Tennessee Mortgage Rates by Credit Score: How Your Score Affects Home Loan Rates

Tennessee Mortgage Rates by Credit Score: Complete Guide

Credit score is the single largest factor determining your Tennessee mortgage rate. Understanding rate tiers—and how small score improvements translate to lower rates—helps Tennessee borrowers save $50-200/month on typical home purchases.

Tennessee Mortgage Rate Tiers (Early 2026)

Current Tennessee mortgage rates by credit score and loan type:

Conventional Mortgages (3-20% Down)

Credit Score	Rate Range	Monthly P&I on $350K	Total Interest (30 Years)
800+	6.25-6.35%	$2,154-$2,172	$425,400-$431,920
760-799	6.35-6.50%	$2,172-$2,206	$431,920-$444,160
740-759	6.50-6.60%	$2,206-$2,223	$444,160-$450,280
720-739	6.60-6.75%	$2,223-$2,257	$450,280-$462,520
700-719	6.75-6.90%	$2,257-$2,291	$462,520-$474,760
680-699	6.90-7.10%	$2,291-$2,333	$474,760-$489,880
660-679	7.10-7.25%	$2,333-$2,367	$489,880-$502,120
640-659	7.25-7.50%	$2,367-$2,418	$502,120-$520,480
620-639	7.50-7.75%	$2,418-$2,469	$520,480-$538,840

Key insight: 740 vs 680 credit = 0.50% rate difference = $85/month = $30,600 over 30 years

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FHA Mortgages (3.5% Down, 580+ Credit)

Credit Score	Rate Range	Monthly P&I + MI on $350K	Total Cost (30 Years)
740+	6.50-6.65%	$2,533-$2,565	$561,880-$573,400
700-739	6.65-6.80%	$2,565-$2,597	$573,400-$584,920
680-699	6.80-6.95%	$2,597-$2,630	$584,920-$596,800
660-679	6.95-7.15%	$2,630-$2,671	$596,800-$611,560
640-659	7.15-7.35%	$2,671-$2,713	$611,560-$626,680
620-639	7.35-7.55%	$2,713-$2,754	$626,680-$641,440
600-619	7.55-7.75%	$2,754-$2,796	$641,440-$656,560
580-599	7.75-8.00%	$2,796-$2,846	$656,560-$674,560

Includes FHA mortgage insurance: 0.55% annual MI + 1.75% upfront MI

Key insight: FHA accepts 580+ credit but rates 7.75-8.00% at that tier. Improving to 680+ saves 0.85-1.20% = $180-250/month.

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VA Mortgages (0% Down, Veterans Only)

Credit Score	Rate Range	Monthly P&I on $350K	Total Interest (30 Years)
740+	6.00-6.15%	$2,098-$2,124	$405,280-$414,640
700-739	6.15-6.30%	$2,124-$2,150	$414,640-$424,000
680-699	6.30-6.45%	$2,150-$2,176	$424,000-$433,360
660-679	6.45-6.60%	$2,176-$2,202	$433,360-$442,720
640-659	6.60-6.75%	$2,202-$2,228	$442,720-$452,080
620-639	6.75-6.90%	$2,228-$2,254	$452,080-$461,440

No mortgage insurance required on VA loans regardless of credit score

Key insight: VA loans offer best rates vs conventional/FHA at same credit tier. 740+ credit VA loan = ~6.00-6.15% vs conventional 6.25-6.35%.

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How Credit Score Affects Tennessee Mortgage Rates

Rate Adjustment Pricing (LLPAs - Loan-Level Price Adjustments)

Lenders use credit score tiers to apply rate adjustments:

• 800+ credit: No adjustment (best pricing)
• 760-799: +0.125% adjustment
• 740-759: +0.25% adjustment
• 720-739: +0.375% adjustment
• 700-719: +0.50% adjustment
• 680-699: +0.75% adjustment
• 660-679: +1.00% adjustment
• 640-659: +1.25% adjustment
• 620-639: +1.50% adjustment

Example: Nashville Conventional Purchase

Base rate (800+ credit): 6.25%

Credit score adjustments:

• 760 credit: 6.25% + 0.125% = 6.375%
• 740 credit: 6.25% + 0.25% = 6.50%
• 720 credit: 6.25% + 0.375% = 6.625%
• 700 credit: 6.25% + 0.50% = 6.75%
• 680 credit: 6.25% + 0.75% = 7.00%
• 660 credit: 6.25% + 1.00% = 7.25%
• 640 credit: 6.25% + 1.25% = 7.50%
• 620 credit: 6.25% + 1.50% = 7.75%

Payment impact on $350K loan:

• 800 credit (6.25%): $2,154/month
• 740 credit (6.50%): $2,206/month (+$52)
• 680 credit (7.00%): $2,325/month (+$171 vs 800 credit)
• 620 credit (7.75%): $2,469/month (+$315 vs 800 credit)

30-year cost difference (800 vs 620 credit): $113,400

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Tennessee Credit Score Improvement Strategies

Strategy 1: Pay Down Credit Card Balances (Fastest Impact)

Timeline: 30-60 days Potential improvement: 20-50 points Effort: Moderate

How utilization affects score:

Credit utilization = Total credit card balances / Total credit limits

• 80%+ utilization: Severely damages score
• 50-79% utilization: Moderate damage (-30 to -60 points vs optimal)
• 30-49% utilization: Minor damage (-10 to -30 points vs optimal)
• 10-29% utilization: Good (minor improvement possible)
• <10% utilization: Optimal (best scores)

Tennessee example: Memphis borrower improving utilization

Before:

• Card 1: $8,000 balance / $10,000 limit = 80%
• Card 2: $4,500 balance / $6,000 limit = 75%
• Total: $12,500 / $16,000 = 78% utilization
• Credit score: 665

Action:

• Pay Card 1 down to $2,000 (20% utilization)
• Pay Card 2 down to $1,200 (20% utilization)
• Total: $3,200 / $16,000 = 20% utilization

Result:

• Credit score: 665 → 705 (+40 points)
• Rate improvement: 7.10% → 6.75% (0.35% better)
• Monthly savings on $350K: $73/month
• 30-year savings: $26,280

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Strategy 2: On-Time Payments (Most Important Long-Term)

Timeline: 6-12 months Potential improvement: 30-80 points Effort: Low (automatic bill pay)

Payment history = 35% of credit score

Late payment impact:

Late Payment	Score Impact	Recovery Timeline
30 days late	-50 to -100 points	12-18 months
60 days late	-70 to -120 points	18-24 months
90+ days late	-90 to -150 points	24-36 months

Recovery strategy after late payment:

1. Bring account current immediately
2. Set up automatic bill pay for all accounts
3. Make 6 consecutive on-time payments (score begins recovery)
4. Make 12 consecutive on-time payments (significant recovery)
5. Make 24 consecutive on-time payments (late payment fades from impact)

Knoxville example: Late payment recovery

Timeline:

• Month 0: Late payment made (score drops 650 → 575)
• Month 6: Six on-time payments (score recovers to 605)
• Month 12: Twelve on-time payments (score reaches 640)
• Month 18: Eighteen on-time payments (score reaches 670)
• Month 24: Twenty-four on-time payments (score reaches 695)

Rate impact:

• At 575 credit: Likely declined for conventional; FHA 8.00%+
• At 640 credit: Conventional 7.50%; FHA 7.35%
• At 695 credit: Conventional 6.90%; FHA 6.80%

Improvement from Month 12 to Month 24: 0.60% better rate = $125/month savings

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Strategy 3: Dispute Credit Report Errors

Timeline: 30-90 days Potential improvement: 10-80 points (if errors found) Effort: Low

Common credit report errors:

• Incorrect balances (shows higher than actual)
• Accounts not yours (identity error)
• Paid collections still showing unpaid
• Duplicate accounts (same debt reported twice)
• Closed accounts showing open
• Late payments incorrectly reported

Dispute process:

1. Get free credit reports (AnnualCreditReport.com)
2. Review all three bureaus (Equifax, Experian, TransUnion)
3. Identify errors and document proof
4. File dispute online with each bureau
5. Bureau investigates (30 days maximum)
6. Error removed or corrected
7. Score updates within 30-60 days

Chattanooga example: Collection account error

Issue: Medical collection ($2,500) showing on report; already paid 18 months ago

Action:

• File dispute with proof of payment
• Bureau removes collection from report

Result:

• Credit score: 642 → 685 (+43 points)
• Rate improvement: 7.25% → 6.90% (0.35% better)
• Monthly savings on $275K: $54/month
• 30-year savings: $19,440

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Strategy 4: Authorized User Strategy

Timeline: 1-3 months Potential improvement: 10-40 points Effort: Low (requires trusted relationship)

How it works:

Someone with excellent credit (740+) adds you as authorized user on their oldest, highest-limit credit card. That account’s positive history appears on your credit report.

Requirements:

• Trusted relationship (parent, spouse, family member)
• Their account must have:
  • Long history (5+ years ideal)
  • Low utilization (<10%)
  • Perfect payment history
  • High credit limit

Nashville example: Authorized user addition

Before:

• Credit score: 668
• Oldest account: 3 years
• Average account age: 2 years
• Total available credit: $15,000

Action:

• Parent adds borrower as authorized user on 15-year-old card with $25,000 limit and 5% utilization

Result:

• Credit score: 668 → 695 (+27 points)
• Average account age increases significantly
• Total available credit: $40,000 (utilization drops)
• Rate improvement: 7.00% → 6.75% (0.25% better)

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Tennessee Credit Score Thresholds to Target

Critical score thresholds for Tennessee mortgages:

740+ (Target for Best Rates)

• Best conventional rates
• Best FHA rates
• Best VA rates
• Lowest down payment requirements
• Fast approval process
• Maximum loan-to-value (LTV) allowances

680-739 (Good Rates)

• Competitive conventional rates (+0.25-0.50% vs 740+)
• Good FHA rates
• Strong VA rates
• Standard approval process
• Good LTV allowances

620-679 (Moderate Rates)

• Conventional available but higher rates (+0.50-1.00% vs 740+)
• FHA available with moderate rates
• VA available with competitive rates
• May require higher down payment for best pricing
• Approval conditions more likely

<620 (Limited Options)

• Conventional largely unavailable (620 minimum most lenders)
• FHA available with 10% down (580-619 requires 10% vs 3.5%)
• FHA with 3.5% down only if 620+
• VA available but higher rates
• Manual underwriting likely
• Approval challenging

Key insight: Improve score to 680+ for strong conventional rates; 740+ for best pricing across all programs.

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Tennessee Mortgage Rate Lock Timing

When to lock rate:

Lock immediately if:

• Pre-approved and making offer (lock certainty)
• Rates trending upward (market risk)
• Comfortable with current rate vs market
• Closing within 30-45 days (standard lock period)

Float rate if:

• Rates trending downward (potential improvement)
• Closing 60+ days away (lock costs money for extended periods)
• Willing to accept rate risk

Lock period costs:

Lock Period	Rate Cost
30 days	No cost (standard)
45 days	No cost (standard)
60 days	+0.125% typically
90 days	+0.25% typically
120 days	+0.375-0.50% typically

Example: Franklin new construction (90-day close)

Option A: Lock 90 days

• Rate: 6.50% + 0.25% = 6.75%
• Monthly P&I on $400K: $2,594
• Certainty: Yes

Option B: Float, lock at 45 days

• Rate at 45 days: Unknown (could be 6.25-7.00%)
• Risk: Rate could rise or fall
• Potential savings if rates fall: 0.25-0.50%

Best strategy: If rates rising, lock early despite cost. If rates flat/falling, float and lock at 30-45 days.

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Tennessee Credit Score & Rate Comparison Checklist

Before applying for Tennessee mortgage:

Check Credit (30-90 days before applying):

• Get free credit reports (AnnualCreditReport.com)
• Review all three bureaus for accuracy
• Check credit score (MiddleCreditScore.com)
• Identify improvement opportunities

Improve Credit (if below 740):

• Pay down high-utilization credit cards (<30% ideal)
• Set up automatic bill pay (avoid late payments)
• Dispute any credit report errors
• Consider authorized user strategy
• Avoid new credit applications

Rate Shopping (when ready to apply):

• Get 3-5 rate quotes from different Tennessee lenders
• Compare national lenders, regional banks, credit unions
• Check THDA program eligibility (potentially better rates)
• Request quotes within 14-day period (single credit inquiry)
• Compare APR (true cost including fees), not just rate
• Lock rate when comfortable with pricing

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Real Tennessee Rate Comparison Examples

Example 1: Nashville Purchase, $425,000 Home

Borrower profile:

• Credit score: 755
• Down payment: 20% ($85,000)
• Loan amount: $340,000
• Loan type: Conventional

Rate quotes received:

• Lender A (national): 6.375% (APR 6.512%)
• Lender B (regional bank): 6.50% (APR 6.625%)
• Lender C (credit union): 6.25% (APR 6.401%)
• Lender D (broker): 6.375% (APR 6.489%)

Best option: Lender C (credit union) at 6.25%

Monthly payment comparison:

• Lender C (6.25%): $2,093/month
• Lender A (6.375%): $2,119/month (+$26)
• Lender B (6.50%): $2,144/month (+$51)

30-year savings (Lender C vs B): $18,360

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Example 2: Memphis First-Time Buyer, $250,000 Home

Borrower profile:

• Credit score: 685
• Down payment: 3.5% ($8,750) - FHA
• Loan amount: $241,250
• Loan type: FHA

Rate quotes received:

• Lender A: 6.875% (APR 7.85%)
• Lender B: 6.75% (APR 7.73%)
• Lender C (THDA): 6.50% (APR 7.51%)

Best option: Lender C (THDA) at 6.50%

Monthly payment comparison (P&I + MI):

• THDA (6.50%): $1,762/month
• Lender B (6.75%): $1,802/month (+$40)
• Lender A (6.875%): $1,826/month (+$64)

30-year savings (THDA vs Lender A): $23,040

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Example 3: Knoxville Veteran, $310,000 Home

Borrower profile:

• Credit score: 720
• Down payment: 0% (VA loan)
• Loan amount: $310,000
• Loan type: VA

Rate quotes received:

• Lender A: 6.375% (APR 6.485%)
• Lender B: 6.25% (APR 6.361%)
• Lender C: 6.50% (APR 6.603%)

Best option: Lender B at 6.25%

Monthly payment comparison:

• Lender B (6.25%): $1,909/month
• Lender A (6.375%): $1,933/month (+$24)
• Lender C (6.50%): $1,958/month (+$49)

30-year savings (Lender B vs C): $17,640

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Tennessee Mortgage Rate Summary

Key takeaways:

• Credit score heavily impacts rates: 740+ gets best pricing; each 20-point drop costs ~0.25%
• Rate differences are substantial: 0.50% rate difference = $85/month on $350K loan = $30,600 over 30 years
• Credit improvement strategies work: Utilization reduction, on-time payments, error disputes can improve score 20-80 points in 30-90 days
• Tennessee rates competitive: Track national averages within 0.10-0.25%; Nashville/Memphis highly competitive
• Shop multiple lenders: 3-5 quotes reveal 0.25-0.75% rate differences worth $50-150/month
• THDA offers benefits: State program often provides 0.25-0.50% better rates than conventional for qualified buyers

Tennessee borrowers maximize mortgage value by improving credit to 740+ before applying, comparing 3-5 lenders (national, regional, credit unions, THDA), and locking competitive rates when market conditions favorable.