Down Payment Options for Nashville Buyers

Think you need 20% down to buy a home in Nashville? You have more options than you might think. Many Davidson County buyers purchase with far less, including low down payment loans, local assistance, and smart ways to structure credits. If you want a clear path to keys in hand, this guide breaks down the programs, rules, and next steps to help you move forward with confidence. Let’s dive in.

Down payment basics in Nashville

Conventional loans at 3% down

Conventional financing can work with as little as 3% down through programs like Fannie Mae HomeReady and Freddie Mac Home Possible. These are for primary residences and often target first-time or low-to-moderate income buyers. If you put less than 20% down, you’ll have private mortgage insurance (PMI). The Consumer Financial Protection Bureau explains how PMI works, when it is required, and when you can remove it.

Lenders set credit score and underwriting standards, and many prefer scores in the low-to-mid 600s or higher for 3% down options. Expect variations by lender, especially when markets are competitive. Ask your lender to outline any overlays that apply to you.

FHA loans at 3.5% down

FHA loans allow 3.5% down for borrowers with credit scores of 580 and higher. Borrowers with scores between 500 and 579 typically need 10% down. FHA requires mortgage insurance, including an upfront mortgage insurance premium (UFMIP), commonly 1.75% of the loan amount, plus annual MIP. See HUD’s overview of FHA mortgage insurance premiums for details and current rules.

FHA can be attractive if your credit needs flexibility or you want to maximize purchasing power with a smaller down payment.

VA loans at 0% down

If you’re an eligible veteran, active-duty service member, or qualifying spouse, VA financing allows 0% down and does not require monthly PMI. Most VA loans include a funding fee unless you are exempt. You can review eligibility, COE steps, and funding fee details on the VA Home Loan page.

USDA loans at 0% down

USDA loans also offer 0% down for eligible buyers and properties. Eligibility depends on geography and income. Many urban parts of Nashville are not eligible, though some outlying areas in Davidson County or nearby counties may qualify. Always verify property eligibility using the USDA eligibility map.

Ways to fund your down payment

• Cash or savings you have set aside.
• Gift funds from approved donors with proper documentation.
• Down payment assistance (DPA) from state, local, or nonprofit programs.
• Seller credits to cover closing costs or buydown costs within program limits.
• Retirement plan funds or loans, if allowed by your plan and lender.
• Employer assistance or community nonprofit grants.

Local help buyers use in Davidson County

THDA assistance and MCC

The Tennessee Housing Development Agency (THDA) often provides mortgage programs and down payment assistance statewide, commonly used by Nashville buyers. Some years also include Mortgage Credit Certificate (MCC) options. Income limits, purchase price limits, and funding availability change, so check current offerings at the THDA homebuyer page or speak with a THDA-approved lender.

Metro Nashville assistance

The Metro Nashville Office of Housing and Community Development may offer down payment help tied to certain neighborhoods or workforce initiatives, depending on funding cycles. Program windows and terms can change. Review the Metro Nashville housing programs page for current offerings and timelines.

Nonprofit and employer support

Local nonprofits and community development organizations sometimes provide counseling, grants, or second-lien assistance. Large employers may offer housing benefits. Availability shifts over time, so it pays to research active programs early in your home search.

How gift funds and seller credits work

Gift funds

Gift funds are common and allowed across many loan types. Lenders will require a signed gift letter stating no repayment is expected, plus documentation of the donor’s ability to give and the transfer of funds. Acceptable donors vary by program. FHA, conventional, VA, and USDA permit gift funds, but each has its own rules. Keep the paper trail clean and ask your lender for the exact list of documents.

Seller concessions

Seller credits can cover closing costs, prepaids, and sometimes buydown expenses. Common limits include:

• FHA: up to 6% of the purchase price for approved uses.
• Conventional: concessions often cap around 3% at lower down payments, with higher caps as your down payment increases.
• VA: concessions are allowed within program rules.

Most programs do not allow seller concessions to directly cover your required minimum down payment. Structure your offer with your lender so credits stay within limits and support your goals.

Buydowns and mortgage insurance

Temporary vs permanent buydowns

Temporary buydowns, such as a 2-1 buydown, lower your interest rate for the first one or two years. The upfront cost is typically covered by seller credits, lender credits, or buyer-paid points and is held in a buydown account. At the end of the buydown period, your rate returns to the note rate.

A permanent buydown means paying discount points to reduce your interest rate for the life of the loan. The CFPB explains discount points and how to evaluate the tradeoff. Always compare the upfront cost with the time you expect to own the home and your monthly payment savings.

PMI, MIP, and VA

Conventional loans with less than 20% down require PMI, which you can often cancel later as equity grows. FHA loans include UFMIP and annual MIP that may last for the full term depending on your LTV and loan details. VA loans do not require monthly PMI but include a funding fee unless you are exempt. Compare the total monthly payment across options, not just the down payment.

Smart ways to combine programs

• FHA + DPA: Pair an FHA loan with THDA or Metro assistance to cover the 3.5% down and part of your closing costs.
• Conventional 3% + DPA or gift: Use a HomeReady or Home Possible loan and fill the gap with a second-lien DPA or documented gift funds.
• VA or USDA + seller credits: Use 0% down financing and request seller credits for closing costs or a temporary buydown, within program limits.

Keep in mind that not all assistance programs can be stacked together. Some are forgivable second liens, others are repayable. Confirm details and lien position with your lender and the DPA provider before you write offers.

Nashville buyer checklist

1. Get pre-approved early with a local lender.
   • Ask for side-by-side scenarios: conventional 3%, FHA 3.5%, VA 0%, USDA 0% where eligible, plus DPA options.
2. Verify program eligibility before touring homes.
   • For USDA, confirm property eligibility on the official map. For THDA and Metro programs, check income and price limits.
3. Prepare your documentation.
   • Gather W-2s, pay stubs, bank statements, and tax returns. If using a gift, get the gift letter and donor bank documents ready.
4. Model total monthly cost and cash to close.
   • Include PMI or MIP, UFMIP or funding fee, property taxes, insurance, HOA dues, and buydown costs.
5. Structure your offer with precision.
   • If you need seller credits or buydown funds, write them into the offer and keep within program limits.
6. Understand your DPA terms.
   • Know if the assistance is forgivable, deferred, or repayable, and how it affects future refinancing or sale.

What lenders will ask you

• Your credit score range and credit history.
• How much cash you have for down payment and closing costs.
• Whether you are a first-time buyer.
• Whether you will use gift funds and who the donor is.
• Employment history and income documentation.
• Any bankruptcies, foreclosures, or judgments.
• Property details once you’re under contract.

Final thoughts

Buying in Davidson County without 20% down is not only possible, it is common. Between 0% to 3.5% down loan options, local assistance, and strategic use of seller credits or buydowns, you can shape a plan that fits your budget today and your goals tomorrow. The key is running the numbers across programs, confirming eligibility early, and writing offers that align with the rules.

If you want a local strategy session tailored to Nashville’s market, connect with Joseph Goodman. We coordinate closely with lenders, help you evaluate options, and guide you from pre-approval to closing with clear steps and strong representation.

FAQs

What is the minimum down payment for a conventional loan in Nashville?

• Many buyers can qualify for 3% down through programs like Fannie Mae HomeReady or Freddie Mac Home Possible, with PMI required under 20% down.

Can I buy a home in Davidson County with 0% down?

• Yes, if you are eligible for VA or if the property and your income meet USDA rules; always verify VA eligibility and USDA property eligibility.

How do THDA programs help Nashville buyers?

• THDA often offers mortgage and down payment assistance statewide; check current income and price limits, availability, and approved lenders before you shop.

Can seller concessions cover my down payment?

• Typically no; concessions usually cover closing costs, prepaids, or buydown costs and are capped by program rules, such as FHA up to 6% and conventional around 3% at low down payments.

What documents do I need for gift funds?

• Expect a signed gift letter stating no repayment, plus donor bank statements and proof of transfer; your lender will detail the exact documentation needed.