Conventional loans are mortgage products that are not guaranteed or insured by the federal government. They are offered by most banks, credit unions, and mortgage lenders and follow guidelines set by Fannie Mae and Freddie Mac.

Typical down‑payment thresholds

• 3% minimum: Many lenders will accept a down payment as low as 3% of the home’s purchase price, but borrowers must purchase private mortgage insurance (PMI) to protect the lender.
• 5% to 10%: A down payment in this range is common for borrowers who want a lower monthly payment than the 3% option but are not ready to reach 20%.
• 20% or more: Putting down at least 20% of the purchase price removes the requirement for PMI, which can reduce the overall monthly cost.

Why PMI matters

PMI is an extra insurance premium that protects the lender if the borrower defaults. It is usually added to the monthly mortgage payment and can be canceled once the loan balance falls below a certain equity threshold (often 78% of the home’s original value). Avoiding PMI by reaching a 20% down payment can save hundreds of dollars each year.

Tennessee‑specific considerations

• Tennessee does not levy a state income tax, which can leave more of a borrower’s cash available for a down payment.
• The Tennessee Housing Development Agency (THDA) offers down‑payment assistance programs for eligible first‑time homebuyers, typically providing a grant or second‑mortgage that can cover up to about 5% of the home price.
• Most closings in Tennessee are handled by title companies rather than attorneys, though both options are available depending on the county.

How to meet the down‑payment requirement

Borrowers can combine personal savings, gifts from family (subject to lender documentation), and eligible assistance programs to reach the required percentage. Maintaining a strong credit profile and steady income also helps lenders approve lower‑down‑payment conventional loans.

This article provides general information and does not constitute personalized financial or lending advice.