How Do You Finance a Home With 0% Down in Tennessee?

By Christopher Armantrout, Licensed Mortgage Loan Originator · NMLS #1210804Published May 15, 2026 · Updated September 15, 2026Reviewed by Christopher Armantrout, NMLS #1210804 · Figures accurate as of September 2026

What are the exceptions and catches?

• The lender-funded 0% down conventional program this page used to describe is no longer offered. As of September 2026 there is no broker-channel program pairing a conventional first mortgage with a lender-paid second lien that covers the down payment. See the note below.
• The appraisal has to hit the price. With no down payment there is no cushion; if the home appraises low, the gap is cash, a renegotiation, or a dead contract.
• The financed program fee can make the initial loan balance slightly higher than the purchase price. On a first-use VA loan with the funding fee financed, the note is 102.15% of the price on day one. That only matters if you sell early.
• Primary residence only. Every 100% structure here requires you to move in.
• Closing costs are not part of “0% down.” On a $350,000 Tennessee purchase they are typically several thousand dollars before credits; the full list is here.
• Everything on this page is current as of September 2026 and is set by the agencies and lenders named; it changes without notice.

How is a 100% VA or USDA loan actually structured?

The mechanics are the same for every VA and USDA purchase in Tennessee, so here they are on one home: $350,000, Robertson County, first-use VA on one line and USDA on the other.

VA funding fee per VA.gov schedule effective April 7, 2023 (waived for veterans receiving VA disability compensation; 3.3% on subsequent use). USDA fees per the FY2026 fee structure for the Single Family Housing Guaranteed Loan Program. Illustrative example only. Actual interest rates and APRs vary based on loan program, borrower qualifications, property, market conditions and other factors.

Three things follow from the table. The fee is added to the loan, not deducted from it, which is why the loan-to-value is above 100%; VA and USDA both allow that. The loan amount the appraisal has to support is the $350,000 price, not the $357,525 note. And because neither program has a down payment, your pre-approval should be sized on the fee-inclusive note, not the price, or the debt-to-income ratio will be a little off when the file hits underwriting.

Who can use each: VA requires qualifying military service (service thresholds here); USDA requires an eligible address and household income under the county cap (county-by-county eligibility and 2026 income limits). If you fit either, this is the simplest 0% down structure: one loan, one payment, no second lien on the house.

How does a first-mortgage-plus-second-mortgage structure work?

If you are not VA- or USDA-eligible, 0% down means two loans recorded against the house at closing. The first mortgage carries most of the price; the second supplies the down payment the first requires.

FHA and conventional loans may be available with low down-payment options. Eligibility, pricing, mortgage insurance and assistance requirements vary by borrower and program. The down payment the first mortgage requires can come from a family gift or from a down-payment-assistance second mortgage; in Tennessee that second is usually THDA’s Great Choice Plus (with an FHA, VA or USDA first mortgage) or HFA Advantage Plus (with THDA’s Freddie Mac HFA Advantage conventional first mortgage, which has no first-time-buyer requirement). Whether the assistance covers the entire required down payment or only part of it depends on the assistance option, the purchase price and the first-mortgage program; we work that out for your specific price before you write an offer.

How the THDA second behaves. Per THDA, the deferred option is a second mortgage with no monthly payment that is forgiven at the end of THDA’s deferral period; sell or refinance before then and the full amount is due. The amortizing option is a second mortgage repaid monthly alongside the first, so it has its own payment from month one. Either way it is a recorded lien: when you refinance the first mortgage later, the second has to be paid off or subordinated, which is a THDA approval step, not an automatic one. Requirements are a 640 score for everyone on the loan, homebuyer education, primary residence, and THDA’s county income and purchase-price limits (Robertson County: $500,000 price, $139,320 income for 1–2 persons and $162,540 for 3 or more, effective August 1, 2026). Current assistance amounts, deferral periods and repayment terms are published by THDA at the link above. Program terms and eligibility are subject to THDA and lender guidelines and may change.

What the two structures cost each month. FHA charges an upfront mortgage insurance premium plus an annual premium for the life of the loan (HUD Mortgagee Letter 2023-05 sets the current rates). A conventional low-down-payment loan charges private mortgage insurance priced by your credit score, which you can cancel once you reach 20% equity. Depending on credit profile and lender pricing, conventional PMI may be more competitive for some higher-score borrowers, while FHA may be more competitive for some borrowers with lower scores. Which one actually costs less depends on your rate, the PMI or MIP quote, the loan amount, lender pricing and how long you keep the loan, so we run both for your file.

Is the 0% down conventional program with a lender-paid second lien still available?

No. Until September 2026 this page described a wholesale-lender program, offered through mortgage brokers, that paired a conventional first mortgage with a lender-funded second lien covering the down payment, with no monthly payment, due when the first mortgage was refinanced or paid off. That program has been withdrawn and we no longer offer it.

Lender-funded 0% down conventional programs come and go with the lender’s appetite; several have launched and closed since 2020. If a similar one becomes available again we will update this page with the program name, the lender, the eligibility rule and the repayment trigger. Until then, the conventional low-down-payment route works with THDA’s HFA Advantage Plus assistance, a family gift, or seller-paid closing costs, and the VA and USDA routes above remain true 100% financing.

Where does the money for closing costs come from if you have none?

Zero down removes the down payment and nothing else. On a $350,000 Tennessee purchase the buyer’s side of the closing statement still carries lender and title fees, the realty transfer tax ($0.37 per $100 of price, $1,295 here, customarily paid by the buyer), the mortgage recordation tax ($0.115 per $100 of loan above $2,000, about $409 on the VA note), the first year of homeowners insurance, escrow deposits and prepaid interest. Here is where that money comes from when the buyer does not have it. Seller-paid closing costs and interested-party contributions vary by loan type and transaction. The limits below are general examples and do not mean every type of cost or concession is permitted up to that percentage.

In practice, the Tennessee contract that makes a 0% down purchase work reads something like “seller to pay up to $X of buyer’s closing costs and prepaids,” with X set from our estimate before the offer is written, not negotiated after inspection. Ask for it in the offer; it is far harder to add later.

What are the steps to a 0% down purchase, in order?

1. Clear the eligibility layer first. VA: we pull your Certificate of Eligibility from your DD-214 or statement of service. USDA: the exact address on USDA’s map and your household’s income against the county cap. THDA: county income and price limits, and the homebuyer-education class, which takes a few hours online and is required before closing.
2. Credit pull and a real pre-approval. Sized on the fee-inclusive note, with the program fee, taxes for the actual city (inside or outside city limits changes the escrow) and a real insurance quote. A pre-approval that ignores these is the one that falls apart in underwriting.
3. Write the offer with the money built in. Seller-paid closing costs up to the program cap, an appraisal contingency, and on VA the mandatory escape clause that lets you walk if the appraisal comes in low.
4. Appraisal and property conditions. VA has minimum property requirements (safe, sound, sanitary); USDA and FHA require well and septic testing on rural parcels and will not lend on income-producing acreage. Order these early; a failed water test late in the contract can jeopardize a rural 0% down closing.
5. Underwriting. Income, assets (including the gift trail and the seller-credit language), the second-mortgage approval if THDA is involved, and the Certificate of Eligibility or USDA conditional commitment.
6. Closing. Your cash to close depends on what was negotiated. With sufficient seller credits, lender credits, assistance and eligible financed costs, some borrowers may have very little cash required at closing. Without them, you pay closing costs and prepaids at closing, typically several thousand dollars on a $350,000 purchase, even with no down payment.

Recent examples in Middle Tennessee have commonly been approximately 30 to 35 days from contract for VA and FHA, and 35 to 45 for USDA, because the file also goes to USDA Rural Development for a conditional commitment after our underwriting. Underwriting and agency processing times are not guaranteed.

What does 0% down cost compared with putting money down?

The honest comparison is not 0% versus 20%; almost nobody choosing between them has 20%. It is 0% versus a modest down payment. On the same $350,000 first-use VA purchase:

Funding fee tiers per VA.gov: 2.15% under 5% down, 1.5% at 5% to 9.99%, 1.25% at 10% or more (first use). Illustrative example only. Actual interest rates and APRs vary based on loan program, borrower qualifications, property, market conditions and other factors. No payment is shown because it depends on the rate you qualify for.

In this illustration, putting 5% down reduces the amount borrowed (by $20,037: the $17,500 itself plus the $2,537 it shaved off the funding fee) and the VA funding-fee percentage, but requires $17,500 more upfront. Whether that tradeoff makes sense depends on your cash reserves and how long you expect to keep the loan.

Is 0% down a bad idea?

Not by itself. A longer expected ownership period can make a 0%-down strategy easier to justify because you have more time to build equity and recover transaction costs; stable income and cash in reserve after closing matter for the same reason. For eligible borrowers, a 0% down VA or USDA loan can be one of the lowest-upfront-cost ways to purchase a home. Whether waiting to save a larger down payment makes sense depends on your expected timeline, cash reserves, market conditions and the cost of the available loan options.

It is a poor fit when you expect to move within two or three years. The loan starts slightly above the price, principal reduction is slow in the early years, and the cost of selling in Tennessee (agent commissions, which are negotiable, plus title and closing fees) can exceed the equity you have built. That is the scenario where a 0% down buyer writes a check to sell. If a move is realistic in that window, we talk about it before you buy, not after.

On a conventional loan the low down payment does have a price: private mortgage insurance and loan-level pricing adjustments at high loan-to-value. VA and USDA do not charge mortgage insurance tied to the down payment; their cost is the funding fee or guarantee fee. Those program fees are not based on whether you are a first-time buyer; the applicable fee depends on the program and borrower circumstances. Your interest rate on any of these programs depends on your qualifications and the market on the day you lock.

Where these figures come from

Last reviewed September 15, 2026 by Christopher Armantrout, NMLS #1210804. The lender-funded 0% down conventional program previously described on this page was confirmed withdrawn on that date. We re-check every figure when the underlying fee schedules and limits are revised.

Related guides

• Can you buy a home with no down payment in Tennessee?: who qualifies for each program, 2026 USDA income limits, and a five-year program-cost comparison.
• Robertson County mortgage guide: the county this example uses, with town-by-town USDA eligibility and the city-limits property tax stack that changes your escrow.
• VA loans, USDA loans, FHA loans and down payment assistance program pages.
• Closing costs vs. down payments and the step-by-step guide from pre-approval to closing.
• About Christopher Armantrout, the licensed originator who wrote and reviews this page.