Closing Costs in Tennessee

Categories of closing costs

Closing costs fall into three broad categories: lender fees, third-party fees, and prepaid items.

Lender fees

• Origination fee: The lender's charge for processing the loan, typically 0.5–1% of the loan amount
• Discount points: Optional prepaid interest to buy down the rate; 1 point = 1% of the loan amount
• Underwriting fee: Flat fee for underwriting review, typically $500–$1,000
• Application fee: Some lenders charge; many do not

Third-party fees

• Appraisal: $500–$700 for a standard single-family home in Tennessee
• Title search and insurance: Lender's title policy required; owner's title policy recommended; combined typically $1,000–$2,500
• Attorney/settlement fee: Tennessee closings often involve a real estate attorney; $400–$800
• Survey: May be required; $300–$600
• Credit report: $30–$75
• Flood certification: $15–$25

Prepaid items and escrow setup

• Prepaid interest: Interest from closing date to end of month
• Homeowner's insurance: First year's premium paid at closing
• Property tax escrow: 2–6 months of property taxes deposited into escrow
• Insurance escrow: 2–3 months of insurance premium deposited into escrow

Tennessee-specific costs

Tennessee charges a mortgage recordation tax (also called a deed of trust tax) of $0.115 per $100 of the loan amount. On a $300,000 loan, that's $345. There's also a real estate transfer tax of $0.37 per $100 of the purchase price, typically paid by the seller.

Tennessee does not have a state income tax on wages, but property taxes vary significantly by county. Davidson County (Nashville) has higher effective rates than many rural counties.

Strategies to reduce closing costs

• Negotiate seller concessions: Ask the seller to contribute toward closing costs in the purchase contract. In slower markets, sellers often agree to 2–3% in concessions.
• Lender credits: Accept a slightly higher interest rate in exchange for a lender credit that offsets closing costs. This makes sense if you plan to sell or refinance within a few years.
• Shop third-party services: You can shop for your own title company, attorney, and settlement agent. Comparing quotes can save several hundred dollars.
• Close at end of month: Closing late in the month reduces prepaid interest since you're paying fewer days of interest before your first payment.