First-Time Homebuyer Programs in Tennessee

The down payment on a new home is often the biggest hurdle for first-time homebuyers. In Tennessee, where the average home value is $320,181, you would need a down payment of $64,036 to avoid buying private mortgage insurance.

Fortunately, first-time homebuyer programs in Tennessee can help you achieve homeownership. Some mortgages allow first-time homebuyers to put less down on a home, but these usually have income requirements and require mortgage insurance. MoneyGeek explores several state-specific and government-backed first-time homebuyer programs for people from different financial backgrounds.

Tennessee First-Time Homebuyer Programs

Tennessee has grants and loans to assist first-time homebuyers with down payment and closing costs. Below, we have compiled the first-time homebuyer programs offered by the Tennessee Housing Development Agency to help you find the best option for your particular needs and situation.

Great Choice Home Loan

The Great Choice Home Loan from THDA is a 30-year, fixed-rate mortgage program for middle- to moderate-income homebuyers. This loan is insured by FHA or USDA-RD, which means you may be eligible to borrow up to 96.5% of the total price of the home you’re buying. Note that it features a minimum credit score requirement of 640 and sets limits on household income and purchase prices, which vary by county. Eligible homes include off-site manufactured housing and traditional site-built homes.

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ELIGIBILITY REQUIREMENTS

To qualify for the Great Choice Home Loan, you must meet certain eligibility requirements:

  • Must meet income and purchase price limits specific to the county
  • Must have a minimum credit score of 640
  • Home must be used as a primary residence
  • Only applicable to certain property types, including off-site manufactured homes and site-built homes

Homeownership for Heroes

The Homeownership for Heroes program by THDA offers special mortgage benefits for eligible active-duty military, veterans, law enforcement officers, EMTs, paramedics and firefighters. It provides a fixed-rate Great Choice Home Loan with a reduced interest rate of 0.5%. Additionally, qualified applicants can finance up to 100% of the home purchase price with VA or USDA-RD loans, while FHA loans offer financing up to 96.5%. The program also waives the first-time homebuyer requirement for participants statewide.

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ELIGIBILITY REQUIREMENTS

To qualify for the Homeownership for Heroes program, you must meet specific eligibility requirements:

  • Must be an active-duty military member, veteran, National Guard member, law enforcement officer, EMT, paramedic or firefighter
  • Meet county-specific income and purchase price limits
  • Minimum credit score of 640 for all borrowers on the application
  • Property must be used as a primary residence
  • Complete THDA-approved homebuyer education if applying for down payment assistance

Down Payment Assistance Program

The Down Payment Assistance Program by THDA offers two options for eligible homebuyers using the Great Choice Home Loan. Both options provide funds to help cover down payment and closing costs and can be tailored based on the borrower’s repayment preferences.

  • Deferred Option: Provides $6,000 in assistance as a second mortgage. It carries a 0% interest rate and is forgivable after 30 years. If the property is sold or refinanced within 30 years, the full amount is due.
  • Amortizing Option: Offers up to 5% of the home’s purchase price, with a maximum of $15,000. This option is structured as a 30-year second mortgage, with the interest rate matching the primary mortgage.
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ELIGIBILITY REQUIREMENTS

To qualify for the Down Payment Assistance Program in Tennessee, here are the criteria you need to fulfill:

  • Must qualify for a THDA Great Choice Home Loan
  • Complete a THDA-approved homebuyer education course
  • Meet income and purchase price limits specific to the property location
  • Use the property as a primary residence

Tennessee First-Time Homebuyer Programs by City

Aside from statewide first-time homebuyer programs in Tennessee, city-specific programs are also available to help you pursue homeownership in your city of choice. Check out the table below for some of the cities in Tennessee that provide first-time homebuyer programs for potential residents.

City
First-Time Homebuyer Program

Clarksville

Clarksville's Down Payment Assistance program offers low-interest loans up to $25,000 for down payment and approved closing costs to income-eligible first-time homebuyers.

Qualifications include meeting income and purchase price limits and completing an HUD-approved housing counseling program.

Memphis

Memphis' Down Payment Assistance program, through its Division of Housing and Community Development (HCD), offers up to $25,000 or 10% of the sales price in the form of a deferred payment loan with no monthly payments during the five- to 10-year affordability period.

To qualify, you must be a first-time homebuyer whose income does not exceed 80% of the area median income (AMI).

Murfreesboro

Murfreesboro's Affordable Housing Assistance Program offers up to $10,000 in financial assistance to low-income, first-time homebuyers purchasing a home in the city. The assistance comes in the form of a no-interest, no-payment second mortgage due when you sell your home.

Program requirements include providing 1% cash towards closing and meeting income limits established by the U.S. Department of Housing and Urban Development.

Zero-Down-Payment Loan Programs in Tennessee

Zero-down-payment loan programs in Tennessee allow homebuyers to purchase a home without putting money down. USDA and VA loans are two government-backed options that come with no down payment.

USDA Loans

USDA loans are designed to assist homebuyers in rural areas. They are issued by the U.S. Department of Agriculture through its Rural Development Guaranteed Housing Loan program.

USDA loans offer several benefits, including low interest rates and zero down payments. They are intended to make homeownership more accessible for those who might not qualify for conventional financing. The program also provides flexible credit guidelines to help more families achieve homeownership.

To be eligible for a USDA loan, your property must be 2,000 square feet or below and located in a USDA-eligible rural area with less than 35,000 people. You also must meet certain income limits, which vary depending on where you live. For example, in Grundy County, Tennessee, the income limit for a four-person household is $54,900. In contrast, Sevier County, Tennessee, has an income limit of $58,700. Understanding these criteria can help you determine if a USDA loan is a viable option for your home purchase.

VA Loans

VA loans are a type of mortgage issued by the U.S. Department of Veterans Affairs and are designed to help veterans, active-duty service members and eligible surviving spouses become homeowners.

VA loans offer several benefits, including a no-down payment requirement. They also do not require private mortgage insurance (PMI), which can lead to further savings over the life of the loan. As of November 2024, the APR for a 15-year fixed-rate VA loan in Tennessee is 6.22%, while the APR for a 30-year fixed-rate loan is 6.37%.

To be eligible for a VA loan, you must meet specific requirements related to your length of service or service commitment, duty status and character of service. You must also meet certain income limits depending on where you live and provide a valid certificate of eligibility (COE).

Low-Down-Payment Loan Programs in Tennessee

First-time homebuyers in Tennessee can take advantage of low-down-payment loan programs that allow them to finance their home with a down payment of 3.5% or less. These programs include conventional, FHA and FHA 203(k) loans.

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    Conventional Loans

    Conventional loans are mortgage loans not insured by the government. There are two main types: conforming (which follows Freddie Mac or Fannie Mae guidelines) and nonconforming (which goes beyond the conforming limits).

    You may secure a mortgage with a 3% down payment, depending on the lender. However, if your down payment is 20% or less, you'll need to pay private mortgage insurance. Eligibility requirements include a minimum credit score of 620 and a debt-to-income ratio of 43% or lower.

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    FHA Loans

    FHA loans adhere to Federal Housing Administration policies and procedures. For 2024, the mortgage limit for single-family properties in Tennessee is $766,550. For two-family properties, it's $981,500. Eligibility requirements include a minimum credit score of 500 and a 3.5% down payment. Note that private mortgage insurance is required if you put down less than 20%.

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    FHA 203(k)

    FHA 203(k) loans allow you to roll the cost of renovations into the mortgage. There are two main types: Standard and Limited. You can obtain this mortgage with a 3.5% down payment. Eligibility requirements include a credit score between 500 and 580 and a front-end debt-to-income ratio of 31% or less. This loan is not limited to first-time homebuyers. Note that you can't have two FHA loans simultaneously.

FHA vs. Conventional Loan: Which Is Right for You?

FHA loans and conventional loans are the two most common types of mortgages. FHA loans require a minimum down payment of 3.5%, making them accessible for buyers with limited savings. Conventional loans can require as low as a 3% down payment for first-time homebuyers but generally have stricter credit score and debt-to-income ratio requirements than FHA loans.

Interest rates are another important factor to consider. As of November 2024, the current APR for a 15-year fixed-rate conforming loan is 5.97%, while the APR for a 15-year fixed-rate FHA loan is 8.28%. APRs on FHA loans can be higher because there tend to be more fees and extra costs associated with borrowing money on government-backed loans.

Use our FHA vs. conventional loan calculator to help you compare FHA and conventional mortgage programs and find the best option for you.

FHA vs. Conventional Loan Calculator

Compare FHA and conventional mortgage programs to better understand your loan opportunities in Tennessee.

Basic Details

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Calculation Results
Financial AnalysisFHAConventionalDifference
Monthly Payment (First Year)FHA$0Conventional$0Difference$0
Upfront Costs FHA$0Conventional$0Difference$0
Total 30-Year CostFHA$0Conventional$0Difference$0
Total 5-Year CostFHA$0Conventional$0Difference$0
Monthly Mortgage Insurance (First Year)FHA$0Conventional$0Difference$0
Down PaymentFHA$0Conventional$0Difference$0
Calculator results are rounded to the nearest whole dollar.
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RECOMMENDED CREDIT SCORES FOR FIRST-TIME HOMEBUYERS

Qualifying for first-time homebuyer programs often involves meeting minimum credit score requirements, which can vary depending on the loan program. Conventional loans typically require a credit score of 620, while government-backed loans like FHA loans may only need a minimum credit score of 500.

According to Experian, the average credit score in Tennessee is 705, suggesting that many residents may be well-positioned to qualify for various first-time homebuyer programs.

FAQ: First-Time Homebuyer Programs in Tennessee

We answered some frequently asked questions about first-time homebuyer programs in Tennessee to help you get closer to homeownership.

Does Tennessee have first-time homebuyer programs?

What qualifies me as a first-time homebuyer in Tennessee?

Can you buy a house in Tennessee with no down payment?

Who can help me with my down payment on a house in Tennessee?

Additional Resources for First-Time Homebuyers in Tennessee

Explore additional MoneyGeek resources for first-time homebuyers in Tennessee to help you with the homebuying process.

About Zachary Romeo, CBCA


Zachary Romeo, CBCA headshot

Zachary Romeo is a certified Commercial Banking and Credit Analyst (CBCA), and the Head of Loans and Banking at MoneyGeek. Previously, he led production teams for some of the largest online informational resources in higher education, with over 13 years of experience in editorial production.

Romeo has a bachelor's degree in biological engineering from Cornell University. He geeks out on minimizing personal debt and helping others do the same through people-first content.


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