Choosing between an FHA loan and a conventional loan is one of the first decisions Tennessee buyers face, and the right answer depends on your credit, your down payment, and how long you plan to keep the loan. FHA loans are built for accessibility, with low credit and down payment minimums. Conventional loans reward stronger credit and let you drop mortgage insurance once you build equity. Here is how the two compare for a Tennessee purchase.
FHA Loans in Tennessee, in Brief
FHA loans are government-insured mortgages designed to make homeownership reachable for buyers with lower credit or limited savings. You can put down as little as 3.5% with a credit score of 580 or higher, and the down payment can come from a gift. The tradeoff is mortgage insurance: an upfront premium of 1.75% plus an annual premium of about 0.55% that, with less than 10% down, stays for the life of the loan. For the full walkthrough, see how to get an FHA loan in Tennessee.
FHA loans are backed by HUD FHA program guidelines.
Conventional Loans in Tennessee, in Brief
Conventional loans are not government-insured and follow Fannie Mae and Freddie Mac guidelines. They start at 3% down for programs like HomeReady, usually want a credit score around 620 or higher, and charge private mortgage insurance only when you put down less than 20%. That PMI cancels once you reach about 20% equity, which can save money over time. Conventional loans also reach higher amounts before becoming jumbo, up to the 2026 Tennessee conforming limit of $832,750.
FHA vs Conventional: Side by Side
| FHA | Conventional | |
|---|---|---|
| Minimum down | 3.5% (credit 580+); 10% for 500–579 | 3% with HomeReady or Conventional 97 |
| Minimum credit | 580 for 3.5% down | Around 620 |
| Mortgage insurance | 1.75% upfront plus ~0.55%/yr; lasts the life of the loan with under 10% down (11 years with 10%+) | PMI only with under 20% down; cancels near 20% equity; cost varies by credit |
| 2026 TN loan limit | Floor $541,287; higher in costlier counties | $832,750 baseline; up to $1,249,125 high-cost |
| Income limits | None | None (HomeReady caps at 80% AMI) |
| Best suited to | Lower credit or the smallest down payment | Stronger credit, or dropping mortgage insurance later |
Which One Fits Your Situation
FHA tends to suit buyers with credit in the 500s to low 600s or those who want the smallest possible down payment. Conventional tends to suit buyers with stronger credit who want to cancel mortgage insurance later, or who are buying above FHA limits. One point worth keeping in mind: a higher rate is not automatically worse if it lowers your monthly payment, so compare the full payment on each option rather than the rate alone.
How Loan Limits Differ in Tennessee
Both loan types cap out, and the caps differ. For 2026, the FHA floor in Tennessee is $541,287 with higher limits in costlier counties, while the conventional conforming limit is $832,750 and rises to $1,249,125 in high-cost counties. Above those amounts you would need a jumbo loan. See Tennessee conforming loan limits and Tennessee FHA loan limits for the county detail.
Limits are set annually per FHFA conforming loan limits.
Not sure which loan fits your numbers? Contact JVM Lending and we’ll compare FHA and conventional side by side for your Tennessee purchase.
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