Nashville FHA Loans: How to Qualify and Buy a home with 3.5% Down
Understand FHA loans | What you qualify for, and the exact steps to get pre-approved—without the pressure.
A Path to Homeownership With An FHA Loan
Why Choose FHA
What is an FHA Loan?
The FHA loan is one of the most widely used mortgage products in America — and for good reason. Backed by the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (HUD), FHA loans are designed to make homeownership accessible to buyers who may not qualify for conventional financing. That means lower credit score requirements, a smaller required down payment, and more flexible underwriting guidelines overall.
It’s important to understand that the FHA does not lend money directly to homebuyers. Instead, it insures loans made by approved private lenders — like Valor Mortgage, LLC. That insurance protects the lender against loss if a borrower defaults, which is what allows lenders to offer more flexible terms than a conventional loan would permit. In exchange, borrowers pay a mortgage insurance premium, which is discussed in detail below. For Tennessee buyers — whether you’re purchasing in Robertson County, the Nashville suburbs, or a rural community — FHA financing is often the most practical path to a first home.Chris was nothing short of amazing. He made purchasing our home as painless as possible, going above and beyond to make sure we understood what was happening during each step of the process.
Benefits of an FHA Loan
FHA loans can make homeownership possible sooner by reducing the upfront cash and credit hurdles that often stop buyers from moving forward.
Low Down Payment
The most cited benefit of FHA financing is the down payment requirement. Borrowers with a credit score of 580 or higher can purchase a home with just 3.5% down. On a $275,000 home — close to the median home price in Robertson County — that’s $9,625 out of pocket for a down payment. Compare that to $55,000 for a conventional 20% down payment, and the FHA advantage becomes immediately clear.
Borrowers with credit scores between 500 and 579 may still be eligible for FHA financing but will be required to put 10% down. FHA does not insure loans for borrowers with scores below 500.
Gift Funds are Fully Permitted
FHA guidelines allow 100% of the required down payment to come from gift funds — meaning a parent, grandparent, employer, or approved nonprofit organization can provide the money on your behalf. The gift must be documented with a letter confirming that no repayment is expected, and the funds must come from an acceptable source. This flexibility is especially valuable when FHA is paired with down payment assistance programs, which are structured as gifts or soft second loans
FHA Financing on 1 to 4 Unit Properties
FHA loans are not limited to single-family homes. Qualified Tennessee buyers can use FHA financing to purchase duplexes, triplexes, and fourplexes — as long as they occupy one unit as their primary residence. This creates an opportunity to generate rental income from the other units to offset your mortgage payment. In Middle Tennessee’s competitive rental market, this strategy can meaningfully reduce your effective housing cost.
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Flexible Credit Requirements
FHA loans are among the most credit-inclusive mortgage products available. While conventional loans typically require a minimum score of 620 to 640, FHA financing is available to borrowers at 580 and above. This is particularly relevant in Tennessee, where many hardworking buyers have experienced past credit setbacks — a medical bill in collections, a period of unemployment, or a prior bankruptcy — and are rebuilding their financial foundation.
It’s worth noting that individual lenders are permitted to set their own minimum score requirements above the FHA floor. Some lenders require a 620 minimum even on FHA loans. At Valor Mortgage, LLC we work to match borrowers with the right loan product and are transparent about what each program requires.
Seller Concessions up to 6%
In a purchase transaction, FHA allows the seller to contribute up to 6% of the home’s purchase price toward the buyer’s closing costs, prepaid expenses, and discount points. Conventional loans cap seller contributions at 3% for buyers putting less than 10% down. This additional 3% can cover a significant portion of closing costs — a real advantage in Tennessee’s current market where closing costs on a $275,000 purchase can easily total $6,000 to $8,000.
Assumable Loan Feature
An often-overlooked benefit of FHA loans is assumability. When you sell your home, a qualified buyer can assume your existing FHA loan — taking over your interest rate and remaining balance instead of getting a new loan at current market rates. In a rising interest rate environment, this can be a compelling selling point that sets your home apart and potentially increases its value in the eyes of future buyers.
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