What is Happening with Mortgage Rates in Tennessee?

If you’re interested in buying or refinancing a home in the Volunteer State, it’s important to keep a close eye on mortgage rates in Tennessee.

Several essential factors make up a homebuying experience, including:

• Down payment
• Insurance premiums/mortgage insurance
• Home Price
• Property tax
• Loan term
• Closing costs

However, one of the biggest factors is also one of the most variable—mortgage interest rates. 

New homebuyers quickly realize how small adjustments to how you finance your homebuying could mean thousands of dollars saved or lost over the years.

To help you understand what is happening with mortgage rates in Tennessee, let’s break down both the current and future outlook of home loan rates.

Current Tennessee mortgage rates and insights

Mortgage rates have been dropping since mid-November, a welcome sign for homebuyers and borrowers in general.

The Federal Reserve has performed a minor course correction with a smaller-than-expected interest rate hike. 

Because of this, according to Freddie Mac, the 30-year FRM (fixed-rate mortgage) fell to 6.31% from 6.33% the week before.

Mortgage payments for home loans

As of mid-December, homeowners with a home loan of $400,000 would have a monthly payment of $2,480. 

Five weeks ago, rates were above 7%, and the monthly payment for the same person was $2,680.

What are experts saying about future mortgage rates?

Many experts have pointed out that the swift rise in mortgage rates throughout 2022 has heavily impacted the real estate market. 

A telling indicator of that impact can be seen with the US Census November 2022 data showing that housing starts (a measure of new residential constructions) were down 16.4% compared to last year. 

Fannie Mae, the “leading source of mortgage financing” for all markets throughout the year, just recently released its December Housing Forecast. 

In the report, Fannie predicted that the quarterly average rate for 30-year fixed-rate mortgages would gradually but steadily decline over 2023 ending next year at 6.0%.

Mike Fratantoni, chief economist and senior VP at Mortgage Bankers Association (MBA), acknowledged on Bloomberg TV that starts and permits were down 11% in the single-family sphere and even more so in the multi-family sphere. He added that the MBA expected a 9% drop in single-family housing starts in 2023.

The sticker shock of last summer might be wearing off

“Buyers,” Fratantoni said, “have had to face the fact that mortgage rates are more than double where we were since the beginning of this year.” 

He went on to say that it isn’t surprising that buyers were pulling back. But he also pointed out that people still need somewhere to live, and rents are still rising.

“I’m not going to be too surprised if the market shifts a bit towards a first-time homebuyer’s market,” he said.

What is the future of mortgage rates?

The future, Fratantoni indicated, is beginning to look a little brighter.

“Over the past couple of weeks, we’ve seen mortgage rates down as much as 75-basis points… I think that the move for 30-year mortgage rates from 7% to 6.25 or so—that’s going to be impactful.”

This time of year, typically the slowest buying season is not the best metric for how the market might behave in the future. 

Fratantoni said he believes that if rates could be kept around 6% or below by the first quarter (the spring buying season), many buyers who had sticker shock last summer could come “flooding back.”

Lower competition for Tennessee homebuying

As of August, Redfin reported that sellers had competing bids just over 40% of the time, a significant drop from just one year before when the rate was 63.5%. Just a month earlier, in July 2022, the rate was 47.2%.

This statistic indicates a continued decline in homebuying competition for the seventh-straight month. Competition is also unlikely to increase anytime soon, as the deep winter months are traditionally the slowest buying time of the real estate market.

When the warm weather starts next year, often referred to as the “spring buying season,” there will likely be a significant rise in competitive bids for homes.

Mortgage loan options in Tennessee

Most states (Tennessee included) have several loan types that give homebuyers an excellent opportunity to finance a mortgage and buy a home. 

Two of the most popular loan products are FHA loans and conventional loans. A majority of lenders offer both.

Conventional loans are ideal for borrowers with credit scores of at least 620 and who have a minimum of three percent of the purchase price available immediately.

Furthermore, FHA loans are open for homebuyers who have lower credit scores, as little as 580, and who can proceed with a down payment of 3.5% or more. 

Note: if a borrower has upfront funds available of at least ten percent, their credit score could be as low as 500.

Tennessee homebuyers might also have access to USDA loans or VA loans. 

VA loans are designed only for eligible military members, veterans, or their surviving spouses.

USDA loans are for most Americans willing to purchase their primary residence in designated rural areas in Tennessee and elsewhere.

Both of these government-backed loan programs have no requirement for a down payment, making them a popular choice for those who have challenges saving their cash.

Calculate payments with Homefinity’s mortgage calculator

Your income, down payment funds, and debts are the primary factors in calculating what sort of loan amount you can afford.

Regardless of the details of your personal financial situation, a simple way to better understand your homebuying options is to use an affordability calculator. 

While this may not be the most accurate assessment of your buying options, it will likely give you a good starting point.

Contact a professional loan officer to get a more detailed, close-up analysis of your mortgage capabilities and get a pre-qualification done.

Mortgage rates in Tennessee—the bottom line

Mortgage rates always fluctuate due to the constant tension between supply and demand. Almost no one finds the “perfect time to buy.” 

Instead, it’s better to get an accurate assessment of your homebuying potential as it stands today and in the near future.

The loan officers at Homefinity have the passion and collective years of expertise to draw upon to help you find your home-buying solutions. 

Reach out to us, and let us help you start your homebuying journey.

Photo by RODNAE Productions