Last updated: November 2025
FHA loans in Tennessee offer a financing option with flexible credit and income guidelines, allowing eligible homebuyers to put down as little as 3.5%.
When combined with Tennessee Housing Development Agency (THDA) assistance programs such as Great Choice and Great Choice Plus, an FHA loan may significantly reduce upfront costs.
What is an FHA loan and how does it work in Tennessee?
An FHA loan is a mortgage insured by the Federal Housing Administration and issued by FHA-approved lenders. These loans are often used by first-time buyers or borrowers with moderate income or limited credit history.
In Tennessee, FHA loans are available statewide and can be combined with THDA assistance to improve affordability for qualified buyers.
Standard FHA loan features:
- Minimum 3.5% down payment with a credit score of 580 or higher
- 10% down payment with credit scores between 500 and 579
- Flexible debt-to-income (DTI) ratio requirements
- Fixed-rate and adjustable-rate options available
- An FHA appraisal is required for property approval
Let’s Build Your Path to Homeownership
At Salute Mortgage, we combine veteran-led guidance with clear, tactical support—whether you're buying your first home, refinancing, or planning for long-term equity.
FHA loan limits in Tennessee for 2025
FHA loan limits are based on median home prices by county. In 2025, the standard FHA limit for most counties in Tennessee is $524,225 for a one-unit property.
Some higher-priced areas may have higher limits.
| Property Type | Standard Limit | High-Cost Limit |
|---|---|---|
| 1-Unit | $524,225 | $989,000 |
| 2-Unit | $671,200 | $1,266,100 |
| 3-Unit | $811,275 | $1,530,450 |
| 4-Unit | $1,008,300 | $1,901,950 |
FHA loans are commonly used in fast-growing markets like Nashville, where first-time buyers may benefit from a Nashville FHA loan to access competitive financing despite rising home prices.
FHA loan eligibility criteria in Tennessee
To qualify for an FHA loan in Tennessee, applicants must meet general federal guidelines and any lender-specific requirements.
Standard eligibility includes:
- U.S. citizenship or lawful permanent residency
- Two years of verifiable income or employment
- Minimum credit score of 580 for 3.5% down, or 500–579 with 10% down
- The DTI ratio is typically up to 57%, depending on compensating factors
- Occupying the property as a primary residence
Property eligibility:
- The home must pass an FHA appraisal
- Property must meet HUD’s minimum property standards
- Condos must be in FHA-approved projects
How THDA down payment assistance works with FHA
The Tennessee Housing Development Agency (THDA) offers down payment assistance through its Great Choice Home Loan Program, which can be used with FHA financing.
Buyers in cities like Memphis can layer THDA’s Great Choice Plus with an FHA loan to reduce upfront costs. Memphis homebuyer assistance programs, when combined with FHA financing, can make homeownership more achievable—even in tight housing markets
Key components of THDA’s Great Choice program:
- 30-year fixed-rate FHA loan through a THDA-approved lender
- Additional down payment help available via Great Choice Plus
Great Choice Plus options:
| Type | Assistance Amount | Terms |
|---|---|---|
| Deferred Option | Up to 5% of the loan amount | 0% interest, no payments until sale or refinance |
| Amortizing Option | $6,000 | 15-year term at low interest rate, monthly payments required |
General program eligibility includes:
- Must be a first-time buyer or purchasing in a targeted county
- Completion of a THDA-approved homebuyer education course
- Meet THDA income and purchase price limits based on location and household size
- Minimum credit score of 640
Salute Mortgage works with eligible borrowers to ensure documentation is aligned with both the FHA and THDA program requirements.
Combining FHA with Great Choice Plus
When used together, an FHA loan and Great Choice Plus assistance can reduce or eliminate upfront costs, such as the down payment and some closing costs.
Example:
- A buyer qualifies for an FHA loan with 3.5% down
- Great Choice Plus provides 5% assistance through the Deferred Option
- Assistance can cover down payment and/or allowable closing costs
- Buyer completes homebuyer education and meets THDA criteria
Salute Mortgage helps coordinate the two programs by verifying timelines, document needs, and compliance with lender and THDA expectations.
Understanding credit and FHA flexibility
FHA loans are structured to allow more flexibility for borrowers with less-than-perfect credit histories.
FHA credit score tiers:
- 580 and above: Eligible for 3.5% down
- 500–579: May qualify with 10% down (subject to lender discretion)
- Below 500: Generally not eligible under FHA guidelines
Recent late payments, charge-offs, or collections do not automatically disqualify a borrower but may require manual underwriting or additional documentation.
Salute Mortgage reviews credit files and helps buyers identify next steps if credit improvement is recommended before applying.
FHA mortgage insurance
FHA loans require two types of mortgage insurance:
- Upfront Mortgage Insurance Premium (UFMIP)
○ 1.75% of the base loan amount
○ Typically financed into the loan - Monthly Mortgage Insurance Premium (MIP)
○ Added to the monthly mortgage payment
○ Required for the life of the loan if the down payment is less than 10%
These costs are standard for all FHA borrowers and help ensure the program remains available to a broad range of applicants.
Step-by-step: FHA loan process in Tennessee
- Prequalification: Discuss income, credit, and goals with a loan advisor to estimate borrowing power.
- Preapproval: Submit documentation such as pay stubs, tax returns, and bank statements. Upon review, a lender issues a preapproval letter.
- Home shopping and offer: Use your prequalification to confidently make offers within your qualified price range.
- FHA appraisal and underwriting: Your selected home is appraised to confirm it meets FHA standards. Final underwriting review ensures program compliance.
- Closing: Salute Mortgage works with THDA (if applicable) and coordinates with the title company to finalize the transaction.
How Salute Mortgage supports FHA buyers in Tennessee
Salute Mortgage offers borrowers educational guidance and operational support throughout the FHA loan and THDA assistance process.
Support includes:
- FHA loan eligibility assessment and credit review
- THDA program coordination and documentation support
- Homebuyer education resource connections
- Step-by-step communication from preapproval through closing
Whether you’re buying in Chattanooga, Knoxville, or anywhere across the state, Salute Mortgage helps you navigate the FHA process from start to close. A Chattanooga FHA loan could be the key to unlocking homeownership with flexible credit terms.
Ready to explore FHA loan options in Tennessee?
If you think an FHA loan paired with THDA assistance might be the right path for you, here’s how to get started:
- Prequalify for an FHA loan: We’ll help you assess your credit, income, and buying power—with no obligation.
- Check your THDA eligibility: We’ll walk you through THDA’s income limits, education course, and which option (Deferred vs. Amortizing) fits your budget.
- Schedule a call with Salute Mortgage: Talk to a loan advisor who understands the Tennessee market and will guide you step by step.
Ready to explore your options? Start your FHA quote with Salute Mortgage.
FAQ: FHA loan in Tennessee
A: A credit score of 580 is typically required for a 3.5% down payment. Scores between 500 and 579 may qualify with 10% down, depending on lender policy.
A: Yes. THDA’s Great Choice Home Loan Program and Great Choice Plus assistance may be used with an FHA loan if eligibility requirements are met.
A: For most counties, the limit is $498,257 for a one-unit home. Limits may be higher in specific counties based on home prices.
A: It is a 0% second mortgage that provides up to 5% of the loan amount in assistance. Repayment is deferred until the home is sold, refinanced, or no longer used as a primary residence.
A: Salute assists with FHA loan qualification, coordinates with THDA-approved programs, and helps ensure all requirements are met for timely closing.
