Do I need a transfer case, transmission or both?

I have a 1999 4x4 Chevrolet Tahoe with the 5.7(350) and the other day it started acting funny, it was making this horrible grinding noise and wouldn't go into gear. I got it home after messing with the 4x4 selector. When I got it home I checked the trans fluid and that was good. So I got under it and had my son put it in gear and it made the noise again, it sounded like it was coming from the transfer case which would explain why it works with messing with the 4x4 selector? And now it won't go back into 2hi, it's stuck in 4lo which makes me think even more it's the transfer case. When it finally does go into gear all the gears work, but when you go forward a few feat you can hear rattling. I just want to get an opinion before I go waste money on a part I don't need, transfer cases dont come cheep