Buying Your First Home in East Tennessee: The 2026 Landscape

Welcome to East Tennessee. If you are reading this, you are probably drawn here for the same reasons most of us are – the rolling foothills, the Great Smoky Mountains, and the financial freedom that comes with having no state income tax. But let’s be honest: trying to buy your first home here has felt a little like hiking a steep ridge without a map for the last few years.

Prices in hubs like Knoxville and Chattanooga have jumped significantly since 2020, and the days of easily finding a move-in ready starter home for under $200,000 are largely behind us. However, 2026 is painting a slightly different picture than the frantic years prior. We have seen inventory in East Tennessee increase by roughly 30% in early 2026. That means homes are sitting on the market a little longer, absorption rates are approaching a balanced 5 months, and you finally have some negotiating power.

While interest rates are still a major factor in your monthly payment, the region remains more affordable than the national average. The median home price across the broader East Tennessee region sits around $360,000, though if you are looking specifically in the Knoxville metro area, that number is closer to $415,000. The good news is that between state-specific programs like THDA and rural loan options, there are solid paths to bridge the affordability gap.

Step 1: Assessing Your Financial Readiness

Before we start looking at listings in South Knoxville or Hixson, we need to look at your bank account. Buying a house involves more than just swapping a rent check for a mortgage payment. Lenders in Tennessee are going to look at a few specific benchmarks to decide what you can afford.

Credit Score Reality Check You might see generic advice online saying you can get a loan with a 580 score. While that is technically true for some FHA loans, the reality on the ground is different if you want financial assistance. Most conventional lenders prefer a score of 620 or higher. However, if you plan to use the popular Tennessee Housing Development Agency (THDA) down payment assistance programs, the requirement is stricter. You generally need a hard minimum credit score of 640.

Liquid Savings Even with down payment assistance, you cannot buy a house with zero cash in the bank. You need to be prepared for upfront costs that occur before you even get the keys:

• Earnest Money Deposit: This is the “good faith” money you put down when you make an offer to show the seller you are serious. Plan on $1,000 to 1% of the purchase price.
• Inspections: You will likely spend $500 or more on inspections immediately after your offer is accepted.

Debt-to-Income (DTI) Lenders look at how much debt you carry relative to your income. Ideally, they want your total monthly debt payments (including the new mortgage) to be under 43% of your gross monthly income. FHA loans can sometimes stretch this higher, but staying lower gives you more breathing room in your budget.

Step 2: Mortgage Options Popular in East Tennessee

One of the best things about living in this part of the country is the variety of loan types available. Because East Tennessee blends mid-sized cities with vast rural areas, you have access to loan programs that buyers in big cities like Atlanta or Nashville might not.

USDA Rural Development Loans If you take nothing else away from this article, remember USDA loans. This is often the top choice for first-time buyers in our region because it offers 0% down payment. The definition of “rural” is surprisingly broad here. While downtown Knoxville or Chattanooga won’t qualify, many parts of Blount, Sevier, and Washington counties are eligible. If you are willing to live just outside the city limits, this can save you thousands upfront. Income limits do apply – usually around $110,000 or more for a 1-4 person household, but you should verify specific county limits.

FHA Loans If your credit score is in the 580 range or you have higher debt, the FHA loan is a strong backup. It requires a 3.5% down payment. It is a very common product for first-time buyers who might not fit the strict box of a conventional loan.

VA Loans We have a large veteran population in Tennessee, and for good reason. If you have served, the VA loan is arguably the best mortgage product available. It offers 0% down payment and generally has lower interest rates than conventional loans.

Conventional Loans For buyers with strong credit (700+), a conventional loan is often the most straightforward. You can get in with as little as 3% down. This is often the best route if you want to avoid the upfront mortgage insurance premiums attached to FHA or USDA loans.

Step 3: Utilizing THDA and Local Assistance Programs

When you search for “first time home buyer grants,” you are usually looking for the Tennessee Housing Development Agency (THDA). They are the heavy hitters for down payment assistance in our state. Let’s break down how their programs actually work, because the details matter.

Great Choice Home Loan This is the base product. It is a 30-year fixed-rate loan designed for first-time buyers or anyone who hasn’t owned a home in the last three years. To get the down payment help, you have to start with this loan.

Great Choice Plus (The Down Payment Help) This is what everyone wants to know about. There are two distinct options for how you get the cash for your down payment and closing costs:

• Option A (Deferred): This provides $6,000 as a loan with 0% interest and no monthly payments. If you stay in the home for 30 years, the loan is forgiven. If you sell or refinance before then, you pay it back.
• Option B (Amortizing): This allows you to borrow up to 6% of the purchase price. This is a much larger amount of money, but unlike Option A, you have to pay it back. It is set up as a second mortgage with a 15-year term and a matching interest rate.

Homeownership for the Brave This is a special thank you to our military, law enforcement, firefighters, and EMTs. It offers a 0.5% interest rate reduction on the Great Choice mortgage. Over the life of a 30-year loan, that half-percent reduction saves you a significant amount of money.

Local Grants Don’t stop at the state level. If you are looking in Hamilton County, check out Chattanooga Neighborhood Enterprise (CNE). In Knoxville, city-specific grants often pop up, though they are frequently tied to specific redevelopment zones.

Step 4: Choosing Your Market – Knoxville, Chattanooga, or Tri-Cities?

“East Tennessee” isn’t a single market. It is a collection of very different micro-economies. Your budget will stretch very differently depending on which metro area you target.

Knoxville

Knoxville is the economic hub of the region, anchored by the University of Tennessee and major employers. Consequently, it is the most expensive and competitive market. With a median price hovering around $415,000, first-time buyers often look to the outskirts. Areas like Maryville, Lenoir City, or Clinton offer better value while keeping you within commuting distance of Knoxville jobs. To navigate such a fast-moving landscape, keeping an eye on Knoxville housing market trends is essential, and many buyers find that partnering with the best real estate agent in East Tennessee is the key to securing a home before it’s gone.

Chattanooga

Known as the “Gig City” for its high-speed internet, Chattanooga has a vibrant downtown and a strong tech scene. The downtown slopes are pricey, but the suburbs in Hamilton County offer a good mix of affordability and lifestyle. It feels a bit larger and more urban than the other East TN options.

The Tri-Cities (Johnson City, Kingsport, Bristol)

If affordability is your number one priority, head northeast. The Tri-Cities area is generally the most affordable metro in the region. You can often find homes here for $50,000 to $80,000 less than a comparable house in Knoxville. The pace is slightly slower, but the mountain views are just as good.

Rural Counties

Once you get into counties like Cocke, Greene, or Monroe, prices drop further. Property taxes are generally lower, and almost every property is USDA eligible. The trade-off is the commute and access to healthcare or shopping, but for many, the privacy is worth it.

Step 5: The Search and Critical Inspections

Buying a home here involves checking for things that friends in flat states like Florida or Kansas never have to worry about. Our geography and climate introduce specific risks you need to inspect for.

Radon Testing is Non-Negotiable This is serious. East Tennessee has a high concentration of uranium in the rock and soil, which breaks down into radon gas. It is the second leading cause of lung cancer. You cannot smell it or see it. During your inspection period, pay the $150 to $300 for a radon test. If levels are high (4.0 pCi/L or above), don’t panic – it can be fixed. A mitigation system costs around $1,500, and you can often ask the seller to pay for it.

Termites and Moisture We have a warm, humid climate that termites absolutely love. A standard home inspection does not usually include a termite check. You need to order a separate wood-destroying organism (WDO) report. This is vital to ensure the structural integrity of the home hasn’t been compromised.

Septic Systems If you are buying in a rural area or even older suburbs, you will likely be on a septic system rather than city sewer. Do not assume it works just because the toilets flush. Sellers often forget to pump them for years. Inspecting the tank and field lines costs roughly $300 to $500, but replacing a failed field line can cost tens of thousands.

Terrain and Foundations We build on hills here. Steep driveways can be a nightmare in icy weather, and hillside foundations need good drainage to stay stable. Make sure your inspector looks closely at how water flows around the house. You want water moving away from your foundation, not pooling against it.

Step 6: Closing Costs and Hidden Fees

You have your down payment ready, but don’t forget the closing costs. In Tennessee, you should plan to set aside an additional 2% to 4% of the purchase price for these fees.

State and Local Taxes Tennessee charges a Realty Transfer Tax of $0.37 per $100 of value and a Mortgage Tax of $0.115 per $100 of indebtedness. These add up. For a median-priced home, you are looking at several thousand dollars in taxes alone.

Property Taxes and Prepaids The good news is that property taxes here are generally low compared to other states. In Tennessee, taxes are paid in arrears. This means at closing, the seller will give you a credit for the portion of the year they owned the house. You will also need to pay for one full year of homeowners insurance upfront and fund your escrow account.

On average, total closing costs might range from $4,000 to $8,000 depending on your price point. If you need a more precise number, you can look for Tennessee closing cost estimates to help build your budget. And remember the silver lining: while these upfront costs sting, the lack of state income tax on your paycheck helps your monthly cash flow recover faster.

FAQs

What is the minimum credit score for a first-time home buyer in Tennessee?

While some generic FHA guidelines mention a 580 score, most programs you will actually want to use in Tennessee have higher standards. Specifically, if you want to use the THDA Great Choice down payment assistance, you must have a minimum credit score of 640.

How much down payment assistance can I get in Tennessee?

Through the THDA Great Choice Plus program, you have two main choices. You can get a deferred $6,000 loan that is forgiven after 30 years (Option A), or an amortizing loan of up to 6% of the purchase price that you pay back over 15 years (Option B).

Does Tennessee have a first-time home buyer tax credit?

Tennessee does not have a state income tax, so there is no state-level tax credit to deduct from your income tax return. However, THDA does offer a Mortgage Credit Certificate (MCC) program that can provide a federal tax credit, which helps reduce your federal tax liability.

Is it hard to buy a house in East Tennessee right now?

It is becoming easier than it was a few years ago. Inventory in early 2026 has increased significantly, giving buyers more choices and less pressure to waive inspections. While prices in Knoxville and Chattanooga remain high, the market is more balanced now than during the frantic post-2020 boom.