Tennessee DSCR Loans & Rates 2026

Tennessee DSCR loan terms at a glance

Term	Save Financial (20+ DSCR lenders)
Minimum DSCR	1.0+ for the best pricing; down to 0.75 on a separate program at a higher rate; no-ratio option where rent is not used
Max loan-to-value	Up to 80% on purchases (20% down); about 75% on the no-ratio program; cash-out typically 70–75%
Minimum credit score	660; 700+ improves pricing; 740+ gets the best rates
Loan amount	$150,000 to $3,000,000
Loan terms	30-year fixed, interest-only and ARM options
Prepayment	Usually 1 year; no-prepay and longer-prepay options trade against rate and fees
Residency	Not required — out-of-state investors welcome
LLC vesting	Yes — LLC, corporation or personal name, with a personal guarantee
Short-term rentals	Yes, where local rules allow them
Income documents	None — no tax returns, W-2s, pay stubs or debt-to-income ratio
Closing time	Often about 18 days once documents are complete; appraisal timing varies

Tennessee housing market at a glance

Tennessee home prices rose 38.5% over the five years to mid-2026, the 19th-largest gain among the 50 states and faster than the U.S. average of 33.4%, according to FHFA’s purchase-only index. About 33.1% of Tennessee households rent their home, versus 34.8% nationally.

Measure	Tennessee	United States
Households that rent their home	33.1%	34.8%
Median gross rent (per month)	$1,189	$1,413
Median value of owner-occupied homes	$286,700	$332,700
Home-price change, last 5 years (to Q2 2026)	+38.5%	+33.4%
Home-price change, last 12 months (to Q2 2026)	+0.9%	+2.1%
Population, July 1, 2025	7.3 million	341.8 million
Population change since April 2020	+5.8%	+3.1%

Sources: U.S. Census Bureau QuickFacts (renter share, rent and home value are 2020–2024 American Community Survey 5-year estimates; population is the Vintage 2025 estimate) and the FHFA House Price Index (purchase-only, seasonally adjusted, released August 2026).

Worth knowing about Tennessee

Tennessee welcomed 150 million visits in 2025, generating a record $32.5 billion in direct visitor spending. (Tennessee Tourism, Gov. Lee Commend State’s Economic Impact & Record $32 Billion Visitor Spending)
Nashville-Davidson added 9,244 residents between July 2024 and July 2025, the eighth-largest numeric gain of any U.S. city, per the Census Bureau. (U.S. Census Bureau Vintage 2025 City and Town Population Estimates (CB26-80))

What rent does a Tennessee rental need for a 1.0 DSCR?

At an illustrative 7.25% 30-year fixed rate with 20% down, Tennessee’s average property tax rate and our insurance assumption below, a rental priced like the Nashville median needs monthly rent of about 0.64% of its price to reach a 1.0 DSCR. Here is what the payment looks like at median prices in Nashville, Memphis, Knoxville, Chattanooga and Clarksville.

Market	Median price	Monthly PITIA at 20% down (= rent needed for 1.0)	Rent needed as % of price
Nashville (Davidson County)	$464,779 (Redfin, Sep 2026)	$2,990	0.64%
Memphis (Shelby County)	$179,914 (Redfin, Sep 2026)	$1,310	0.73%
Knoxville (Knox County)	$324,785 (Redfin, Aug 2026)	$2,170	0.67%
Chattanooga (Hamilton County)	$374,822 (Redfin, Sep 2026)	$2,460	0.66%
Clarksville (Montgomery County)	$311,794 (Redfin, 3 months ending Aug 2026)	$2,090	0.67%

Assumptions: 7.25% 30-year fixed (an example, not a quote); property tax at 0.52% of value, Tennessee’s average effective rate on owner-occupied homes (rentals don’t get homestead breaks, so an investor’s effective rate is usually higher); insurance at $3,045 a year (MoneyGeek’s 2026 Tennessee average homeowners premium); no HOA. Actual county tax rates, premiums and your rate will differ.

How much down do you need to reach 1.0?

If you know a property’s rent-to-price ratio (monthly rent ÷ price), this shows the down payment that gets it to a 1.0 DSCR for a home priced like the Nashville median, under the same assumptions.

Monthly rent as % of price	Down payment, 30-year fixed	Down payment, interest-only
0.40%	About 56%	About 50%
0.45%	About 48%	About 42%
0.50%	About 41%	About 33%
0.55%	About 34%	About 25%
0.60%	About 26%	20% (the minimum)
0.65%	20% (the minimum)	20% (the minimum)

If the numbers fall short, there are three other routes: a program that accepts a DSCR down to 0.75 at a higher rate, interest-only payments, or a no-ratio DSCR loan with about 25% down.

Example: a median-priced Nashville rental at three structures

The property: a $464,779 rental, the median price in Nashville (Davidson County).

Costs: property tax about $201 a month and insurance about $254 a month under the assumptions above. Rate is an illustrative 7.25%, an example and not a quote.

Structure	Loan	Monthly PITIA	Rent needed for 1.0
20% down, 30-year fixed	$371,823	$2,990	About $2,990
25% down, 30-year fixed	$348,584	$2,830	About $2,830
25% down, interest-only	$348,584	$2,560	About $2,560

The takeaway: moving from 20% down to 25% down with interest-only lowers the rent this property needs to qualify by about $430 a month. We price each structure side by side so you can compare the extra cash against the rate.

Tennessee property tax and insurance: what changes the DSCR

Property tax

Tennessee’s average effective property tax rate is about 0.52% of home value for owner-occupied homes, per the Tax Foundation. Residential property is assessed at 25% of appraised value, and counties reappraise on 2- to 6-year cycles (Knox County uses 2 years). Memphis rentals pay both a City of Memphis levy and a Shelby County levy. Lenders use the tax bill you will actually pay as an investor, so get the county’s estimate for a non-owner-occupied property before you make an offer.

Insurance

Tennessee homeowners premiums run below the national average, at about $3,045 a year on MoneyGeek’s 2026 figures. Tornadoes, severe storms and flooding drive claims, and many policies carry separate wind/hail deductibles of 1-2% of dwelling coverage. A rental needs a landlord (dwelling) policy, and the full premium goes into the payment the rent has to cover, so get a real quote early.

Tennessee landlord rules that matter to a lender

Rent control: State law (Tenn. Code 66-35-102) bars cities and counties from enacting or enforcing rent control on private residential or commercial property.

Evictions: In URLTA counties, a landlord serves a 14-day notice to pay or quit for unpaid rent (after a 5-day grace period) or a 14-day notice to cure for lease violations; after filing a detainer warrant, hearings are typically set 7-21 days out, followed by a writ of possession if the landlord wins.

The Uniform Residential Landlord and Tenant Act applies only in counties with more than 75,000 people (including Davidson, Shelby, Knox, Hamilton, Rutherford, Williamson and Montgomery), and since Jan 1, 2025 landlords must disclose owner/manager contact and maintenance-request details in new leases.

Short-term rental rules in Tennessee markets investors ask about

A lender only counts Airbnb or VRBO income if the property can legally operate as a short-term rental. If it can’t, the loan is sized on long-term rent from the appraiser’s rent schedule.

Nashville: Metro Codes issues owner-occupied permits (owner must be a natural person living on site) and non-owner-occupied permits, each capped at four sleeping rooms and one party, renewed annually. New non-owner-occupied permits are only allowed in mixed-use, office, commercial and downtown zones, not in AR2A, R, RS or RM residential zones; existing permits there can renew but do not transfer on sale. Hosts must remit business, sales and hotel occupancy taxes.
Gatlinburg / Pigeon Forge / Sevier County: Since Jan 1, 2024, short-term rentals in unincorporated Sevier County need an annual permit and fire-safety inspection from the county Fire Marshal ($250/yr for units sleeping 12 or fewer, plus $25 per extra occupant above that). Rentals inside Gatlinburg, Pigeon Forge or Sevierville follow each city’s own permit and business-license rules, and units sleeping 13+ face stricter fire-code requirements.
Chattanooga: Every short-term vacation rental needs an annual city certificate. Owner-occupied ‘homestay’ rentals (owner lives there 183+ days a year) are allowed in a designated homestay overlay and certain commercial zones, while non-owner ‘absentee’ rentals are limited to commercial and form-based zones that allow hotels (C-C, C-R, C-MU1, C-MU2, CC, CX, IX, RF, RV, SH). Fees are $250 (homestay) or $500 (absentee) per year, and a 25% density cap applies.

Rules change often. Confirm the permit status for the exact address with the city or county before you buy.

Other Tennessee factors for rental investors

Tennessee has no tax on wage income, and the Hall tax on interest and dividends was fully repealed starting Jan 1, 2021.
Rentals held in an LLC, LP or corporation are generally subject to state franchise tax (0.25% of Tennessee net worth, $100 minimum) and excise tax (6.5% of taxable income), unless the entity qualifies for the family-owned non-corporate entity (FONCE) exemption, which many residential-rental LLCs do.
Memphis has the state’s lowest big-city price point (Redfin median about $180K, Sep 2026, down 2.7% year over year), but owners pay both city and Shelby County property taxes.
Smoky Mountain STR supply is shifting fast: AirDNA counted about 3,146 active Pigeon Forge listings in Sep 2026, 26.3% fewer than a year earlier, with about 56% annual occupancy.

Broker vs. direct DSCR lender

A direct DSCR lender can only offer its own program. As a broker, Save Financial compares 20+ DSCR lenders, including lenders active in Tennessee, which matters most when a property doesn’t fit the standard box.

	Single direct DSCR lender	Save Financial (broker, 20+ lenders)
Programs available	One lender’s guidelines and rate sheet	Guidelines and pricing from 20+ DSCR lenders, compared for your file
DSCR below 1.0	Only if that lender offers it	A program down to 0.75, plus a no-ratio option
Short-term rental income	That lender’s single method	Matched to the lender whose method gives the strongest qualifying rent
Lease requirement	Usually required on occupied units	One of our lenders uses the appraiser’s market rent with no lease
Reserves	Set by that lender	Cash-out loans generally need none; one lender requires none at all
Prepayment penalty	That lender’s structures	Choose 1-year, no-prepay or longer, priced side by side
How the originator is paid	Built into the rate and fees	Disclosed on your Loan Estimate; when lender-paid, it’s reflected in the rate

Tennessee DSCR loan questions

Can I get a DSCR loan in Tennessee if I live in California or another state?

Yes. A DSCR loan qualifies on the Tennessee property’s rent, not your residency, job or tax returns, so out-of-state investors close Tennessee rentals the same way local investors do. Save Financial is a California-based broker that arranges Tennessee DSCR loans through lenders active in the state.

What DSCR do lenders require in Tennessee?

A DSCR of 1.0 or higher, meaning the rent covers principal, interest, taxes, insurance and any HOA, gets the best pricing. A separate program accepts ratios down to 0.75 at a higher rate, and a no-ratio DSCR loan skips the ratio with about 25% down.

How do Tennessee property taxes affect a DSCR loan?

Taxes are part of the payment the rent has to cover. Tennessee’s average effective rate is about 0.52% for owner-occupied homes, per the Tax Foundation, and rentals don’t get owner-occupant breaks, so an investor’s bill is usually higher. See the property tax section above for how Tennessee assesses rentals.

What share of Tennessee households rent, and how much have home prices risen?

About 33.1% of Tennessee households rent their home (U.S. Census Bureau, 2020–2024), and the median gross rent is $1,189 a month. FHFA data show Tennessee home prices rose 38.5% in the five years to mid-2026, versus 33.4% nationally.

Can I use Airbnb income on a Tennessee DSCR loan?

Yes, if the property can legally operate as a short-term rental under local rules. Lenders use 12 months of platform payouts, an AirDNA projection (often counted at 75–80%), or fall back to the appraiser’s long-term rent. Check the city rules above before you buy.

Can I close a Tennessee DSCR loan in an LLC?

Yes. DSCR loans close in an LLC or corporation with you as personal guarantor. If your LLC was formed in another state, Tennessee may require it to register as a foreign LLC before it holds property there; confirm with your attorney or CPA.

Do DSCR loans have prepayment penalties?

Usually. Most of our DSCR loans carry a one-year prepayment period. A no-prepay loan is available at a slightly higher rate or more in fees, and a longer prepayment period can lower your rate or fees.

How long does a Tennessee DSCR loan take to close?

Often about 18 days once your documents are complete, though appraisal timing varies. The appraisal with the rent schedule is usually the longest step, and closings can be done remotely or with a mobile notary.

DSCR Loans in Tennessee