2026 Tennessee First-Time Homebuyer Programs and Loans

If you’re looking to buy your first home in Tennessee, there are some programs that may help save you money, including down payment assistance and tax credits.

Here’s what you need to know about first-time homebuyer loans and grants in the Volunteer State and what it takes to qualify for them. 

First-time homebuyer programs in Tennessee

Tennessee offers a variety of programs aimed at first-time homebuyers, including one designed specifically for veterans and first responders. Each program has its own set of requirements (as well as its own pros and cons), which we delve into below:

Great Choice Home Loan Program

The Great Choice Home Loan Program is offered through the Tennessee Housing Development Agency (THDA). It provides assistance for first-time homebuyers with middle to moderate incomes. These 30-year loans — which are usually insured by the Federal Housing Administration (FHA) or the U.S. Department of Agriculture (USDA) Rural Development — come with fixed interest rates and require a minimum 3.5% down payment. Eligible borrowers can take advantage of the Great Choice Plus down payment assistance program to help defray upfront loan costs.

Requirements

Pros and cons 

Homeownership for Heroes

The THDA also offers the Homeownership for Heroes program for members of the military, veterans and first responders. Homeownership for Heroes is part of the Great Choice Home Loan program, providing 30-year loans insured by the U.S. Department of Veterans Affairs (VA), the USDA or the FHA. Interest rates are fixed and reduced by 0.5% for those homebuyers who qualify.

Requirements

Pros and cons

Great Choice Plus

Once first-time homebuyers are approved for a Great Choice Home Loan, they can also apply for down payment assistance through the THDA’s Great Choice Plus program. This program offers second loans with either deferred or amortizing payment options. The deferred option provides a $6,000 second mortgage with a 0% interest rate, and it’s forgivable at the end of the loan’s 30-year term. 

However, if you sell or refinance the home before the end of that term, you’ll have to pay it back in full. The amortizing option provides up to 5% of the home’s sales price with a limit of $15,000, which is paid off over the life of the loan. The interest rate is equal to that of the first mortgage.

Requirements

Pros and cons

New Start Loan Program

The New Start Loan Program helps low- and very low-income Tennessee residents buy newly constructed homes. Nonprofit organizations work with established programs to select homebuyers, determine eligibility and manage construction of the home. There are two tiers — Tier I and Tier II — that determine the terms of the loan. The interest rate for Tier I loans is a fixed 0%, while the interest rate for Tier II is equal to one-half of the Great Choice program interest rate.

Requirements

Pros and cons

Tennessee first-time homebuyer qualifications

While each first-time homebuyer program in Tennessee has its own specific qualifications, most include income limits, which may vary by county. A minimum 640 credit score is necessary for most programs, though it drops to 620 for New Start loans. According to Experian, the average credit score in Tennessee was 703 in 2025, which means many state residents will meet the minimum credit score qualifications of 620 or 640. Applicants typically need to have a debt-to-income ratio of 45% or less, and may need to complete a homebuying education program.

Steps to apply for a first-time homebuyer program

If you qualify and are ready to apply for a first-time homebuyer program in Tennessee, here are the steps you need to take:

Step 1: Attend a first-time homebuyer class.

Completion of a homebuyer-education class is mandatory for first-time homebuyer programs in Tennessee. There is a cost for these classes, which ranges from $50 for in-person to $100 for online via Zoom.

Step 2: Find an approved lender.

Select mortgage lenders have been approved by the THDA to help homebuyers determine their eligibility, apply for preapproval and complete the application process. THDA provides a list of those lenders from which you can choose.

Step 3: Find an approved Realtor.

Once you’re ready to shop for homes, you’ll need to select a Realtor. The THDA has a list of approved Realtors, which is broken up into three divisions across the state — Eastern, Western and Middle.

Step 4: Apply for assistance with your down payment and closing costs.

If you’re approved for a Great Choice Home Loan, you can also apply for help with your down payment and closing costs. Great Choice Plus second loans offer deferred and amortizing options.

Step 5: Close on your mortgage.

Before the home is officially yours, the final step you need to take is closing on the mortgage. It can take anywhere from a few days to a couple of months to complete all the necessary steps to close and finally sign all the necessary papers. Once you do so and the escrow company receives your funds, you’re ready to move into your new place.

Understanding Tennessee first-time homebuyer down payment assistance

One of the typical challenges facing first-time homebuyers is coming up with a down payment. In Tennessee, there are several types of assistance that can help. Out of the 28 down-payment assistance (DPA) programs in Tennessee, 71.4% of them had available funding as of the fourth quarter of 2025, according to Down Payment Resource’s homeownership program index.

Deferred second mortgage

Requires repayment? Yes, when the home is sold or refinanced.

A deferred second mortgage is an additional lien on your home. It provides funds up front to help cover closing costs and/or the down payment. It’s repaid when the home is sold or refinanced.

Forgivable second mortgage

Requires repayment? No, if the buyer lives in the home for the required period of time.

A forgivable second mortgage is also a second lien on your home. However, in this case, the funds won’t have to be repaid as long as the buyer lives in the home for the required period of time.

Grant

Requires repayment? Some types of grants require repayment if the home is sold within a certain period of time.

Grants are given to homebuyers to pay their down payment and closing costs and generally won’t require repayment. However, depending on the type of grant, repayment could be required if the home is sold within a certain period.

Mortgage credit certificate

Requires repayment? No, if you live in your home for a required period of time.

Some first-time homebuyers can earn a tax credit of up to $2,000 of the mortgage interest they pay. To be eligible, you must meet the mortgage credit certificate requirements, which include income and purchase price limits. 

How much of a down payment do I need to buy a house in Tennessee?

The amount you’ll need for a down payment in Tennessee will vary depending on a number of factors, including the type of loan you secure and the size of your mortgage. However, a recent LendingTree study found that the median down payment in the state of Tennessee was $37,500.

Can I qualify for down payment assistance in Tennessee?

In Tennessee, down payment assistance is offered through Great Choice Plus second loans. To secure one, you must already be qualified for a Great Choice Home Loan. The requirements for Great Choice Home Loans include:

How do I apply for Tennessee first-time homebuyer down payment assistance? 

To apply for first-time homebuyer down payment assistance in Tennessee, you must first attend a homebuyer education class and secure a Great Choice Home Loan. Your lender can then help you apply for this assistance.

Other first-time homebuyer loan programs

Conventional loans

Conventional loans, unlike FHA and USDA loans, aren’t backed by the government. They often come with stricter eligibility requirements for those who qualify and they’re typically the most cost-effective home loans.

FHA loans

FHA loans are backed by the Federal Housing Administration. They’re generally easier to qualify for than conventional loans and typically have lower interest rates, but they also come with some extra costs, such as two forms of mortgage insurance.

VA loans

VA loans are guaranteed by the U.S. Department of Veterans Affairs. They’re available to active-duty service members, veterans and surviving spouses. They typically offer lower interest rates and closing costs and don’t require a down payment.

USDA loans

USDA loans are backed by the United States Department of Agriculture. These loans help low- and moderate-income borrowers to build or purchase a single-family home in eligible rural areas. Similar to VA loans, USDA loans don’t require a down payment.

What are the best first-time homebuyer loans?

Which loans are best for first-time homebuyers? It depends on your personal circumstances. Factors to weigh include your income, credit score and the amount of money you have for a down payment. In some cases, your profession and where you intend to purchase a home may be factors as well.

Home price trends in Tennessee’s major areas

Housing prices have been on the rise in the U.S., and while Tennessee is no exception, it has been shielded from the highest increases over the last year. Between Q4 2024 and Q4 2025, prices across the state rose by 0.39%, less than one-quarter of the national average rise of 1.8%.

Of course, specifics vary by metro, and some Tennessee cities saw substantially higher increases in home prices. In the mountain town of Chattanooga, for example, prices increased by 3.6% year-over-year; in that same time frame, they increased by 2.36% in Knoxville and 2.24% in Memphis.

What are the current mortgage rate trends in Tennessee?

Mortgage rates across the U.S. fell significantly in 2025 and are still on the decline. According to LendingTree’s mortgage rates forecast, mortgage interest rates are expected to hover just above 6.0% (though specifics vary depending on your financial factors) and may drop below 6.0% at least temporarily this year.