Memphis, TN Mortgage Rates

Living in Memphis, TN

Are you looking to combine a low cost of living with a booming art scene, four seasons of great weather and world renowned barbecue? If so, Memphis may be a city for you to consider. While incomes and jobs are growing in Elvis’s hometown, median home prices are well below the national average.

As of June 2019, the median home sales price in Memphis was $205,000, compared with $254,000 across Tennessee as a whole, according to Tennessee REALTORS. Although prices in Memphis are lower than the state average, it’s a seller’s market. Prices in Memphis are steadily climbing, with the median home price going up 4.6% year over year as of June, according to the Memphis Area Association of Realtors. With tight inventory, buyers may have less room for price negotiation.

Although the housing market in Memphis is tight, the overall economy in the city is still feeling the effects of the 2008-2009 recession. In 2018, 40.9% of Memphis residents lived in distressed zip codes, according to a report from the Economic Innovation Group. This makes Memphis the third-most distressed metropolitan area in the United States. Still, homes in Memphis are snapped up quickly. More than half of all houses that sold in Memphis during May 2019 were on the market for 30 days or less. Buyers face especially limited inventory when buying homes priced between $100,000 and $200,000.

The rules and costs of buying a home in Memphis

When it comes to buying a home in Memphis, buyers (and sellers) need to understand and follow Tennessee’s laws. These are a few of the most important laws for prospective homeowners to know about buying and owning in Memphis.

Home seller and buyer laws

Real estate property disclosures. In Tennessee, home sellers generally have to disclose any “material defects” or major problems when listing a home unless a buyer opts to purchase the home “as is.”

Despite the seller’s disclosures, buyers should be sure to pay an independent inspector before buying a home. A thorough inspection may reveal problems the seller didn’t know about.

How does foreclosure happen? When a homeowner stops paying the mortgage, a lender can begin the foreclosure process. In Tennessee, foreclosure is typically considered to be a non-judicial process. That means lenders have the power to sell a property on which the mortgage isn’t being paid as long as they have given notification. In Tennessee, lenders may also choose to pursue a judicial foreclosure in which the lender works through the courts.

How are assets divided in a divorce? If you’re married and plan to buy a home in Tennessee, it’s important to understand the rules related to divorce. Tennessee is an equitable distribution state. That means all assets acquired during a marriage, including equity in a home, is divided in what the court deems to be an equitable manner between both spouses in the event of a divorce. However, if you buy a house before marriage, it may be considered separate property in the event of a divorce.

No closing attorney required. Some states require an attorney to be present when buyers close on a home. In Tennessee, buyers may work with an escrow agent or title officer to handle the closing. However, that doesn’t mean working with a real estate attorney is a bad idea. An attorney can make sure the entire transaction takes place safely and legally.

Taxes

Real estate transfer taxes: When closing on a property in Tennessee, buyers have to pay a real estate recording tax. The tax is $0.37 for every $100 in real estate transferred. That means when you buy a $200,000 house, you can expect to pay $740.

Property tax exemptions: If you’re a Memphis resident, and you cannot afford property taxes on your home, you may have some opportunity for relief. Tennessee provides for the following groups: low-income eldery and disabled people, disabled military veterans and select surviving spouses of military veterans. Depending on the value of your home, you may still have to pay some of your property taxes each year.

You can find more information on property tax exemptions in Memphis here.

Typical property taxes: In Shelby County (where Memphis is the county seat), the property tax rate is $4.05 for every $100 in “assessed” property value. For residential real estate, the assessed value is just 25% of the appraised value. That means a $200,000 home has just a $50,000 assessed value. The tax rate on that home would be $2,025 per year.

Conforming loan limits

In Memphis, the conforming loan limit for a single-family house is $484,350. That means, if you want to take out a conventional mortgage (the most common mortgage in the U.S.), your loan must be for less than $484,350. Each year, the Federal Housing Finance Agency (FHFA) sets the conforming loan limits, which dictate the maximum amount that will be backed by government-sponsored enterprises Fannie Mae and Freddie Mac. In some pricier areas of the country, the conforming limits can be higher. If you wish to buy a more expensive home in Memphis, you may be in the market for a jumbo mortgage.

Programs for homebuyers in Memphis

If you think homeownership in Memphis is out of reach, don’t count yourself out just yet. Between a citywide down payment assistance program and generous financing options from the state, there is help available. These are a few homebuying programs offered in Memphis.

Memphis Down Payment Assistance (DPA) Program

Memphis offers several down payment assistance programs through which qualified applicants can receive a grant of up to $10,000 (or 10% of the home purchase price) to buy a house within Memphis city limits.

Who qualifies?

Everyone receiving down payment assistance from Memphis must meet these requirements:

  • Purchase a house within Memphis city limits
  • Not exceed the maximum sales price of $275,665

In addition to the general requirements, buyers in Memphis must meet other eligibility criteria. The eligibility criteria vary based on the subprogram:

Citywide DPA, Memphis Housing Authority DPA and Memphis Housing Connect DPA:

  • Borrower must be a first-time homebuyer
  • Borrower must earn less than 80% of area median income

Homebuyer Program Incentive Police

  • Borrower must be a uniformed officer in the City of Memphis Police Department for one year or more

Homebuyer Program Incentive Firemen

  • Borrower must be a front-line firefighter with City of Memphis Fire Department for one year or more

Learn more

Great Choice Plus Home Loan

In Tennessee, borrowers can take out a 30-year, fixed-rate mortgage through the Tennessee Housing Development Agency. In conjunction with this mortgage, you can take out a second mortgage called a Great Choice Plus Home Loan. Through this program, you can borrow up to 5% of the sales price, and the loan can be used to cover a down payment and closing costs. This loan has no monthly payments and no interest charges. You pay back the loan when you move, sell your home or refinance it.

Who qualifies?

Learn more

Hardest Hit Fund-Down Payment Assistance

Certain zip codes, including several in the Memphis area, were hit hard by the 2008-2009 recession. Buyers in these areas may qualify for an extra form of down payment assistance. The Hardest Hit Fund-Down Payment Assistance program (HHF-DPA) offers a forgivable second mortgage worth up to $15,000. The second mortgage has no interest and no monthly payments and is forgiven over 10 years.

Who qualifies?

  • Use a Great Choice Home Loan
  • Purchase a property in select zip codes
  • Complete a homebuyers education course
  • Purchase an existing property (no new construction allowed)

Learn more

Take Credit: mortgage credit certificate

The Tennessee Take Credit program allows homebuyers to claim half of all the mortgage interest they paid as a federal tax credit, up to $2,000. This program could reduce your tax bill substantially at the end of the year.

Who qualifies?

  • Occupy the property as a primary residence
  • Purchase a property that meets price limits ($250,000 in Shelby County)
  • Earn less than income limits ($66,584 for one to two people or $76,572 for three or more people)

Learn more

Rate shopping tips

In a hot market like Memphis, getting preapproved for a mortgage can help you make an offer on a home with confidence. When you’re shopping, these are a few tips to consider.

Contact at least three lenders on the same day

When it comes to getting your best interest rate, the key is comparing rates from multiple lenders. To increase your chances of finding the right lender, be sure to request quotes (called loan estimates) from at least three lenders so you can make an informed comparison. As interest rates are volatile, contacting the lenders on the same day is key, as that is the only way you can make a true comparison. A rate you are quoted one day may no longer be available the next.

Give each lender the same information

When you get rates from lenders, you want to compare apples to apples. By giving all lenders the same information about your finances and the home you hope to purchase, you will help to ensure you’ll get the most accurate information possible about the rate for which you qualify. Be sure to tell the lenders that you’re rate shopping with others, so they may be more inclined to offer you the best possible rates for your situation.

Add up all the lender fees to confirm costs

Once you’ve received loan estimates from all three lenders, you can look at the total loan costs on page 2 of the estimate. You can also compare the annual percentage rate (APR) on page 3 of the estimate to see which loan is the least expensive overall.

When you’re reviewing each of the loan estimates, be sure you’re comparing the same type of loan (FHA, conventional, etc.) and the loan terms are the same (15- or 30-year and fixed- or adjustable-rate).

Know when to lock in a rate

It may be tempting to lock in the lowest interest rate right away, but don’t lock it in without thinking through your options. Some lenders will match written estimates, so don’t be afraid to negotiate before you make your final decision. Locking in the rate will help ensure your rate won’t rise along with the market before the homebuying process is over. In most cases, you’ll want to lock in a rate either before you make an offer on a house or shortly after. If rates go down after you’ve locked yours in, you may be able to get a lower rate through what is known as a float-down option.

Be sure to ask about down payment assistance and other programs

Memphis and the state of Tennessee offer down payment assistance programs, tax credits and other beneficial options. Be sure to ask your lender about these programs while you’re shopping for rates.

The information in this article is accurate as of the date of publishing.