Your Guide to Buying a Home in Tennesse
- In the state of Tennessee, a real estate attorney or representative from a title agency will be needed to close the transaction.
- The buyer and seller will join together to complete the transaction at the same table.
- Certain inspections are common in Tennessee, including termite inspections.
- Most of Tennessee is under the base loan limits. However, counties surrounding the Nashville area have higher limits.
Phase 1: Negotiating Terms of the Purchase
Once you have found a Tennessee home and agreed on a price, you may think that the deal is final. However, there are more details that need to be worked out, including disclosures, inspections, and repairs.
- Once the offer is accepted by the seller, a contract will be signed. This document will legally bind both the buyer and the seller, and will outline numerous details, including deadlines for many tasks, such as completing the finance application.
- Earnest money from the buyer will be deposited in an escrow account. This deposit is never given directly to the seller.
- A title search will begin and all work related to transferring the title can start. This should be done early in case there are title issues that need to be addressed.
- The buyer can review all disclosures from the seller. Disclosures help the buyer understand potential issues with the home, as well as past repairs that were completed.
- Inspections should be completed at this time. The contract will have a deadline for all inspections, which can include a general inspection as well as specific inspections. Inspections may include termite and mold inspections. In Tennessee, cosmetic and purely visual defects are not considered during inspections, only structural and safety issues can be considered.
- The outcome of inspections will define the next step. Depending on the results, the buyer can request changes, repairs, or an adjustment to the contract. The seller can respond in kind until an agreement is reached.
- A home warranty can be requested by the buyer. This warranty will cover the cost of appliance repairs or replacement for a certain period. The warranty is part of typical home-buying negotiations and does not have to be accepted by the seller.
Phase 2: The Loan
Most buyers will need a loan to make the purchase. This process can be long and detailed, so it’s best to start early. In most situations, you can begin Phase 1 and Phase 2 at nearly the same time.
Step Zero: In most cases, the buyer of the Tennessee property will already have pre-qualification or pre-approval before home shopping. Final approval, however, is more detailed.
- The buyer will first submit a loan application, which can be done independently but often uses a loan broker or mortgage agent.
- The lender will send a “Good Faith Estimate,” which is their best calculation of the closing costs. Final costs can differ, but they make the best effort to be accurate.
- Now the buyer will need to send a series of documents to verify their financial situation. Requested documents may include:
- Bank statements for the past several months
- Information on outstanding loans
- Two years of tax returns (Certain IRS forms may be needed to release the documents.)
- Employment information, including pay stubs and employer contact information
- Information that is important to your financial situation. This can include divorce settlements, child support, liens, and legal judgements. (It should include payments you make, as well as those you receive.)
- Information on large deposits. If you are using a cash gift for your downpayment, you will need to document the gift and provide information to the lender, including a statement that it is not a loan and will not need to be repaid.
- Repeat information on any of the above documents. Remember that a lender wants as much information as possible. The more documents you can provide, the better your chances of reaching loan approval.
4. Once all documents are collected, the lender will issue a decision.
5. Assuming you are approved, the lender will provide a loan commitment letter. This essentially outlines their intention to support your home purchase in the state of Tennessee. There will likely be conditions, including appraisal results. Conditions can also include that there is no change to your financial situation. (Meaning no new jobs, debts, or other financial changes.)
6. The final contingency can now be removed. If the buyer is unable to get a loan for the purchase, the seller can terminate the contract and the buyer will have their deposit returned.
7. An appraisal will be completed by a professional expert. This appraisal is important to lenders, as they want to know that the home they are lending against has the appropriate value. If the appraisal is low, the lender may pull their loan offer or request changes to the loan terms.
8. At this time, homeowner’s insurance will need to be ordered. Proof of this insurance should be provided to the lender.
Phase 3: Closing the Purchase in Tennessee
In Tennessee, the closing will take place at one table with all parties present at the same time. This usually happens at the office of the lender, attorney, or title company. Once all documents are signed, the buyer will receive the keys to their new home!
- A title search will need to be completed before final closing. This ensures that the title is clear and the seller has legal ownership and can therefore sell the property without complications.
- If the title is clear, the closing can proceed as planned. Paperwork for changing the title and title insurance will be prepared.
- A final cash total for the closing is prepared. This is based on many factors, including the downpayment, closing costs, agent fees, and more.
- A final inspection of the property will need to be completed. This inspection will ensure that the property is still in good condition and has not been damaged since it was last seen by the buyer.
- At the closing, both the buyer and the seller will sign all the appropriate documents. The buyer will also sign final loan documents.
- The buyer will pay their remaining funds to the title company representative or the attorney overseeing the transaction.
- The transaction will then be recorded with the appropriate government, either a city or county government.
- The buyer now gets their keys and can move into their new home!
Loan Limits in the State of Tennessee
Across the country, limits for conforming loans are determined by the Federal Housing Finance Agency. (FHFA, not to be confused with the FHA.) The limits are set by the county, with most counties falling under the base limits. However, high-cost areas can have larger loan limits.
In Tennessee, most of the state falls under the base limit, which is currently $548,250 for a single-family home. For a duplex, the limit is $702,000, and for a three-unit property, the limit is $848,500. If you want to purchase a four-unit property in Tennessee, the limit for most of the state is $1,054,500.
However, in the counties that make up the Nashville metro area and the surrounding region the loan limit is lifted to reflect higher costs.
Tennessee counties with higher limits include:
In these counties, the limit for a single-family home is lifted to $586,500, while two-unit properties have a limit of $750,800. If you are purchasing a three-unit property, the limit is $907,550, while four-unit properties have a limit of $1,127,900.
It should be remembered that these are limits for conforming loans only. If you need financing above these amounts for your Tennessee home purchase, there are options available, including jumbo loans.