Tennessee is one of the best states in the US when it comes to cost of living. According to the cost of living index, in which the US is an average of 100, Tennessee comes in at a 86.5. Combine that with the fact that there is no state income tax, the state is a very attractive place to move for many families and professionals. Although the housing prices in the larger cities like Nashville are on the rise, buying a home in a smaller area at a lower price is a great investment as the mortgage rates are at a solid place compared to the rest of the country.
What are the Current Tennessee Mortgage Rates?
In the early stages of 2016, the current rate on a 30-year fixed rate loan is 3.77 percent, while the rate on a 15-year fixed loan is 2.86 percent. Refinance rates are also fairly low, with 30-year as low as 3.39 percent and 15-year is at 2.69 percent.
Since the state is fairly large, it has a diverse amount of lenders and property values, so setting up a new loan can vary from area to area. For example, Nashville is one of the fastest growing markets in the state, where the home values are much higher than the state average. So, for example, if you looking to move to East Nashville, you would be looking to pay about 300,000 for a 3-bedroom home. Let’s say your credit score is around 740, and you have 20 percent to put down on your purchase and you want to do a 30-year fixed mortgage. Some companies will offer you a rate of 3.125 percent with an estimated payment of $1285 per month.
What Factors Might Offset the Benefit of Low Interest Rates?
Interest rates are at a low not seen since before the housing crisis in 2007. However, this market is very different than the one we had in the early portions of the last decade. For one, the driving factor of the last housing bubble was subprime mortgages. This time, it is mostly due to the market not moving as fast as the realty agents want it to, so banks are willing to offer lower rates to entice home buyers.
That being said, there are some things that will offset these rates. The job market in Tennessee for most fields outside of agriculture and production are located in only 3 major metropolitan areas: Nashville, Memphis, and Knoxville. This means a buyer will be looking at higher priced homes in larger areas unless they are willing to have longer commutes. And since none of the big cities’ public transportation systems are as strong as somewhere like Atlanta or New York, getting around the city means a lot of driving. Luckily, gas prices are very low, so the cost of getting to work is not as bad as it was just a few years ago.
How Does Tennessee Compare to the Rest of the Country?
Tennessee is one of the poorer states in the country, as it is ranked 45 out of 50 in median household income. This is due to the more rural parts of the state dragging down the average. As mentioned previously, cities like Nashville have fairly high levels of income due to being large centers of commerce.
This relative level of income is offset by the lack of a state income tax, which makes the state much more attractive for potential home buyers. The property taxes are also fairly low, but can vary from county to county. Most of the revenue generated for the state is through added taxes on purchases and the state-run lottery system.
What is the Forecast for the Tennessee Housing Market?
The housing market rose an estimated 5 percent in 2015. This trend will most likely continue, as outside factors such as energy costs and the job market continue to improve. The state continues its policy of attracting more private sector jobs in lucrative industries such as manufacturing and shipping. The unemployment rate for the state is just around 5 percent, although in areas like Memphis, it is as high as 8 percent. This number will most likely go lower as several projects, such as the expansion of the interstate system along the western edge of Tennessee proceeds, and other major projects around the state kick off.
The only thing that could put a damper on the outlook is the state of the global economy. Japan and China are both starting to slow down heavily in their growth, which can mean problems for some of the industries located in the state, such as tire and other car part manufacturing might shed some jobs.
New home sales increased to 496 units, up by 12.7 percent in 2015. This is the highest number since 2007, which is a positive sign that the market is still willing to grow.
How Does All of This Impact Home Buyers in Tennessee?
With more money in your pocket, combined with low interest rates and a weaker global economy, now is the perfect time to get into a home in Tennessee.
This is not like the pre-housing crash market where anyone with a few thousand dollars and a job can get into a home, however. It is important to have solid employment, good credit and a hefty down payment. Banks are willing to work with prospective clients, but they are not willing to make the same mistakes as before.
Credit below 700 will be a challenge when it comes to getting a new mortgage. So the best plan is to get ahead of those issues by getting your report and doing what you can to clean it up, especially if you have some missed payments or are behind. Another thing to do is be willing to pay more points up front than the 20% and expect a higher interest rate.
2 Point Highlight
With more money in your pocket, combined with low interest rates and a weaker global economy, now is the perfect time to get into a home in Tennessee.
Interest rates are at a low not seen since before the housing crisis in 2007.
