How much money do you need to buy a house in Tennessee?

Less than you think. The 20% down payment is a myth conventional loans start at 3% down, FHA at 3.5%, and VA and USDA loans can be zero down. But your down payment isn't the whole picture. Your true cash-to-close also includes closing costs (about 2% to 5% of the price), prepaid escrow for taxes and insurance, and sometimes cash reserves. On a $400,000 Tennessee home with 3% down, that often totals somewhere around $20,000 to $26,000 and down payment assistance can shrink that number substantially.

By Khristian Schlemmer | July 22, 2026

The single biggest thing keeping people in Lebanon, Mt. Juliet, and across Middle Tennessee from buying is a number that isn't even real: the belief that you need 20% down. Let's put that to rest and walk through what you actually need.

The 20% myth, and what loans really require

You do not need 20% down to buy a home. Here's where the minimums actually start:

• Conventional loan: as little as 3% down (programs like Conventional 97), typically with a 620+ credit score.

• FHA loan: 3.5% down with a credit score of 580 or higher (10% if your score is 500–579).

• VA loan: 0% down for eligible veterans and service members.

• USDA loan: 0% down in eligible rural areas which includes parts of Wilson County outside the Lebanon and Mt. Juliet cores.

  
  

So where does 20% come from? That's the threshold where you avoid private mortgage insurance on a conventional loan. Avoiding PMI is nice, but it's an option, not a requirement. Plenty of buyers put down 3% to 10%, pay PMI for a while, and drop it later once they've built equity.

Down payment isn't the same as cash-to-close

This is where buyers get tripped up. Your down payment is just one line in the total cash you bring to closing. Here's the full list:

1. Down payment. 0% to 3.5%+ depending on your loan.

2. Closing costs. Roughly 2% to 5% of the purchase price lender fees, title, appraisal, and more. National median loan costs alone have been running north of $6,600 and rising. I break these down in detail in my guide to buyer closing costs in Tennessee.

3. Prepaid escrow. Your lender collects a few months of property taxes and homeowners insurance up front to fund your escrow account.

4. Cash reserves (sometimes). Conventional loans may want 0 to 6 months of housing payments in the bank; FHA usually requires none unless your credit or debt-to-income is borderline.

   
   

One important clarification: your earnest money is not an extra cost. In Tennessee it's typically 1% to 3% of the price, paid up front to show you're serious and then credited back toward your down payment or closing costs at the table. It's part of your total cash, not on top of it. I explain how it works and how to protect it in my post on earnest money in Tennessee.

What the real number looks like

Let's put it together on a $400,000 home right in the range of a lot of Middle Tennessee starter and move-up homes.

• Down payment at 3% (conventional): $12,000

• Closing costs (~2.5%): roughly $10,000

• Prepaid escrow: a few thousand, depending on tax and insurance timing

  
  

That puts realistic cash-to-close somewhere around $20,000 to $26,000 not the $80,000 a 20%-down assumption would suggest. Go FHA at 3.5% and the down payment piece rises slightly to about $14,000. Qualify for VA or USDA and the down payment drops to zero, leaving mostly closing costs and prepaids.

Assistance can cut that number way down

Tennessee has real programs to bridge the gap. The THDA Great Choice program offers up to $15,000 as a second mortgage at 0% interest with no monthly payment forgiven entirely after 15 years of living in the home. Used well, it can cover most of your down payment and a chunk of your closing costs, which is often the difference between "someday" and "this year."

Sellers can help too. In today's market, with homes sitting longer, many sellers are willing to contribute toward your closing costs as a concession another lever that lowers the cash you personally bring.

The better question to ask

"How much do I need down?" is the wrong first question. The better ones are: What monthly payment am I comfortable with? How much cash do I want to keep in reserve after closing? And which loan program fits my situation?

A smaller down payment means a bigger loan and usually mortgage insurance, so it's a trade-off between cash now and payment later not a moral test you pass by hitting 20%. The right answer is personal, and it's exactly the conversation I have with buyers before we ever look at a house.

Frequently Asked Questions

Do you really need 20% down to buy a house in Tennessee?

No, it's the most common myth in home buying. Conventional loans go as low as 3% down, FHA as low as 3.5%, and VA and USDA can be zero down. Putting 20% down lets you avoid private mortgage insurance, but it's not required to buy.

How much cash do you actually need to close on a home in Tennessee?

Beyond your down payment, plan for closing costs of about 2% to 5% of the price, plus prepaid escrow and sometimes reserves. On a $400,000 home with 3% down, total cash to close often lands around $20,000 to $26,000 before any assistance.

Is earnest money extra money on top of the down payment?

No. Earnest money (typically 1% to 3% in Tennessee) is paid up front and then credited toward your down payment or closing costs at the table. It's part of your total cash, not an additional cost, as long as the deal closes.

Can down payment assistance lower how much cash I need?

Yes, significantly. THDA's Great Choice program offers up to $15,000 as a 0% second mortgage with no monthly payment, forgiven after 15 years in the home. It can cover much of your down payment and closing costs.

Does a lower down payment mean a higher monthly payment?

Usually yes. A smaller down payment means a larger loan and, on conventional and FHA loans, mortgage insurance both of which raise your monthly payment. The right balance depends on your cash and your comfortable payment, not a fixed rule.

The bottom line

You almost certainly need less cash to buy in Tennessee than you think. Loan minimums start at 0% to 3.5%, and while your true cash-to-close adds closing costs and prepaids, assistance programs and seller concessions can pull the number down from there. The 20% rule shouldn't be what stops you.

If you want to know your real number for your income, your credit, and the price range you're eyeing that's a quick conversation, and I can connect you with lenders who handle these programs every day. Reach out anytime.

About Khristian Schlemmer

Khristian is a top-producing Middle Tennessee Realtor and founder of First Class Real Estate, serving buyers, sellers, and investors throughout the Greater Nashville area. With over $60 million in career sales and 200+ homes sold, he is known for creative marketing, strong negotiation, and delivering a true first-class client experience. Born into a family passionate about real estate investing and home building, Khristian combines local market expertise with modern marketing strategies to help clients confidently achieve their real estate goals.