Down Payments for Tennessee Home Buyers
How much do you actually need to put down? The answer depends on your loan program, credit profile, and financial goals — and it's often less than buyers expect.
Down payment by loan program
| Program | Minimum Down | Notes |
|---|---|---|
| VA | 0% | Eligible veterans and service members only |
| USDA | 0% | Eligible rural/suburban areas and income limits apply |
| FHA | 3.5% | 580+ credit score; 10% required for 500–579 |
| Conventional (HomeReady/Home Possible) | 3% | Income limits apply; typically first-time buyers |
| Conventional (standard) | 5% | Most borrowers; PMI required until 20% equity |
| Conventional (no PMI) | 20% | Eliminates PMI entirely |
| Jumbo | 10–20% | Varies by lender and loan amount |
The 20% myth
Many buyers believe they need 20% down to buy a home. This is a persistent myth. While 20% eliminates PMI and reduces your monthly payment, it's not required for most loan programs. The majority of Tennessee home buyers put down less than 20%.
The real question isn't "how much do I need?" but "how much should I put down given my financial situation?" A larger down payment reduces your monthly payment and total interest paid, but it also depletes savings that could be used for emergencies, home improvements, or investments.
Gift funds
Down payment funds can come from a gift from a family member on most loan programs. The gift must be documented with a gift letter stating that no repayment is expected. The donor's ability to give the funds must also be documented with bank statements.
Conventional loans allow 100% gift funds when the down payment is 20% or more. For lower down payments, the borrower may need to contribute a minimum amount from their own funds depending on the program and occupancy type.
Tennessee down payment assistance
The Tennessee Housing Development Agency (THDA) offers down payment assistance programs for qualifying buyers. The Great Choice Home Loan program provides a 30-year fixed-rate mortgage with down payment assistance of up to 6% of the loan amount as a second mortgage.
THDA programs have income and purchase price limits that vary by county. They can be combined with FHA, VA, USDA, or conventional financing. Morgan Hardy can determine whether you qualify and walk you through the application process.
Down payment vs. closing costs
Don't forget that closing costs are separate from your down payment. Tennessee buyers typically pay 2–4% of the purchase price in closing costs on top of the down payment. Some of these costs can be covered by seller concessions negotiated in the purchase contract, or rolled into the loan in certain circumstances.
Find the right down payment strategy
Morgan Hardy can help you evaluate the tradeoffs between different down payment amounts and identify any assistance programs you may qualify for.
Contact Morgan Hardy