Conventional vs. FHA, VA & USDA: Which Loan Fits Tennessee Buyers?

Loan Types Compared

Conventional vs. FHA, VA & USDA: Which Loan Fits Tennessee Buyers?

Reviewed by the HomeMath editorial team Updated 2026-08-06

Key takeaways

Conventional loans are non‑government‑backed and usually require a minimum down payment of about 3%‑5%.
Tennessee buyers can combine a conventional loan with state first‑time‑buyer assistance, but the loan’s basic requirements stay the same.
The decision hinges on loan features (fixed vs. adjustable rate, credit score, down payment) rather than a difference between “conventional vs. conventional.”

Conventional vs. Government-Backed Loan Options

What buyers in Tennessee actually weigh is a conventional loan against FHA, VA, or USDA financing. Here is how the four main programs differ at a national level — your lender will verify the exact numbers for your Tennessee situation.

Conventional: best for buyers with a credit score of 620+ and at least 3% down; private mortgage insurance (PMI) drops off automatically once your balance reaches 78% of the original value.
FHA: allows credit scores as low as 500–580 with a 3.5% down payment, but charges an upfront and annual mortgage insurance premium (MIP) that typically lasts the life of the loan on 30-year terms.
VA: offers $0 down and no monthly PMI for eligible veterans and service members, in exchange for a one-time funding fee (often waived for disabled veterans).
USDA: offers $0 down for eligible buyers in designated rural areas of Tennessee, with low mortgage insurance and county income limits.

Your ideal choice depends on your credit tier, down payment savings, and whether you qualify for VA or USDA programs. Run the numbers below with our calculator to see how each program shapes your real monthly payment.

When you hear the term “conventional loan,” it refers to a mortgage that is not insured or guaranteed by a federal agency such as the FHA, VA, or USDA. Lenders underwrite these loans based on private‑sector guidelines, most commonly the standards set by Fannie Mae and Freddie Mac.

Core features of a conventional loan

Typical down‑payment range: 3% – 20% of the purchase price.
Maximum loan‑to‑value (LTV) without private mortgage insurance (PMI) is usually 80%.
Credit‑score requirements: most lenders look for a score of 620 or higher, with better rates offered to borrowers in the 700+ range.
Fixed‑rate or adjustable‑rate options are both available, letting buyers choose the payment structure that fits their plans.

Why “conventional vs. conventional” isn’t a real comparison

Both sides of the title refer to the same loan type, so there is no intrinsic difference in eligibility, underwriting, or cost. The real comparison you should make is between the various features within the conventional loan category—such as a 30‑year fixed rate versus a 5/1 ARM, or a low‑down‑payment option versus a higher down payment that avoids PMI.

Tennessee‑specific considerations

Tennessee does not levy a state income tax, which can affect your overall debt‑to‑income calculations but does not change conventional loan requirements.
The state’s housing agency offers first‑time‑buyer assistance programs that can be paired with a conventional loan to provide down‑payment grants or low‑interest loans.
Most closings in Tennessee are handled by title companies rather than attorneys, which can influence closing‑cost estimates.

In short, focus on the loan’s terms—interest‑rate type, down‑payment size, and credit‑score requirements—rather than looking for a distinction between “conventional vs. conventional.” Those factors will determine which loan structure best fits your financial situation.

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

FAQ

Do I need private mortgage insurance (PMI) with a conventional loan in Tennessee?

PMI is typically required if your down payment is less than 20% of the home’s purchase price, regardless of the state. Paying 20% or more eliminates the need for PMI.

Can I use Tennessee’s first‑time‑buyer assistance with a conventional loan?

Yes, many state programs can be combined with a conventional loan, providing down‑payment grants or low‑interest secondary loans, as long as the primary loan meets the program’s eligibility criteria.

What credit score do I need for a conventional loan?

Most lenders look for a minimum score of 620, but a score of 700 or higher usually qualifies you for better interest rates and more favorable terms.

Are there any Tennessee‑specific costs I should budget for when closing a conventional loan?

Closing costs often include title‑search fees, title‑insurance premiums, and recording fees. In Tennessee, these are typically handled by title companies, and the exact amounts can vary by county.

Estimate your monthly payment →