General information, not legal or tax advice

Closing Costs for Buyers in Tennessee

Your down payment is not the only money you need to buy a home. Buyers also pay closing costs, and many of them are easy to plan for once you know what they are. This page walks through the common buyer costs in Tennessee, using what the Tennessee Code, the Coffee County Register of Deeds and the federal Consumer Financial Protection Bureau (CFPB) say.

This is general information, not legal or tax advice. Every purchase is different. Your lender and your closing attorney or title company prepare the official numbers.

Your two most important documents

The CFPB says your lender must give you a Loan Estimate within three business days of receiving your mortgage application. It shows the estimated interest rate, monthly payment and total closing costs, plus estimated taxes and insurance. Every lender uses the same standard form, so you can compare offers side by side.

Before closing, the lender must give you a Closing Disclosure at least three business days before you close. The CFPB says that window gives you time to compare your final terms and costs to your Loan Estimate and to ask questions before you sign. When we work together, I will review both with you and flag anything that changed.

Who pays what

The CFPB says that when you buy a home, you generally pay the costs tied to your loan, but depending on the contract or state law, the seller may end up paying some of them. In Tennessee, your purchase contract is where those details get settled, so read it carefully. The CFPB also notes that a seller credit or lender credit is not free: a seller may want a higher price, and a lender may raise your rate or loan amount in exchange.

Lender charges

On the Loan Estimate, the CFPB groups lender costs into a few sections:

Origination charges. Upfront fees charged by your lender. The CFPB lists application, origination, underwriting, processing, verification and rate lock fees as common examples, and says the total is what matters when you compare lenders.
Points. An optional upfront fee you pay the lender for a lower interest rate.
Services you cannot shop for. Third party services the lender requires and chooses, such as the appraisal, credit report and flood determination. For FHA, VA and USDA loans, any upfront mortgage insurance premium or funding fee also shows up here.

The appraisal

If you use a loan, the CFPB says the lender uses an appraisal by an independent, professional appraiser to decide how much the home is worth, and you have a right to receive a copy. The appraisal fee is one of the lender required services listed on your Loan Estimate.

Title insurance and the closing agent

The CFPB says most lenders require you to buy a lender's title insurance policy, which protects the amount they lend. An owner's title insurance policy is optional on the Loan Estimate, and it can protect your own investment if someone later claims an interest in the home from before you bought it, such as a past owner's unpaid taxes or an unpaid contractor. The CFPB adds that if you buy both, using the same provider is usually less expensive.

Title services, which include title insurance, the title search and in most areas the settlement agent who conducts your closing, are usually things you can shop for. The CFPB calls them the largest costs in that group. Your lender must give you a written list of providers, and you may be able to use one not on the list if the lender agrees.

Survey and pest inspection

The CFPB sample Loan Estimate lists a survey fee and a pest inspection fee among the services you can shop for, when your lender requires them. A survey can also be worth considering on your own, especially for rural or acreage property around Coffee County. The Tennessee Department of Agriculture says a wood destroying insect report issued with a real estate sale must be warranted for 90 days for the accuracy of what it says.

Your home inspection

You hire and pay your own home inspector, separate from your lender, so ask the inspector how and when payment is due. Budget for it along with any added tests such as radon, septic or a water test. My home inspection guide explains what Tennessee law requires of inspectors and how to verify a license, and my septic systems guide covers homes on septic.

Tennessee recordation taxes

Tennessee charges a recordation tax under Tenn. Code Ann. section 67 4 409, and the Coffee County Register of Deeds collects it when documents are recorded. There are two parts:

The realty transfer tax is 37 cents per $100, based on the purchase price or the value of the property, whichever is greater. The statute says this tax is paid by the grantee, which is the buyer. Your purchase contract can say who pays which costs, so check yours.
The mortgage tax, also called the indebtedness tax, is 11.5 cents per $100 of the loan amount recorded on your deed of trust. The statute exempts the first $2,000 of the debt and places this tax on the borrower. If you pay cash with no loan, there is no mortgage tax.

The Coffee County Register of Deeds lists the same rates as $3.70 per $1,000 for the conveyance and $1.15 per $1,000 for the mortgage, with the first $2,000 exempt, plus a $1.00 probate fee collected when state tax is paid.

Recording fees

The Register of Deeds also charges fees to record your documents, set by Tenn. Code Ann. section 8 21 1001. For deeds and deeds of trust, the Coffee County Register of Deeds lists $5.00 per page, a $10.00 minimum charge and a $2.00 computer fund fee. The exact total depends on how many pages your documents have.

An illustration with hypothetical numbers

This example uses a made up price and loan amount to show how the state tax math works. It is not market data and not a quote.

Say a hypothetical home sells for $300,000 and the buyer borrows $270,000.

Transfer tax: $300,000 divided by 100 is 3,000, times $0.37 is $1,110.
Mortgage tax: $270,000 minus the $2,000 exemption is $268,000. Divided by 100 is 2,680, times $0.115 is $308.20.

Recording fees, the probate fee and every other cost on this page would be added on top. Your Closing Disclosure shows the real numbers for your purchase.

Prepaids and your escrow account

Prepaids are costs you pay ahead at closing. The CFPB lists property taxes, homeowners insurance and interest until your first payment is due as common examples. It also says you usually pay the first 6 to 12 months of homeowners insurance at or before closing. You choose your insurance company, so shop around.

Many lenders also set up an escrow account. The CFPB says the lender collects part of each monthly payment and uses it to pay your property taxes and insurance, and many lenders require it. Your Closing Disclosure shows the initial deposit into that account at closing. Property taxes are set by local government, not by the lender, so the CFPB suggests checking that the lender's estimate is accurate. My Coffee County property taxes guide explains how city and county taxes work, and your closing statement will show how the year's taxes are split between you and the seller.

Cash to close

The CFPB says your cash to close includes your down payment and closing costs, minus any deposit you already paid, any seller credits and other adjustments. You will usually need a cashier's check or a wire, and your lender will need to document where the money came from. Always call your closing agent at a number you already know to confirm wire instructions before you send money.

Help with closing costs

If you are a first time buyer, the Tennessee Housing Development Agency offers Great Choice Plus, a second loan that can help with the down payment and closing costs for eligible Great Choice borrowers. See my first time buyer guide. If you are using a VA or USDA loan, see my VA loan guide or USDA loan guide.

How I help

I help you read your Loan Estimate early, line up inspections and services, and compare your Closing Disclosure to your estimate before you sign. If you are selling a home too, my seller closing costs guide covers the other side of the table.

Keep reading:

Ready to plan your purchase?

I help buyers across Manchester and Coffee County from the first lender conversation to the closing table. Request my buyer guide below or call me and tell me what you are looking for.

Common questions

What is the mortgage tax in Tennessee?

Tennessee charges 11.5 cents per $100 of the loan amount recorded on the deed of trust, with the first $2,000 of the debt exempt, under Tenn. Code Ann. section 67 4 409. The statute places this tax on the borrower.

Who pays the transfer tax in Tennessee?

The statute says the realty transfer tax of 37 cents per $100 is paid by the grantee, the buyer. Your purchase contract can set who pays which costs, so check yours.

When do I get my final closing costs?

Your lender must give you a Closing Disclosure at least three business days before closing, according to the CFPB. Compare it to your Loan Estimate.

Is title insurance required when buying a home in Tennessee?

Most lenders require a lender title insurance policy, according to the CFPB. An owner title policy is optional and protects your own investment.

What are recording fees in Coffee County TN?

The Coffee County Register of Deeds lists $5.00 per page with a $10.00 minimum and a $2.00 computer fund fee for deeds and deeds of trust, plus a $1.00 probate fee when state tax is paid.

Matt Sargent is a Tennessee licensed affiliate broker with Keller Williams who helps buyers and sellers in Manchester and Coffee County. Call (615) 497 1658 or send a message.