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2022 Tennessee First-Time Homebuyer Programs

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The Tennessee Housing Development Agency (THDA), the Volunteer State’s housing-finance authority, offers qualified first-time homebuyers several down payment assistance programs. The programs come with income restrictions and limits on home purchase prices that vary according to location and prevailing home prices within the state. Below are more details on the programs and their eligibility requirements.

Tennessee statewide and local first-time homebuyer programs

Borrowers who qualify for 30-year fixed mortgages under Tennessee’s Great Choice, GC97 or Homeownership for the Brave programs may also obtain down payment assistance through the Great Choice Plus or GC97 Plus programs. Each is offered in two forms, as a forgivable $6,000 second mortgage with deferred payments, or as a 15-year second mortgage for up to 6% of the purchase price. Here are details.

Program nameAssistance amountAssistance typeWhere it’s available
Great Choice Plus-DeferredUp to $6,000Forgivable 30-year second mortgage.Statewide
Great Choice Plus-AmortizingUp to 6% of home purchase price15-year second mortgageStatewide
GC97 Plus- DeferredUp to $6,00030-year second mortgageStatewide
GC97 Plus- AmortizingUp to 6% of home purchase price15-year second mortgageStatewide
Homeownership for the BraveUp to $6,000 or 6% of home purchase price30-year mortgage loan with interest-rate discount of 0.5%Statewide for service members, veterans, reservists, spouses of all

What to know about different types of down payment assistance

Tennessee offers down payment assistance in connection with its Great Choice, GC97 and Homeownership for the Brave loan programs. They come in the form of:

  • Second mortgages. Assistance could be in the form of a second loan, on top of your primary mortgage. Some second mortgages for down payment assistance must be paid back in monthly payments starting immediately. Others, often known as “soft seconds,” do not require monthly payments and are only paid back when you sell the home. Some second mortgages are completely forgivable over time.
  • Mortgage loans with interest-rate discounts. These are loans that come with an interest rate discount; in the case of the Homeownership for the Brave program, that discount is 0.5%.

How Tennessee first-time homebuyer programs work

For a first-time homebuyer to qualify for down payment assistance through the THDA, you must do the following:

Take a Homebuyer Education course. All recipients of THDA down payment assistance must take this course, which covers the process of applying for and qualifying for a mortgage, maintaining a home to preserve its value and financial management for homeowners. All classes also include a mandatory one-hour, one-on-one consultation with a THDA-approved homeownership counselor. Classes are conducted in-person (COVID restrictions permitting), through numerous nonprofit organizations throughout Tennessee, for fees that vary by organization but cannot exceed $99. The course is also available online for $99. Tennessee’s STEP In program allows state workers and employees of participating companies to enroll in Homebuyer Education classes at a discounted rate of $25.

Find a lender. Qualifying for down payment assistance begins with qualifying for a Great Choice, GC97 or Homeownership for the Brave loan. THDA-authorized lenders throughout Tennessee have trained staff who can assist with the application process and determine whether you qualify. They can also determine if you qualify for down payment assistance and, if so, whether the deferred or amortizing option is better for you. THDA recommends getting mortgage preapproval through your chosen lender, so you’ll have a good idea how much house you can afford to buy.

If necessary, work on your credit. Great Choice and Homeownership for the Brave loans require a minimum FICO Score of 640, and GC97 loans require scores of 660. If you need to improve your credit scores to qualify for down payment assistance, THDA homebuying counselors can recommend strategies for doing so.

Shop for a qualifying home. THDA recommends working with a THDA-approved real estate agent, who’s familiar with the home-purchase price limits that apply in the market where you’re home-shopping.

Tennessee first-time homebuyer program requirements

Tennessee’s first-time homebuyer programs are designed to help middle- and moderate-income Tennesseans become homeowners, so in addition to credit requirements, borrowers’ earnings must fall below specific limits based on the median income in the location in which they plan to buy their home. Here are details.

Program name Credit score minimumDTI ratio maximumMaximum income limitHow long you have to live in home
Great Choice Plus-Deferred64045%$68,600 to $101,160 for one- or two-person households; $78,960 to $118,020 for households of three or moreHomebuyers must use the property as their permanent, primary home for the life of the loan
Great Choice Plus-Amortizing64045%$68,600 to $101,160 for one- or two-person households; $78,960 to $118,020 for households of three or moreHomebuyers must use the property as their permanent, primary home for the life of the loan
GC97 Plus-Deferred66045%80% of median income in the location where the home is purchased, as indicated by Freddie Mac Home Possible® Income and Property Eligibility ToolHomebuyers must use the property as their permanent, primary home for the life of the loan
GC97 Plus-Amortizing66045%80% of median income in the location where the home is purchased, as indicated by Freddie Mac Home Possible® Income and Property Eligibility ToolHomebuyers must use the property as their permanent, primary home for the life of the loan
Homeownership for the Brave64045%$68,600 to $101,160 for one- or two-person households; $78,960 to $118,020 for households of three or moreHomebuyers must use the property as their permanent, primary home for the life of the loan

THINGS YOU SHOULD KNOW

To qualify for a Great Choice or Great Choice Plus loan, your home-purchase price and household income must fall below limits set on a county by county basis. GC97 and GC97 Plus loans are also subject to income limits. They use the limits that apply to Freddie Mac Home Possible® loans, which require applicants to earn less than 80% of the median annual income for the population area known as a census tract where a prospective home is located.

Limits for specific Tennessee addresses can be found using an interactive map-search tool at the Freddie Mac website. Note that, unlike the Great Choice and Homeownership for the Brave loans, GC97 income limits apply to an individual mortgage applicant’s income, not the household’s.

National first-time homebuyer programs

Tennessee’s first-time homebuyer’s programs all require securing approval for a THDA-authorized mortgage. These include a variety of conventional loans and also loans backed by a number of federal agencies. You can think of these government-backed loans, designed to promote homeownership nationwide, as a federal first-time homebuyers’ program, although they are not confined to first-time home purchases.

Loans issued through the Tennessee Great Choice, Homeownership for Heroes and GC97 programs include the following types of mortgages:

Conventional loans. Conventional mortgages aren’t government-backed and typically have stricter approval requirements than federally insured mortgages, and require buyers who put less than 20% down to purchase PMI. Fannie Mae HomeReady® and Freddie Mac Home Possible® mortgages are conventional loans designed for borrowers who earn less than 80% of their local median income, and are well-suited to many first-time homebuyers, with lower mortgage insurance premiums than FHA loans.

FHA loans. The FHA backs loans for borrowers with lower credit scores and higher debt ratios than most conventional lenders allow. The maximum amount you can borrow through an FHA loan is typically less than with most conventional loans, and the FHA charges both an up-front mortgage insurance premium and a monthly premium. FHA guidelines allow borrowers with credit scores as low as 580, but THDA loans and down payment assistance require minimum scores of 640, even on loans issued in conjunction with FHA.

VA loans. Designed for service members, veterans and surviving spouses, VA loans place no limit on the amount you can borrow, and require no down payment or mortgage insurance. VA loans issued in conjunction with the Homeownership for Heroes program may be eligible for Great Choice Plus-style down payment assistance, which can be used to offset closing costs in the absence of a down payment requirement.

USDA loans. Homebuyers with low to moderate incomes can use loans backed by the USDA to finance homes in designated rural areas of Tennessee. USDA loans require no down payment, but if issued in conjunction with a Great Choice Plus or Homeownership for the Brave loan, down payment assistance funds can be used toward closing costs.

FAQs about Tennessee’s first-time homebuyer programs

Who qualifies as a first-time homebuyer in Tennessee?

A first-time homebuyer, as defined by THDA, is anyone who hasn’t owned his or her principal residence in the last three years, anyone buying in special targeted areas, or an honorably discharged or re-enlisted veteran and spouse.

Can I qualify for down payment assistance in Tennessee?

If you meet eligibility requirements for a Great Choice, GC97 or Homeownership for the Brave mortgage through THDA, you may obtain down payment assistance through the Great Choice Plus or GC97 programs.

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

Most Great Choice mortgages require a down payment of at least 3.5% of the home price, while GC97 mortgages require at least 3% down. Uninsured private mortgage loans issued through the Great Choice program require down payments of 22%. Great Choice Plus and GC97 Plus down payment assistance can be used to help satisfy these requirements, and to help pay closing costs.

Home price trends in Tennessee’s major areas

Median home prices rose more than 10% over the last year in greater Nashville, according to data from the National Association of Realtors: In the most affordable of the region’s 10 counties, Cheatham, the median home cost rose to $217,569 and average mortgage payments increased from $768 to $826 during that period. In Williamson County, the region’s (and the state’s) highest housing-cost county, the median home cost reached $567,259 and average mortgage payments climbed from $2,001 to $2,152.

In Shelby County, home to Memphis, the state’s second-largest city (which has a metropolitan area that extends to nearby Mississippi and Arkansas), median housing costs increased 9.4% year-over-year, to $196,600, and average mortgage payments increased from $704 to $746. Knox County, home to Knoxville, the state’s third-largest city, saw its median home price increase 13.3% over 12 months, to $240,600, and an increase in average monthly mortgage payments from $830 to $913.

 

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