Buying A New Home in Nashville? Here Is The Entire Loan Process!




Nashville has started to become one of the best places for new homeowners to find great houses they can stay in forever. The city is well known for its great music history, and it's started to become more and more popular based on its fantastic economy. If you have been thinking about buying a home in the area and you want to know what it's like, check out this post to see what the process is like to get a loan to buy a home in Nashville.


Look at your current finances

Congratulations! You have found the perfect home for you and your family and want to make an offer.

The first thing you need to do is to gather together all of the information you have about your current financial state. You will also need to provide proof that your income is stable enough to afford the mortgage. Start by getting together your tax filing statements from the past two or three years. You will also need proof of employment, like pay stubs, but you can get around this if you get your income directly deposited by your employer.

You also need to have a look at your credit score to make sure it's in a good place. In Tennessee, there is a first-time home buyers program, and this requires you to have a credit score of 620 to qualify. Many other lenders will require a credit score that's the same or slightly lower (but these will require a higher interest rate) in order to pre-approve you.

If you have thought about talking to a professional, now is a good time to do it. If your credit score isn't up to par, then you can speak to a mortgage expert about what steps you can take to fix it slowly. If your credit score is good, they can start guiding you through the steps of obtaining a home loan.


Look at your debts

I know this is probably the part you were avoiding, but it needs to be done, so have a look at the debts you currently have. This could include credit card debt, other loans, or your current mortgage payments if you have one. Lenders are wary of loaning to those who already owe quite a bit to other places, so they look to look at the "debt to income ratio."

In Tennessee, lenders prefer your DTI to be lower than 36%, and the average income of someone in the state is about $3,000. To calculate what a lender will prefer based on your income, you'll need to use the equation: income x .36 = acceptable DTI. If your income is $3,000, your DTI would be: $3,000 x .36 = $1080. Anything under 36% is a great range for lenders in Nashville, and it will mean you are more likely to be pre-approved.


Look at what your down payment will be for the home you want

If you have already started saving for a home, then now is the time to have a look at what your down payment will likely look like for a home or new condo in Nashville. Your down payment will depend on the type of mortgage you are getting, so let's have a look at a few options.

A regular-rated mortgage with no loan insurance: If you don't want the hassle of paying extra monthly fees on top of your mortgage, then think about saving enough to go without it. Most banks expect a 20% down payment for a mortgage that will go without insurance, and that usually means about 80k saved up for an average home in Nashville.

A mortgage with additional private mortgage insurance payments:
If you go with a lower down payment, you will have to pay more on your monthly mortgage due to private mortgage insurance. This is great for anyone who is looking to buy a home quickly, as the down payment rate is usually between 2-5%. This means you might only need 8-12k for your down payment, but your mortgage payments could increase between $30-$200 monthly, depending on the loan size. You also choose to make a lump sum payment to your mortgage insurance to reduce your monthly payments.

Person in a suit and purple shirt holding a house


Choose your rate type

You can also choose between two different mortgage rates in Tennessee, so you should do your research into which one suits you the best. A fixed-rate mortgage will stay the same, while a variable-rate mortgage will be adjusted to the rate in your area.

A fixed-rate mortgage is perfect for anyone who wants to stay at your home for a long time, so they don't have to worry about the market, but a variable rate is ideal for those who want to move within the next few years.

You should make sure you go over all of the terms and conditions of your home loan with a financial expert so they can explain things to you in the easiest way possible. This is the best way to make sure you understand everything that comes along with your home loan. Once you know how much you need and how long you will need, you can finalize the loan with your lender. After all the paperwork has been signed, and the titles have been handed over, you will usually get the keys to your new home, and you can enjoy the rest of your time living in it.