First-Time Homebuyer Programs in Tennessee

Down Payment Assistance Programs

• THDA Great Choice Home Loan. THDA's flagship 30-year fixed-rate first mortgage for first-time buyers (and repeat buyers in federally targeted areas), available with FHA, VA, USDA-RD, or conventional underwriting. Below-market interest rate, no prepayment penalty, and designed to pair with Great Choice Plus down payment assistance. Buyers must meet THDA income and purchase price limits for their county and complete a homebuyer education course before closing.
• THDA Great Choice Plus Down Payment Assistance. Up to $15,000 in down payment and closing cost assistance, structured as a 30-year forgivable second mortgage at 0% interest with no monthly payment. The full balance is forgiven after 30 years of continuous owner occupancy as the buyer's primary residence - if the home is sold, refinanced, or no longer owner-occupied before 30 years, the remaining balance becomes due. Great Choice Plus is only available paired with a THDA Great Choice first mortgage and is the standard DPA stack for first-time Tennessee buyers.
• THDA Homeownership for the Brave. A reduced interest rate (typically 0.5% below the standard Great Choice rate) on the Great Choice first mortgage for active-duty military, veterans, National Guard members, reservists, and surviving spouses. Compatible with Great Choice Plus DPA, FHA, VA, USDA, and conventional underwriting. Homeownership for the Brave is a rate discount layered on top of Great Choice - not a separate loan product - so eligible buyers still access the same DPA and program structure as other Great Choice borrowers.
• THDA Mortgage Credit Certificate (MCC). A federal tax credit equal to a percentage of the annual mortgage interest paid (capped at $2,000 per year), available to eligible first-time buyers using a Great Choice loan. The MCC reduces federal income tax liability dollar-for-dollar each year for the life of the loan as long as the home remains the buyer's primary residence, effectively lowering the true cost of homeownership beyond what the interest rate alone reflects.
• USDA Rural Development (USDA-RD) Loans in Tennessee. USDA Rural Development guaranteed and direct loans offer 100% financing (no down payment required) for primary residences in USDA-eligible rural and suburban areas, and large portions of Tennessee outside the Nashville, Memphis, Knoxville, and Chattanooga urban cores qualify - including most of East Tennessee, Middle Tennessee small towns, and rural West Tennessee. USDA Guaranteed loans (the most common product) require a household income at or below 115% of area median income and a credit score generally of 640 or higher; USDA Direct loans serve very-low and low-income buyers with subsidized interest rates as low as 1% after payment assistance. Both can pair with THDA Great Choice Plus DPA (up to $15,000, 30-year forgivable) when the buyer uses a THDA Great Choice first mortgage underwritten as USDA - meaning the down payment is already zero and the DPA can be applied to closing costs, prepaid items, and reserves instead. Check property eligibility at the USDA Rural Development eligibility map before assuming a Tennessee address qualifies.

Income and Purchase Price Limits

THDA income limits vary by county and household size, generally ranging from roughly $90,000 in lower-cost Tennessee counties to $130,000+ in Davidson, Williamson, and other higher-cost metro counties. Purchase price limits are set per county and typically fall in the $375,000-$500,000 range, with higher ceilings in federally designated targeted areas. Always confirm current Great Choice income and purchase price limits with a THDA-approved lender or at thda.org before assuming eligibility.

City Programs Worth Knowing

Nashville, Memphis, and Knoxville each run city-level down payment assistance designed to stack with THDA's Great Choice first mortgage. Nashville's program is the largest by award size, reflecting Davidson County prices that have outpaced the state median.

• Nashville MDHA Homeownership Voucher Program. Administered by the Metropolitan Development and Housing Agency for income-qualified first-time buyers purchasing a primary residence in Davidson County (Nashville), the Homeownership Voucher Program can provide up to $50,000 in down payment and closing cost assistance. The program is income restricted (typically tied to a percentage of area median income), requires HUD-approved homebuyer education, and is structured as a deferred or forgivable second mortgage with multi-year owner-occupancy requirements. MDHA assistance is designed to stack with THDA Great Choice and Great Choice Plus - confirm current funding availability and exact terms directly with MDHA before counting on it in your offer.
• City of Memphis Down Payment Assistance Program. Up to $10,000 in down payment and closing cost assistance for income-qualified first-time buyers purchasing a primary residence inside Memphis city limits. Structured as a deferred or forgivable second mortgage with multi-year owner-occupancy requirements, HUD-approved homebuyer education required, and designed to stack with THDA Great Choice and Great Choice Plus. Funding cycles can exhaust mid-year - confirm availability with the City of Memphis Division of Housing and Community Development before applying.
• Knoxville's Community Development Corporation Homebuyer Assistance. Up to $8,000 in down payment and closing cost assistance for income-qualified first-time buyers purchasing a primary residence in Knoxville, administered by Knoxville's Community Development Corporation (KCDC). Structured as a deferred or forgivable second mortgage with multi-year owner-occupancy requirements, HUD-approved homebuyer education required, and designed to stack with THDA Great Choice and Great Choice Plus.

All three city programs run on funding cycles that can exhaust mid-year, and homebuyer education must be completed before application - not after offer acceptance. Plan the education step into the front of your timeline, confirm your target property is inside the relevant city limits, and verify current funding availability with the administering agency before counting on it in your offer.

FHA Loan Requirements in Tennessee

FHA loans are widely used by Tennessee first-time buyers and are compatible with THDA Great Choice, Great Choice Plus DPA, Homeownership for the Brave, and all three major city DPA programs (Nashville MDHA, Memphis, Knoxville KCDC). Across most of Tennessee, FHA loan limits use the standard single-family ceiling, with higher limits in the Nashville-Davidson-Murfreesboro-Franklin metro.

How to Apply

1. Confirm you have not owned a primary residence in the past three years for THDA Great Choice (waivers apply in federally targeted areas and for qualifying veterans).
2. Check your credit score - 580 is the FHA minimum for 3.5% down, and THDA typically requires 640 or higher.
3. Review current THDA income and purchase price limits for your county at thda.org.
4. If you're an active-duty military member, veteran, National Guard, reservist, or surviving spouse, ask your lender about Homeownership for the Brave - the reduced rate stacks with Great Choice Plus.
5. If you're buying inside Nashville/Davidson County, contact MDHA to confirm Homeownership Voucher Program eligibility and current funding availability - the program is income restricted and funding can exhaust mid-year.
6. If you're buying inside Memphis or Knoxville city limits, contact the City of Memphis Division of Housing and Community Development or Knoxville's Community Development Corporation to verify program availability and eligibility.
7. Complete a HUD-approved homebuyer education course - required by THDA and by all three major city programs. Some local programs require a specific course; confirm before enrolling.
8. Select an approved lender on both the THDA list and (if applicable) the relevant city program's participating lender list.
9. Apply through your approved lender, who will coordinate the THDA application and the city program submission simultaneously.

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