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Tennessee First-Time Homebuyer Programs

If you’re considering buying a home for the first time in Tennessee, it may help to know the state offers a variety of financial assistance programs for buyers like you. In January 2019, we researched the options, and the following is a guide to what we found.

Tennessee first-time homebuyer programs

In Tennessee, homebuying assistance is part of the responsibility of the Tennessee Housing Development Agency (THDA). The agency can help you get a more affordable mortgage, a federal tax credit on mortgage interest payments and cover down payment or closing costs. If you’re a state employee, you will also have access to the STEP In program that provides homebuyer education courses at a discount.

Eligibility for Tennessee assistance

It’s not a requirement, but the THDA recommends that anyone hoping to work with one of their assistance programs first take a THDA-approved homebuying education course. The courses can be completed online or in person. For some THDA programs — such as the one that helps with down payments costs — the course is required.

Read on for more details on each Tennessee homebuying assistance program and be aware the programs may have their own eligibility requirements.

Great Choice Home Loan

Features

  • 30-year, fixed-rate loans
  • Designed for moderate-income, first-time buyers who may be unsure about the buying process
  • Loans are insured by USDA-RD or FHA so buyers can borrow up to 96.5% of a home’s cost
  • Qualified borrowers can apply to get financial help with down payments and closing costs, too

Eligibility

  • Must be a first-time homebuyer or not have owned a home in the previous three years
  • Requires a 3.5% minimum down payment from buyer
  • Credit score minimum is 640, but THDA counseling is available to boost scores
  • Maximum household income must fall beneath county-specific income limits
  • Purchase price of home must fall beneath county-specific maximums
  • Education course required if borrowers are seeking down payment assistance

How it works

To learn more about the Great Choice loans offered in Tennessee, check here. To apply, you’ll  need to work with a THDA-approved lender in your area.

Great Choice Plus

Features

  • Assistance for down payments and closing costs, taken as a second mortgage to a 30-year loan
  • Second loan can be up to 5% of a home’s price at time of purchase
  • No monthly payments and no interest during the life of the 30-year loan
  • Loan must be paid back once homeowners move, sell or refinance their home
  • Cost to repay the loan is equal to original loan (no interest)

Eligibility

  • Must be approved for a Great Choice Home Loan before applying
  • Must live in Tennessee for the duration of the loan
  • Must complete a homebuyer education course, either online or in person

How it works

A Great Choice Plus loan can help pay down payment and closing costs. To use the program, borrowers access the funds they need by applying for a second mortgage on their home.

Anyone looking to join the Great Choice Plus program must first be approved for a Great Choice Home Loan and can get started here. Borrowers are also required to enroll in a homebuyer education course, listed here.

HHF-DPA

The Hardest Hit Fund Down Payment Assistance (HHF-DPA) program was designed to encourage homebuying in specific parts of Tennessee. The program assists those in distinct ZIP codes hardest hit during recent periods of economic distress.

Features

  • Down payment and closing cost assistance, taken as a second mortgage
  • Borrowers can request loans up to $15,000
  • Second mortgage loan has 0% interest rate
  • No monthly payments for 10-year life of the loan
  • Loan is forgiven 20% each year beginning after five years
  • Program is available in 33 Tennessee counties, including 52 ZIP codes

Eligibility

  • Buyer must be approved for a Great Choice Home Loan before applying
  • Purchase must be an existing home
  • Newly constructed homes do not qualify
  • Applicants required to complete homebuyer education courses both before and after purchase

How it works

Anyone applying for an HHF-DPA loan must first qualify for a Great Choice Home Loan. You will also need to apply to take both a pre-purchase and a post-purchase homebuyer education course, which you can sign up for here. For more information about these loans, go here.

Homeownership for the Brave

This mortgage program falls under the umbrella of both the Tennessee Housing Development Agency and the Great Choice Home Loan program. It’s designed to help active-duty U.S. military members and veterans become homeowners.

Features

  • Offers all benefits of the Great Choice Home Loan program (see above)
  • Offers up to 100% of a home’s purchase price with a VA-backed loan (versus 96.5% with a FHA or USDA-RD loan)
  • First-time buyers are encouraged to apply
  • Veterans need not be first-time buyers to apply

Eligibility

  • Buyers must first qualify for a Great Choice Home Loan
  • Only available to members of the military, including veterans, active-duty military (in all military branches including the National Guard) and reservists
  • Reservists must have served at least 180 days active duty
  • Also available to military spouses, including surviving spouses

How it works

To apply for the Homeownership for the Brave program, first-time homebuyers should first apply, and be approved, for a Great Choice Home Loan. To learn more about the military-related benefits of this program, see details here.

TAKE CREDIT MCC

Tennessee’s TAKE CREDIT MCC program was developed to help both homebuyers save money by providing a federal income tax credit for a portion of the annual mortgage interest they pay. This program does not offer loans. However, it may still help make homeownership more attainable.

Features

  • Federal income tax credits up to $2,000 annually based on how much mortgage interest you pay
  • Tax credits can lower both your final tax bill and your income tax bracket

Eligibility

  • Homebuyer must reside in the home for the life of their mortgage loan
  • Must be a first-time homebuyer or not have owned a home in the past three years
    • This does not apply to honorably discharged military veterans or anyone looking to buy in a “targeted” area (federally designated area of economic distress)
  • Property must be located in Tennessee and serve as a primary residence for the homebuyer
  • Price of the home may not exceed purchase price limits, depending on county
  • Income limits vary by county, too
  • Applicants must complete a homebuyer education course
  • Cannot be used together with a TDHC loan

How it works

To see if you qualify for the TAKE CREDIT MCC program, check these sites for more information on income limits, purchase limits and whether your prospective home is in a  targeted area. Find more information on the program overall, and how to get started, go here.

STEP IN

Features

  • Reduces the cost of taking a Tennessee homebuyer education course
  • Course is $25 instead of $99
  • Education courses offered online
  • Provides access to a 60-minute, individualized session with a certified instructor
  • Buyers can learn about home loans, money management, how to qualify for financial assistance and protecting and maintaining a property

Eligibility

  • Buyers must be current Tennessee state employees

How it works

Tennessee’s STEP IN program offers discounted homebuyer education courses — at a quarter of the price — to anyone who works for the state.  State employees can learn more about the program by visiting the STEP IN website, where they send in an email to get a course discount code.

National first-time homebuyer programs

If the Tennessee programs described above are not right for you, consider a national financial assistance program, such as an FHA or VA loan. These programs can be especially helpful to buyers who are recovering from credit issues or need more down payment help. Check this LendingTree guide to find out more about national first-time homebuyer programs.

 

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