Frequently Asked Questions — Conventional Loans in Tennessee

What is the minimum credit score needed for a conventional loan?

The minimum credit score required for a conventional loan is typically 620. However, it is important to understand that while 620 may get you approved, your interest rate will be significantly more favorable the higher your credit score is. Borrowers with scores in the 740 to 760 range and above generally qualify for the best available rates. If your score is below 620, our team at Valor Mortgage can discuss credit improvement strategies and alternative loan programs that may be a better fit in the short term.

How much do I need for a down payment on a conventional loan?

The down payment requirement for a conventional loan depends on the specific program and the borrower's profile. The minimum is 3% for qualifying first-time homebuyers through the Conventional 97 program, and 5% for most standard conventional loans. Putting down 10% or more will reduce your monthly PMI cost, and putting down 20% eliminates PMI entirely. While a larger down payment reduces your monthly costs, it is not always the right strategy — keeping cash reserves after closing can be equally important. Valor Mortgage will help you evaluate the right down payment strategy based on your complete financial picture.

What is the difference between a conventional loan and an FHA loan?

The primary difference is that FHA loans are insured by the Federal Housing Administration, while conventional loans are not government-backed. FHA loans are generally easier to qualify for — they allow credit scores as low as 580 with 3.5% down and are more forgiving of past credit events. However, FHA loans come with mandatory mortgage insurance that typically lasts for the life of the loan, which increases your long-term cost. Conventional loans require stronger credit but offer the ability to cancel PMI once you reach 20% equity, making them more cost-effective over time for borrowers who qualify.

Can I use a conventional loan to buy an investment property?

Yes. Unlike FHA, VA, and USDA loans which are restricted to primary residences, conventional loans can be used to purchase investment properties and second homes. However, the down payment and reserve requirements for non-owner-occupied properties are typically higher. Investment property purchases generally require at least 15% to 25% down depending on the number of units, and lenders will scrutinize your overall debt load and cash reserves more carefully. Valor Mortgage works with real estate investors throughout Tennessee and can help you structure your financing to maximize your investment strategy.

What is private mortgage insurance (PMI) and how can I avoid it?

Private mortgage insurance is a policy that protects the lender — not the borrower — in the event of default. It is required on conventional loans when the down payment is less than 20% of the purchase price. PMI costs typically range from 0.5% to 1.5% of the loan amount annually, added to your monthly payment. The most straightforward way to avoid PMI is to put 20% or more down at the time of purchase. Alternatively, some borrowers opt for lender-paid PMI, where the lender covers the insurance cost in exchange for a slightly higher interest rate. Once your loan-to-value ratio reaches 80% — meaning you have 20% equity — you can request PMI cancellation.

What are the conventional loan limits in Tennessee?

For 2024, the conforming conventional loan limit for most counties in Tennessee is $766,550 for a single-family home. This means any conventional loan up to that amount is considered a conforming loan and is eligible for purchase by Fannie Mae or Freddie Mac. Loan amounts above this limit are classified as jumbo loans and have their own set of qualification requirements. Tennessee does not currently have any high-cost counties that would qualify for higher conforming loan limits, so the $766,550 baseline applies statewide. If your purchase price exceeds this limit, Valor Mortgage offers jumbo loan solutions as well.

Can self-employed borrowers qualify for a conventional loan?

Yes, self-employed borrowers can absolutely qualify for a conventional loan. The key requirement is a two-year history of self-employment, documented through federal tax returns, profit and loss statements, and potentially business bank statements depending on the lender. One common challenge for self-employed borrowers is that business tax deductions reduce taxable income on paper, which can lower the qualifying income used by lenders. Valor Mortgage has extensive experience working with self-employed clients, business owners, and contractors to find loan programs that accurately reflect their true earning capacity.

How long does the conventional loan process take?

The typical conventional loan process takes between 21 and 45 days from the time a complete application is submitted to closing. The timeline depends on several factors including the complexity of your financial situation, the speed of the appraisal, and how quickly all required documentation is gathered. At Valor Mortgage, we work hard to keep the process moving efficiently and communicate with you at every step so there are no surprises. In competitive markets, we can often work toward faster timelines when needed to meet contract deadlines.

Should I choose a 15-year or 30-year conventional loan?

The right loan term depends entirely on your financial goals, monthly budget, and how long you plan to stay in the home. A 30-year fixed-rate conventional loan offers the lowest monthly payment and maximum cash flow flexibility, which is important for many buyers who want to balance mortgage payments with other financial priorities like retirement savings or college funding. A 15-year fixed-rate loan carries a higher monthly payment but offers a significantly lower interest rate and allows you to pay off your home in half the time, saving a substantial amount in total interest. There is no universally right answer — Valor Mortgage will run detailed comparisons for you so you can see exactly what each option means for your long-term financial picture.

Why should I work with Valor Mortgage instead of going directly to a bank?

As an independent mortgage broker, Valor Mortgage has access to dozens of lenders and loan programs that a single bank simply cannot offer. When you apply at a bank, you are limited to that institution's products, rates, and guidelines. When you work with Valor Mortgage, we shop your loan across multiple lenders to find the most competitive rate and the program that best fits your situation. Christopher Armantrout's recognition as a Top 1% Tennessee Purchase Loan Officer and Top 20 Purchase Loan Officer nationwide reflects a consistent track record of delivering results for clients. We combine the buying power of a large lending network with the personalized service and community commitment that sets Valor Mortgage apart.aph FontThis is a Paragraph Font