Tennessee First-Time Home Buyer Programs of 2021

Tennessee First-Time Home Buyer Programs of 2018

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If you’ve never applied for a home loan, it’s easy to feel overwhelmed. That’s why the Tennessee Housing Development Agency, or THDA, created a program to help first-time home buyers through the process.

Some nationally available loan programs may also reduce barriers to homeownership, thanks to relaxed eligibility requirements. Keep reading to learn more about first-time home buyer programs available in the Volunteer State.

National first-time home buyer loans

Conventional mortgage

Best for:

Low down payments, limited mortgage insurance premiums

What you need to know:

A conventional mortgage is a home loan that isn’t guaranteed or insured by the federal government. Conventional mortgages that conform to the requirements set forth by Fannie Mae and Freddie Mac allow down payments as low as 3% for first-time buyers or lower-income home buyers. Unlike FHA loans, conventional loans allow borrowers to eventually cancel their mortgage insurance or avoid mortgage insurance altogether if they put at least 20% down.

VA loans

Best for:

Military, low down payments

What you need to know:

The U.S. Department of Veterans Affairs helps service members, veterans and surviving spouses buy homes. VA loans are especially generous, providing competitive interest rates, often requiring no down payment or mortgage insurance. Although there is no official minimum credit score, most VA-approved lenders require scores of at least 640.

FHA loans

Best for:

Low credit score, low down payments

What you need to know:

This is the go-to program for many first-time home buyers with lower credit scores. The Federal Housing Administration allows down payments as low as 3.5% for those with credit scores of 580 or higher. The FHA will insure loans for borrowers with scores as low as 500 but requires a 10% down payment for a score that low. Mortgage insurance is required for the life of an FHA loan and cannot be canceled.

USDA loans

Best for:

Low down payments, rural

What you need to know:

A USDA home loan is a zero-down-payment mortgage for eligible rural and suburban home buyers. USDA loans are issued by the U.S. Department of Agriculture through the USDA Rural Development Guaranteed Housing Loan Program. There are income limitations, which vary by region. Applicants with credit scores of 640 or higher receive streamlined processing. Those with scores below that must meet more stringent underwriting standards.

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THDA highlights and eligibility requirements

THDA programs are available to Tennesseans who haven’t owned a home before, as well as repeat buyers who haven’t lived in a home they own for at least three years or who are buying a home in an economically disadvantaged area. Active-duty service members, veterans and spouses are also eligible.

Highlights

  • Includes government-backed and conventional loan options.

  • 30-year, fixed-interest-rate loans.

  • Discounted interest rates for military veterans and their spouses.

Eligibility

  • Borrower must be a Tennessean with a minimum credit score of 640.

  • Borrowers must meet income and loan requirements.

  • Borrowers must complete home buyer education course to get down payment assistance.

  • Property must not exceed purchase price limits, which vary by county.

THDA first-time home buyer loan programs

Great Choice Home Loan

Best for:

Down payment assistance, closing cost assistance

What you need to know:

This 30-year, fixed-rate loan is available to qualified first-time home buyers as well as repeat buyers purchasing property in certain designated counties. Once qualified for the Great Choice loan, you’re automatically eligible for help with your down payment and closing costs, up to $7,500 depending on home price.

Homeownership for the Brave

Best for:

Military, low down payment, low mortgage rates

What you need to know:

This version of the Great Choice loan is for active-duty service members, including the National Guard, veterans and reservists with at least 180 days of active duty. A Homeownership for the Brave loan features reduced interest rates and low down payment requirements, including 0% in some cases.

If you qualify for a Homeownership for the Brave loan — which can require completing a home buyer education course — you’ll have the option of financial assistance for a down payment and closing costs. Spouses of qualified service members, including survivors of deceased veterans, can also take advantage of this loan program.

Great Choice Plus Second Loan

Best for:

Down payment assistance, closing cost assistance

What you need to know:

Saving enough for a down payment is one of the biggest obstacles to homeownership. If you qualify for a Great Choice loan and participate in a home buyer education course, you’ll be eligible for Great Choice Plus, a 15-year second mortgage with the same interest rate as the first mortgage. This second loan can provide up to $7,500 for a down payment and closing costs.

Hardest Hit Fund

Best for:

Mortgage assistance

What you need to know:

This program helps homeowners affected by the economic downturn related to the coronavirus pandemic. You could qualify for $20,000 in mortgage assistance through the Hardest Hit Fund Reinstatement Only Program.

Summary: 2021 THDA first-time home buyer programs

  • Great Choice Home Loan for help with down payment and closing costs.

  • Homeownership for the Brave for reduced interest rates and low down payments for active-duty service members, veterans and reservists.

  • Great Choice Plus Second Loan for down payment and closing costs assistance.

  • Hardest Hit Fund for homeowners who’ve been affected by pandemic-related economic downturn.

Now that you’re more familiar with the basics of loan programs for first-time home buyers in Tennessee, it’s time to dive into the specifics. Know that THDA doesn’t review applications or lend money; it relies on a network of lenders that may have additional borrower requirements. Your next step is to talk to a THDA-approved lender to find out exactly what it takes to get qualified.

For full details on the programs listed above, visit the THDA website.

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