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The Best Programs and Loans for First-Time Home Buyers in Tennessee

The Best Programs and Loans for First-Time Home Buyers in Tennessee

Home Mortgages
SouthEast Bank| March 6, 2023
The Best Programs and Loans for First-Time Home Buyers in Tennessee

The Best Programs and Loans for First-Time Home Buyers in Tennessee

With its vibrant cities like Nashville and quiet secluded towns in the Appalachian mountains, Tennessee offers many choices for first-time home buyers. Buying your first home can be a daunting step, especially if you are on a limited budget.

Luckily, Tennessee is an excellent place to buy your first home; the state offers many programs for first-time home buyers that can help with down payments, closing costs, and those with lower credit scores. 

Buying a House in Tennessee as a First-Time Home Buyer

To be considered a first-time home buyer in Tennessee, which will allow you to qualify for their many programs and loans, you must not have bought a house in the past three years. If this is your second house, but you haven’t had a mortgage in over three years, you can still qualify as a first-time home buyer in Tennessee.

Before looking into what program or loan will best suit your needs as a first-time home buyer, there are some important items to consider, such as:

What type of home will you need – Do you need room for an office? What about location and school zones? Understand what is absolutely important to you and what can be flexible. This will help you decide how much of a budget you need.

Build your credit – Credit score is a large factor for underwriters who will approve your loan application, especially if you are a first-time home buyer. Your credit score will also impact your loan terms and interest rates. Be sure to work towards a high score which can help open up different loan options.

Understand the real cost – You may have found the perfect home in your budget, but don’t forget to include the other fees and expenses that come with buying a new home, such as property taxes, closing costs, moving expenses, and more. These add up quickly and can impact how much you can afford. If you are struggling to save enough for a down payment, look into the THDA programs that can help assist you. 

THDA First-Time Home Buyer Loan Programs

As a first-time home buyer in Tennessee, you have likely come across the term THDA. This stands for the Tennessee Housing Development Agency. The THDA is the primary financing agency for Tennessee and offers housing loans and other housing programs, such as the Good Choice Home Loan. Loans from the THDA program are all 30-year fixed-rate loans. They also offer down payment assistance grants and mortgage tax credits to help first-time home buyers afford their new homes.  

It was formed to help individuals and families of low and middle-class income purchase homes of existing or new units while promoting long-term home ownership. While most of THDA’s programs target first-time home buyers, they also have options for military service members and their spouses.

The requirements for THDA programs will vary by the type of loan and program, with income and purchase price limits on some of them. Keep in mind that THDA programs are meant for those who are in lower or middle-income brackets. All THDA loans or grants do have the following minimum requirements:

Great choice home loan 

The THDA Great Choice Home Loan is an excellent option for first-time home buyers in Tennessee looking for a loan that doesn’t require a large down payment and has low-interest rates. 

If you have decent credit (the minimum required is 640), you can borrow up to 96% of your home’s value, meaning you will only need about 4% for a down payment. Once you are approved for a great choice home loan, you will also be automatically eligible for THDA’s down payment and closing cost assistance, which can help you save even more money. 

Great choice plus 

After qualifying for the Great Choice Home Loan, you are also eligible for the Great Choice Plus program, which helps with closing costs and a down payment in the form of a second mortgage. The Great Choice Plus program lets you borrow up to 6% of your home’s value to pay your closing costs or down payment or can provide you with $6,000 upfront.

Unlike other second mortgages, you won’t have to repay the loan until you move out or sell the house, and the loan does not carry any interest. However, the THDA does require participants in the Great Choice Plus program to complete an educational home buyer’s course. This class can be taken online or in person and can teach you helpful lessons about home ownership.

The Great Choice Plus program offers two options to choose from:

Deferred option – The deferred option gives you $6,000 to use as a second mortgage. This $6,000 comes as a forgivable loan, meaning you won’t have to make payments during the 30-year term, and you will have 0% interest. Once it reaches term, the loan is forgiven. However, if you refinance or sell the home, the loan will need to be paid in full. 

Amortizing option – The amortization option of the Great Choice Plus Program allows you to borrow up to 6% of the home sale price as a second mortgage, which can be used to cover your closing costs. It is a typical loan, so you will have to make monthly payments on it. The interest rate is the same as your first mortgage. 

Homeownership for the brave

The Homeownership for the Brave program is for veterans, active service members, reservists, and their spouses. It is similar to an FHA or USDA loan, requiring only a 3.5% down payment, making it a wise choice for those unable to save up a lot of money. 

The program also boasts low-interest rates and eligibility for their Down Payment Assistance Program.  

First-Time Home Buyer Programs in Tennessee by City

The programs and loans offered through the THDA loans are nationwide and aren’t limited to what city or county you are buying your home in. However, if you are looking to buy a home in one of Tennessee’s major cities, the state also offers city-specific home buyer programs. 

For example, in Nashville, residents can take advantage of the Housing Fund, which helps low and moderate-income buyers help find affordable housing. It even lets existing, and new home buyers access tax relief options and different grants. 

Those who are looking to buy a home in Memphis can apply for a down payment assistance program through the Division of Housing and Community Development Program, or HCD. Qualified residents can receive up to 10% of the sales price as a down payment, not to exceed $10,000.

Suppose you want more programs that cater to a specific city. In that case, many programs are listed on city websites to help first-time home buyers in Tennessee, or you can explore the Housing and Urban Department website, or HUD, which lists resources by city. 

Other Loan Options for First-Time Home Buyers in Tennessee

Although the THDA loan programs are good options for most people looking to buy their first home who need a little extra help, you may not qualify for them based on income or location. 

There are some other alternatives for mortgage loans that can help you as a first-time home buyer in Tennessee affords your dream home.

FHA loans

FHA loans are a popular choice for first-time home buyers with low credit scores or those who are struggling to save enough money for a full down payment. The minimum credit score for an FHA loan is 580 or higher and only requires a 3.5% down payment.

Most people who are first-time home buyers will qualify for an FHA loan, but keep in mind that you will need to have mortgage insurance for the life of the loan, and it cannot be canceled, which will increase your monthly payment amount. 

USDA loans

If you are looking into small towns or rural areas in Tennessee, a USDA loan may be the perfect option for you. A USDA loan requires zero percent down and is issued through the USDA Rural Development Guaranteed Housing Loan Program. 

The minimum credit score needed for a USDA loan is 640, although those with lower scores may still be eligible for the loan if they meet other standards. As with the THDA loans, there is an income limit, but those vary by region. 

The biggest requirement that the USDA has is that the house or land you want to buy must be located in an eligible area. You can check the address of your intended home here

VA loans 

Similar to the THDA’s Homeownership for the Brave, VA loans through the US Department of Veterans Affairs are available to active-duty service members, veterans, and surviving spouses. 

VA loans require no down payment, no mortgage insurance, and no specific credit score, although many lenders usually require at least a 640. There are strict requirements for qualifying for a VA loan; not every service member can automatically get a VA loan. 

Ready to Take the Next Step?

Tennessee is a wonderful state to live in, with its exciting cities and beautiful outdoors. For first-time home buyers looking to find their dream home in Tennessee, the state offers many programs both at the state and local levels to help you with down payments, closing costs, and more. These programs are designed to help make owning a home affordable and available to everyone. If you are interested in learning more about the loans and programs available to you as a first-time home buyer in Tennessee, one of our lenders will happily assist you with any questions. 


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Information contained in this blog is for educational and informational purposes only. Nothing contained in this blog should be construed as legal or tax advice. An attorney or tax advisor should be consulted for advice on specific issues.