choice for you isn’t always the obvious one or the most common type.
- Loan term: Shorter terms often require lower rates, but your monthly payment will be higher. It’s worth doing the math before you make a decision.
- Debt-to-income ratio (DTI): The lower your DTI is, the more lenders tend to approve you. Most lenders want to see your DTI 36% or below.
- Property location: Where you buy matters. Choosing rural areas opens the door for USDA loans. Urban areas have their own exclusive programs and loans.
Types of Mortgages Available in Tennessee
Conventional Home Loans
This is the most common route for homebuyers. You’ll need a minimum credit score of 620. You want a better rate? A higher score, like 680, and a larger down payment will work in your favor. Down payments typically run 5%–10%. If you’re a first-time buyer, you can sometimes get away with as low as 3%. Put 20% down and drop PMI entirely, making a noticeable difference in your monthly payment.
FHA Loans
Backed by the federal government, FHA loans are designed for buyers with lower credit scores. If you haven’t had the time or opportunity to build a strong credit score, FHA loans will suit your situation. Some lenders approve scores below 600 with only 3.5% of down payment. FHA loans are practical options if your credit history is not ideal.
VA Loans
Exclusively offered to veterans, active-duty service members, and eligible surviving spouses. If you’re in one of these groups, you can benefit from VA loans’ advantages, such as no down payment required, no set minimum credit score, and no PMI. A VA funding fee and some service-related documents are usually required for the loans. It’s one of the strongest mortgage products available for those who qualify.
USDA Loans
Thinking of buying a property in a rural or suburban area of Tennessee? The USDA loans offer zero down payment financing for eligible buyers. Income limits in Tennessee also apply, roughly $108,450/year for a household of 1-4 and $143,150/year for 5+. Eligibility depends on location and income. A mortgage professional can quickly tell you whether your target property qualifies.
Home Construction Loans
Planning to build a home rather than buy? Home construction loans cover the building phase. When the construction is done, it typically converts into a conventional mortgage. Just keep in mind that down payment and credit requirements are typically stricter compared to conventional loans.
Tennessee Housing Development Agency (THDA) Loans
The THDA offers programs for first-time homebuyers, veterans, and moderate-income earners. THDA’s Great Choice Loan program provides 30-year fixed-rate mortgages with down payment assistance, specifically designed for buyers with tight budgets in Tennessee, making homeownership a realistic option even if you haven’t saved much.
How to Improve Your Chances of Getting a Good Rate?
- Check your credit first: Before anything else, pull your report from Equifax, Experian, or TransUnion. Errors are more common than people think. Dispute any errors you find, as even a 20-point bump in your score can push you into a better rate tier, which adds up to real money over a 30-year loan.
- Lower your DTI: Revolving debt is one of the first things lenders look at. Getting your monthly obligations down to 36% or less of your gross income puts you in a much stronger position. In some cases, DTI rates are the difference between approval and rejection.
- Save more for a down payment: 20% is the number worth aiming for, as it removes the PMI, lowering your rate. This doesn’t mean smaller jumps don’t count; even going from 5% to 10% can make a significant difference.
- Get pre-approved: Getting a pre-approval early not only shows sellers that you’re serious, but also gives you a realistic picture of your rates and borrowing limits. Start your pre-approval here.
- Compare multiple lenders: Don’t just contact one lender and go with whatever you’re offered. This is a costly mistake. Make sure to get 3-4 quotes from professional brokers who shop dozens of lenders at once. That can save you thousands over the life of the loan.
- Consider THDA programs: If you’re a first-time buyer or moderate-income earner, there’s a good chance that THDA’s programs can get you into a home with a much lower rate and down payment assistance you probably didn’t even know existed.
Working with a Mortgage Broker in Tennessee
Most buyers stick with one lender and never know what options they are missing. This is where an expert, such as a mortgage broker, makes a real difference. A professional mortgage broker doesn’t just find you a loan; they find the best one possible based on your specific situation. The Mortgage Shop is based in Sevierville, TN, and specializes in both primary residence and investment property loans, shopping your loan across multiple lenders in Tennessee to get you the most competitive terms possible. Available loan options include conventional loans, DSCR loans, investment property loans, bank statement loans, HELOC loans, and more. Ready to see what rate you qualify for? Contact a mortgage consultant at The Mortgage Shop or call (800) 816-7982.
