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• Mortgage rates in Knoxville, Tennessee are influenced by current economic conditions and individual financial factors, including your credit score.
• A fixed-rate mortgage offers the borrower consistent monthly payments over the life of the home loan.
• Adjustable-rate mortgages (ARMs) have changeable rates. As a homebuyer, your interest rate can tick up or down during the loan’s term.
• You can easily estimate your monthly payment and the total cost of your loan using an online mortgage calculator.
• As a potential Tennessee homebuyer, you’ll find resources and programs to make the dream of ownership a reality, whether you’re a first-time buyer or one with limited financial resources.
Introduction to Mortgage Interest Rates
Mortgage rates should be a key consideration for anyone looking to buy a home in Knoxville. The rate on your home loan can really influence how much house you can afford, and what kind of long-term financial planning you must do. This guide will help you understand how mortgage rates are determined and how to get the best deal when negotiating yours. If you’re buying your first home, it will be especially helpful. Your first step in the mortgage journey? You’ll need to understand where rates in Knoxville are coming from.
💡Quick Tip: When you are house hunting, lock in your home mortgage loan rate. There will be no surprises if your offer is accepted.
First-time homebuyer programs usually consider anyone who hasn’t owned a home in the previous three years to be a “first-timer.” If you think you might qualify as a first-time homebuyer, you could enjoy special benefits such as lower down payment minimums, grants, and closing cost assistance.
Where Mortgage Rates Come From
The interest rate a homebuyer pays on the money they borrow through a home loan is dependent on a range of factors, including the economy, the borrower’s credit history, and their overall financial situation as well. Let’s take a closer look:
Economic Factors Influencing Mortgage Rates
• The bond market, and especially the 10-year U.S. Treasury Note, have long been considered primary indicators of mortgage-rate activity and the direction they’re headed. When the rate rises on the note, mortgage interest usually follows.
• The housing market’s health also plays a role. If the market cools down, more homes become available and buyers are fewer. Lenders may lower their rates to try to draw more customers.
• Inflation and unemployment rates also help determine what homebuyers pay for their mortgages. A strong economy is one with rising mortgage rates, reflecting increased demand from borrowers and, often, higher costs for lenders. A recession tends to bring lower mortgage rates along with it.
Borrower Factors Influencing Mortgage Rates
• Your credit score is a significant predictor of the attractiveness of the rate you’ll get. Great credit? Your rate will be lower — which is better.
• Your down payment will play a role, too. The larger the amount you put down, the lower your interest rate should be. This is because lenders perceive borrowers with more equity in a newly purchased property as being lower default risks.
• Your debt-to-income (DTI) ratio is also really important. Lenders will want to look at your earnings in relation to your monthly debts. There is no hard maximum DTI, but in general, mortgage lenders prefer a ratio of no more than 36%.
The type of home loan you choose, both in variety and term, will also impact your mortgage interest rate. We’ll discuss that in more detail below.
Discover how your debt level may impact your mortgage.
Try SoFi’s debt-to-income calculator to calculate your DTI number.
Discover how your debt level may impact your mortgage.
Try SoFi’s debt-to-income calculator to calculate your DTI number.
How Interest Rates Affect Home Affordability
In Tennessee, a small chane in mortgage rates can have a giant impact on your experience as a homeowner. If you take out a $300,000 loan at a 6.00% interest rate, for example, your monthly payment will be $1,799. If the rate increases to 7.00%, your monthly payment will jump to $1,996. But over the life of a 30-year mortgage, that one-percentage-point difference will add up to more than $71,000 increase in interest paid.
Mortgage rates have historically seen ups and downs, and played a pivotal role in the housing market’s ebb and flow. From the 1970s all the way into the 2020s, we’ve witnessed rates reaching more than 18.00% — and then dropping to below 3.00%, as you can see from this graph. Both Federal Reserve policy and the shifty economic climate in the U.S. have been the driving forces behind these highs and lows. If you can gain a deeper understanding of these factors, you’ll position yourself to make informed decisions when you purchase a home. Navigating the complex landscape of mortgage financing takes some homework, though.
Historical Interest Rates in Tennessee
The table below shows you how Tennessee’s rate has compared to the U.S. national average in the most recent decades. You can see that the state rate follows a path similar to the national rate — basically shadowing it every year for which the chart shows rates. (The Federal Housing Finance Agency stopped compiling this state-level data after 2018.)
Year
Tennessee Rate
U.S. Rate
2000
7.99
8.14
2001
6.95
7.03
2002
6.55
6.62
2003
5.80
5.83
2004
5.85
5.95
2005
5.96
6.00
2006
6.58
6.60
2007
6.34
6.44
2008
6.03
6.09
2009
4.95
5.06
2010
4.70
4.84
2011
4.50
4.66
2012
3.63
3.74
2013
3.82
3.92
2014
4.11
4.24
2015
3.83
3.91
2016
3.65
3.72
2017
4.01
4.03
2018
4.56
4.57
Source: Federal House Finance Agency
Types of Mortgages Available in Knoxville
Looking for types of mortgage loan that will best set you up to purchase your home in Knoxville, you’ll have options. If you understand all the choices, that knowledge will help you make informed decisions at every point in the process.
Fixed-Rate Mortgage
The fixed-rate mortgage is the most popular, and most predictable, choice. When it comes to home loans, it’s the what-you-see-is-what-you-get option. It comes with an interest rate that will remain constant over the loan’s entire life. This makes the loan stable, meaning your monthly payments will stay the same, and your budget should be fairly easy to plan. Terms for fixed-rate mortgages may include 10, 15, 20, 30, or even 40 years from many lenders.
Adjustable-Rate Mortgage (ARM)
Adjustable-rate mortgages, known as ARMs, come with lower-sounding interest rates compared to fixed-rate loans. At least in the beginning. With an ARM, the borrower gets a steady interest rate for the first part of the loan’s term, but as time passes (typically 5 or 7 years), the rate can adjust up or down, depending on the market. The flexibility works in a borrower’s favor if rates fall, but then again, your payment amount may go up if rates rise. These loans are a good option for a homebuyer who plans to sell the home before the initial fixed-rate period ends.
FHA Loan
This type of loan, offered by the Federal Housing Administration (FHA) was created to allow a broader audience the advantages of homeownership. Homebuyers who qualify for FHA loans have more flexible eligibility criteria than other loan types offer — like possible approval with a credit score of 580 or more, and an option for a low down payment. These loans may be particularly appealing if you qualify as a first-time homebuyer in Knoxville.
VA Loan
Homebuyers who have served our country can often be eligible for Veterans Affairs (VA) administration loans — they offer great opportunities for eligible active-duty military personnel, veterans, reservists, National Guard members, and surviving spouses. One benefit of a VA loan is that it doesn’t require a down payment. These loans are an option even if the borrower doesn’t have a lot of savings. VA loans are likely to offer you competitive rates, and are meant to keep your mortgage costs down.
Jumbo Loan
In Knoxville and other U.S. cities, the 2025 conventional mortgage loan limit for a single-family home purchase is $806,500. If you are looking at a property with a price higher than this, you will need a jumbo loan to help you finance it. These mortgage loans can come with interest rates that are slightly higher than other loans, and stricter requirements for borrowers to qualify. But a jumbo loan can help you secure the funds to purchase the home you really want.
Compare current home interest rates by state and find a mortgage rate that suits your financial goals.
Select a state to view current rates:
Should You Wait for Interest Rates to Drop?
If you are hoping to qualify as a first-time homebuyer in Knoxville, you may be wondering whether or not you should wait for Tennessee mortgage rates to drop. Current market predictions indicate that rates will probably remain stable through 2025 and 2026. What does that mean? Your best plan is to carefully consider your personal financial situation, including the condition of your savings and credit score, and to evaluate overall market conditions. Only you can make the decision about whether buying now is the right choice.
Remember: If interest rates drop, even after you’ve purchased a home, you can take advantage of the lower rates by pursuing a mortgage refinance.
See How Knoxville’s Costs Stack Up
Knoxville’s cost of living is relatively affordable — as are other Tennessee cities when you compare their figures to national standards. Here’s how Knoxville compares to other cities in Tennessee on an index where 100 equals the average cost of living in the U.S.
Tennessee City
Cost of Living
Chattanooga
88.6
Cookeville
90.3
Jackson
88.1
Knoxville
86.4
Memphis
89.8
Morristown
86.1
Nashville
98.7
How to Get Your Best Possible Rate in Knoxville
In Knoxville, if you want to get the best mortgage interest rate, you’ll need to focus on a few key factors.
• Build your credit score by making all your payments on time and paying down any credit card balances you are carrying.
• Lower your DTI ratio by paying down your debts.
• Make a higher down payment. It can help you secure a lower interest rate.
• Maintain a steady source of income. Lenders will likely want to look at your employment history.
• Go through the mortgage preapproval process. This is something to strongly consider — it will give you a better idea of what you can afford.
• Look into government-backed loan programs, which often have lower interest rates than conventional loans.
Mortgage calculators are helpful and easy tools to assist you in understanding the impact of different interest rates on a loan in Knoxville. They can also tell you how the rate you negotiate will affect monthly payments over your loan’s term. These calculators take the amount of your loan, the term length, and the interest rate, and use the numbers to provide a clear and accurate financial picture to help you make smart decisions.
Try out these three mortgage calculators we recommend:
Using the free calculators is for informational purposes only, does not constitute an offer to receive a loan, and will not solicit a loan offer. Any payments shown depend on the accuracy of the information provided.
How to Evaluate Loan Offers in Knoxville
Grabbing a competitive mortgage rate is a win that can save you money over the lifetime of your loan. It’s not just the interest rate that matters, though. You should factor in fees, closing costs, and discount points as well, to calculate what your home loan will cost you. If you’ve found a loan offer that feels right and you’ve completed the mortgage preapproval process, you’re ready to make a bid as soon as you fall in love with a home.
Knoxville Mortgage Resources
Tennessee, the Volunteer State, offers a lot of resources and down payment assistance programs to assist homebuyers, particularly those stepping into homeownership for the first time or dealing with financial constraints. The Tennessee Housing Development Agency (THDA) spearheads the Great Choice Home Loan Program, which offers 30-year fixed-rate loans and down payment help tailored for FHA or USDA loans. If you’re exploring mortgage rates in Knoxville, Tennessee, you may find competitive offers to fit your needs.
Closing Costs in Knoxville
If you decide to buy a home in Knoxville, expect to pay between 2% and 5% of your loan amount in closing costs. For a $361,367 home — the average value for homes in Tennessee in early 2025 — that’s going to be between $5,800 and $14,700.
The amount you will pay will likely depend on a range of factors, from the home’s price to its location in the city. Closing costs in Knoxville may include credit report fees, appraisal fees, loan origination fees, title insurance premiums, and property taxes. Understanding the costs and shopping for the best possible mortgage rates will result in your saving money when you purchase your home. You may find help with your closing costs, too, through local or state programs in Florida.
When you’re figuring out your budget for closing expenses, you may also consider reserving funds for mortgage points. (A mortgage point generally costs 1% of the mortgage amount, and each point lowers your mortgage interest rate by 0.25%.)
The Takeaway
Knoxville’s mortgage landscape is as diverse as this giant Tennessee city itself, offering a wide variety of options for you if you’re looking to become a homebuyer. Staying informed about current mortgage rates in Knoxville and investigating assistance programs are important steps for prospective buyers before you take the plunge. Whether it’s your first time as a buyer or you are an experienced homeowner, take advantage of resources you find and the process will be easier and more affordable.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
Shop around, comparing offers from multiple mortgage lenders to find the best available rates. Once you’ve selected a lender, inquire about how you can hold your rate: Rate locks will typically last 30 to 60 days. Some lenders offer them for free, but more often they carry a cost between around 0.25% and 0.50% of the loan amount.
How do mortgage interest rates work?
A mortgage interest rate is basically a percentage that tells you what it will cost you to borrow money for your home purchase. Rates are impacted by economic conditions, as well as the borrower’s personal financial history. Fixed-rate mortgages carry unchangeable rates, while adjustable-rate mortgages, or ARMs, have rates that can change in time. Homebuyers need to understand the basics of mortgage rates, since even a small change can cost or save you thousands of dollars over a 30-year loan term.
Will Knoxville mortgage rates drop?
Economists have predicted that mortgage rates in Knoxville are likely to remain stable into 2026. But no one can guarantee how they will react to economic factors like inflation. Keeping your eye on the price of Treasury bonds will help you anticipate where rates may go. Even more important: Weigh your personal financial readiness, beginning with your credit situation.
Will Knoxville home prices go down?
The housing market in Knoxville is influenced by a wide range of factors. These include the state of the economy, locally and nationally, and powerful influencers like supply and demand. While it’s hard to predict exactly how home prices will change, especially if home market volatility increases, a real estate agent with local knowledge may have tips and figures to consider.
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*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
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