Conventional Loans in Tennessee: Down Payment, Credit and PMI
How much you need down, what credit lenders look for, when PMI comes off, and the 2026 conforming limits in Tennessee.
Quick answer
A conventional loan is a mortgage that isn’t insured by a government agency. Most follow Fannie Mae and Freddie Mac rules. First-time buyers can put down as little as 3%, most lenders look for a credit score around 620 or higher, and it can finance a primary home, second home or rental.
Below 20% down you pay private mortgage insurance (PMI), which can be canceled at 20% equity. The 2026 limit is $832,750 in most of Tennessee.
Program figures on this page were verified in October 2026, using 2026 loan limits. Program terms and eligibility are subject to Fannie Mae, Freddie Mac and lender guidelines and may change.
At a glance: conventional loans in Tennessee
- Down payment: 3% for first-time or income-eligible buyers; 5% common; 20% avoids PMI
- Credit: about 620+ at most lenders
- PMI: below 20% down; cancel at 80% of original value, ends automatically at 78%
- 2026 limit: $832,750 in most counties; $1,029,250 in the Nashville metro
- Property: primary residence, second home or investment property
- Compared with FHA: stricter on credit; mortgage insurance comes off
How much do you need to put down on a conventional loan?
| Situation | Minimum down |
|---|---|
| First-time buyer (at least one borrower), 1-unit primary home | 3% |
| Fannie Mae HomeReady or Freddie Mac Home Possible, income at or below 80% of area median | 3% |
| Repeat buyer, 1-unit primary home | 5% |
| Second home | 10% |
| Investment property | 15%–25%, depending on units |
Sources: Fannie Mae Selling Guide eligibility matrix; Freddie Mac Home Possible. Program terms and eligibility are subject to Fannie Mae, Freddie Mac and lender guidelines and may change.
Gifts from family can cover the down payment on a primary home, and conventional loans can be paired with THDA’s HFA Advantage program and other down payment assistance. Program terms are subject to THDA and lender guidelines and may change.
What credit score do you need for a conventional loan?
Most lenders look for about 620 or higher. Fannie Mae dropped its fixed 620 minimum for loans approved through its Desktop Underwriter system in late 2025, but many lenders still keep a 620 floor of their own. Your score affects pricing and PMI cost more on a conventional loan than on FHA, so a higher score often matters more here. Total debt-to-income can reach 50% with an automated approval. Program terms are subject to Fannie Mae, Freddie Mac and lender guidelines and may change.
When can you remove PMI on a conventional loan?
- By request: once your balance reaches 80% of the home’s original value, if you have a good payment history and the value hasn’t fallen.
- Automatically: when the balance is scheduled to reach 78% of the original value, under the federal Homeowners Protection Act.
- Through appreciation: some servicers will cancel PMI earlier based on a new appraisal, under their own seasoning rules.
PMI cost depends on your score, down payment and loan amount, and shows on your Loan Estimate. See the CFPB’s PMI guide.
What is the conforming loan limit in Tennessee for 2026?
| Area | 2026 limit, 1 unit | Example counties |
|---|---|---|
| Nashville metro (high-cost area) | $1,029,250 | Davidson, Robertson, Sumner, Williamson, Wilson, Rutherford, Cheatham |
| Rest of Tennessee | $832,750 (national baseline) | Montgomery, Madison, Knox, Shelby, Hamilton |
Source: FHFA 2026 conforming loan limits. Limits are higher for 2–4 unit properties. Loans above the limit are jumbo loans. 2027 limits are typically announced in late November.
What kind of property can you buy with a conventional loan?
Primary homes, second homes and investment properties, including single-family homes, condos, townhomes and 2–4 unit buildings. That flexibility is the main reason investors and second-home buyers use conventional financing; FHA, VA and USDA loans are limited to homes you live in.
Sellers can contribute toward your costs up to 3% of the price with less than 10% down, 6% with 10%–25% down, and 9% with more than 25% down; on investment property the limit is 2%. Seller-paid closing costs and interested-party contributions vary by loan type and transaction; these limits are general examples and do not mean every type of cost or concession is permitted up to that percentage.
Is a conventional loan better than an FHA loan?
It depends. Conventional often fits buyers with stronger credit or 5% or more down, especially if they want mortgage insurance to come off later. FHA is often more forgiving for lower scores or higher debt ratios.
| Feature | Conventional | FHA |
|---|---|---|
| Minimum down | 3% (first-time or income-eligible) | 3.5% (580+) |
| Credit | About 620+ | 580 for 3.5% down |
| Upfront fee | None | 1.75% upfront MIP |
| Mortgage insurance | PMI below 20% down; removable | Annual MIP; life of loan with <10% down |
| 2026 limit in TN | $832,750–$1,029,250 | $541,287–$1,029,250 |
| Property use | Primary, second home, investment | Primary residence only |
Sources: Fannie Mae Selling Guide; HUD Mortgagee Letter 2023-05; FHFA and HUD 2026 limits. Comparative costs depend on rate, mortgage insurance, loan amount, lender pricing and how long you keep the loan. Program terms are subject to agency and lender guidelines and may change.
What does a conventional loan look like on a $350,000 home in Robertson County?
| Down payment | Cash down | Loan amount | PMI? |
|---|---|---|---|
| 3% (first-time buyer) | $10,500 | $339,500 | Yes, until 80% of original value |
| 5% | $17,500 | $332,500 | Yes, until 80% of original value |
| 10% | $35,000 | $315,000 | Yes, until 80% of original value |
| 20% | $70,000 | $280,000 | No |
Illustrative example only. Actual interest rates and APRs vary based on loan program, borrower qualifications, property, market conditions and other factors. Closing costs, prepaid taxes and insurance are not included. Program terms are subject to Fannie Mae, Freddie Mac and lender guidelines and may change.
To try your own numbers, including the property tax for a specific Tennessee address, use the Tennessee mortgage calculator.
What are the catches with a conventional loan?
- Credit score drives pricing and PMI cost more than on FHA, so lower scores can cost more.
- 3% down is limited to first-time buyers or income-eligible programs on a 1-unit primary home.
- Seller contributions are capped at 3% with less than 10% down, lower than FHA’s 6%.
- Waiting periods after bankruptcy or foreclosure are longer than FHA’s, commonly four and seven years.
Conventional loan FAQ
What is the difference between a conventional and a conforming loan?
A conventional loan is any mortgage not backed by FHA, VA or USDA. A conforming loan is a conventional loan that meets Fannie Mae and Freddie Mac rules, including the loan limit: $832,750 in most of Tennessee for 2026. Conventional loans above that limit are jumbo loans.
Do you need 20% down for a conventional loan?
No. First-time buyers can put down 3% and repeat buyers 5% on a 1-unit primary home. Putting 20% down avoids private mortgage insurance; with less, you pay PMI until the balance reaches 80% of the original value. Program terms are subject to Fannie Mae, Freddie Mac and lender guidelines.
Can you use a conventional loan for a rental property?
Yes. Conventional loans can finance investment properties, usually with 15% to 25% down depending on the number of units, plus cash reserves. Investors who want to qualify on the property’s rent rather than personal income can look at a DSCR loan. Terms are subject to agency and lender guidelines.
What is HomeReady or Home Possible?
They are Fannie Mae’s and Freddie Mac’s low-down-payment conventional programs for borrowers with income at or below 80% of the area median. Both allow 3% down and offer reduced mortgage insurance coverage. First-time buyers are not required, but homebuyer education may be. Program terms are subject to agency and lender guidelines.
Can you switch from FHA to conventional later?
Yes, by refinancing. Many FHA borrowers refinance into a conventional loan once they reach enough equity, often to remove FHA mortgage insurance. It depends on qualifying again at the time, including credit, income and an appraisal, and refinancing carries closing costs.
Where these figures come from
| Figure | Source | As of |
|---|---|---|
| 2026 conforming limits | FHFA, 2026 conforming loan limit values | Calendar year 2026 |
| Seller contribution limits | Fannie Mae Selling Guide B3-4.1-02 | Retrieved Oct 26, 2026 |
| Debt-to-income ratios | Fannie Mae Selling Guide B3-6-02 | Retrieved Oct 26, 2026 |
| Home Possible | Freddie Mac, Home Possible | Retrieved Oct 26, 2026 |
| PMI cancellation | CFPB, Ask CFPB | Retrieved Oct 26, 2026 |
| Conventional loan basics | CFPB, conventional loans | Retrieved Oct 26, 2026 |
Related guides
- FHA, VA, USDA and jumbo loan pages.
- How much down payment do you need?
- DSCR loans for investment property.
- Davidson County mortgage guide with 2026 limits.
- Living in or moving to the Nashville area? Start with my Nashville mortgage broker page.
- About Christopher Armantrout, the licensed originator who wrote this page.
Call me at (615) 671-9178. I’ll compare conventional and FHA side by side for your credit score and down payment, including how long the mortgage insurance would last.
If it’s after hours, grab a time on my calendar, or start an application and I’ll review it and reach out with a plan.
Valor Mortgage, LLC · Christopher Armantrout, Mortgage Loan Originator, NMLS #1210804 · Valor Mortgage, LLC is powered by Encore Lending Group, LLC, NMLS #1249911 · Licensed in Tennessee · Equal Housing Opportunity
724 S Main St, Springfield, TN 37172 · (615) 671-9178 · christopher@valor.mortgage · NMLS Consumer Access
The dollar figures on this page are illustrative examples for general information only and are not an offer, a rate quote, or a commitment to lend. Actual interest rates and APRs vary based on loan program, borrower qualifications, property, market conditions and other factors. Program fees, limits and terms are set by the agencies named above and change without notice; all loans are subject to credit approval, income verification and property appraisal. Not all applicants will qualify.