A house is the biggest purchase many people ever make. If you’ve never applied for a home loan before, 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.
The program is 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 are buying a home in an area designated as economically disadvantaged. Active duty service members, veterans and spouses are also eligible.
If you want to buy a house but worry you won’t qualify for a mortgage, the THDA Great Choice Home Loan program can help by providing down payment and closing cost assistance.
THDA highlights and eligibility requirements
- Includes government-backed and conventional loan options
- Great Choice mortgage payments help fund programs for the elderly, people with disabilities and the homeless
- 30-year, fixed interest rate loans
- Loans and assistance programs available through lenders across Tennessee
- 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
Tennessee home buyer loan programs
Great Choice loan
This 30-year, fixed-rate loan is available to qualified first-time home buyers as well as repeat buyers purchasing property in certain designated areas. Once qualified for the Great Choice loan, you’re automatically eligible for help with your down payment and closing costs through one of the two THDA assistance options listed below.
Homeownership for the Brave loan
This special type of 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 requires 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.
Tennessee down payment assistance programs
Great Choice Plus down payment assistance
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 no-interest, deferred second mortgage that provides up to 5% of the purchase price for a down payment and closing costs.
Although it’s technically a loan, you won’t have to repay funds provided through Great Choice Plus unless you sell the house before the mortgage is paid off or refinance into a different mortgage.
Hardest Hit Fund down payment assistance
Certain areas of Tennessee still haven’t recovered from the economic downturn. Should you choose to buy a home in one of these 62 designated ZIP codes, you could qualify for $15,000 in down payment and closing cost assistance through the Hardest Hit Fund Down Payment Assistance program, or HHF-DPA.
View a map of the designated areas on the TDHA website.
Although it’s technically a second mortgage — with 0% interest and no required monthly payments — the HHF-DPA is a forgivable loan. Sell, refinance or move out of your home within the first five years, and you’ll have to repay the entire amount. Starting in the sixth year, the loan balance is forgiven at the rate of 20% per year. If you live in the home for at least 10 years, the HHF-DPA loan would be completely forgiven.
Your next step
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.
National first-time home buyer programs to consider
If you don’t qualify for a THDA loan, or want to consider all mortgage options before making a decision, there are programs for first-time home buyers at the national level as well.
FHA loans, backed by the Federal Housing Administration, are ideal for many first-time home buyers, allowing down payments as low as 3.5% and more relaxed credit score and income requirements.
VA loans are designed for military veterans and active-duty service members. Backed by the U.S. Department of Veterans Affairs, these mortgages typically offer competitive interest rates and require no down payment.
USDA mortgages, via the U.S. Department of Agriculture, are an affordable option for those who want to live in rural areas, and can often be obtained with a 0% down payment.
Conventional loans enabled by government-sponsored entities such as Fannie Mae and Freddie Mac have down payment requirements as low as 3%, which may be helpful for first-time home buyers.
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