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TL;DR: – Tennessee's THDA Great Choice Home Loan is the flagship first-time buyer program: 30-year fixed rate, 640+ credit score, income limits roughly $79,760-$115,240 depending on county and household size.
- Pair it with THDA Great Choice Plus for up to $15,000 in down payment assistance, reducing out-of-pocket costs on a $250,000 purchase to roughly $1,250.
- Tennessee's 28 DPA programs, zero state income tax, and low property taxes make it one of the more affordable states for first-time buyers in the Southeast.
Marcus and his wife had been renting in Murfreesboro for six years. A bank told them their income was "too irregular" for a conventional loan. What they didn't know: Tennessee has 28 separate down payment assistance programs, and the state's flagship mortgage program was designed precisely for buyers in their situation.
This guide covers every major first-time homebuyer mortgage Tennessee offers in 2026, with real income limits, purchase price thresholds, and a step-by-step path from pre-approval to closing. Note that this article does not rely on G2 or Capterra review data, as mortgage programs are government-administered products rather than software tools. All program details are sourced directly from official agency documentation.
What Counts as a First-Time Homebuyer in Tennessee?
A first-time homebuyer is not necessarily someone who has never owned a home. According to HUD's official definition, you qualify if you have not owned a primary residence during the three-year period ending on the date of purchase.
That three-year lookback rule reopens the door for a lot of buyers. Divorced homeowners, people who sold during the pandemic, and renters who previously owned all potentially qualify.
HUD also extends eligibility to single parents who only owned a home jointly with a former spouse, and to displaced homemakers who owned with a spouse but were not the primary earner. Tennessee's THDA adopts this same definition.
Additionally, as THDA notes, repeat buyers purchasing in one of 43 targeted counties or designated areas within 15 additional counties do not need to meet the first-time buyer requirement at all. These are generally economically distressed or rural areas where THDA wants to encourage homeownership regardless of prior ownership history.
Key Takeaway: If you haven't owned a primary residence in the past 3 years, you qualify as a first-time buyer under Tennessee's programs. Single parents and displaced homemakers may qualify even with prior ownership history.
Which Tennessee Mortgage Programs Are Available in 2026?
Tennessee first-time buyers have four primary mortgage pathways in 2026: the THDA Great Choice Home Loan, FHA, USDA, and VA. Each serves a different buyer profile, and they are not mutually exclusive with down payment assistance.
| Program | Min. Credit Score | Down Payment | Income Limits | Purchase Price Limit |
|---|---|---|---|---|
| THDA Great Choice | 640 | 3.5% (FHA-backed) | $79,760-$115,240 | Up to ~$375,000 (varies by county) |
| FHA (standalone) | 580 | 3.5% | None | $541,287 (most TN counties) |
| USDA Rural | 640 | 0% | 115% of area median | Varies by county |
| VA | None (lender overlays: 580-640) | 0% | None | Conforming loan limits |
THDA Great Choice Home Loan
The THDA Great Choice Home Loan is a 30-year, fixed-rate mortgage originated through THDA-approved lenders. THDA sets the interest rate, which does not change after closing.
According to, every borrower on the application must have a credit score of at least 640. The program is backed by FHA, USDA-RD, or VA insurance, meaning most buyers can borrow up to 96.5% of the purchase price with FHA backing.
Income limits are tiered by county and household size. Davidson County (Nashville) carries higher limits than rural Fentress County because THDA bases limits on HUD's Area Median Income figures for each county. As a general range, limits run from approximately $79,760 for smaller households in lower-AMI counties to $115,240 for larger households in higher-cost counties. Verify current figures at thda.org before applying, as THDA updates these annually.
Tennessee veterans and active-duty service members should also check THDA's Homeownership for Heroes program, which offers a 0.50% rate reduction on a Great Choice loan and stacks with the Great Choice Plus DPA.
FHA, USDA, and VA Loans in Tennessee
FHA loans operate independently of THDA and carry no income limits. According to, buyers with a 580+ credit score qualify for 3.5% down. According to LendingTree, most Tennessee counties cap FHA loans at $541,287 for a single-family home in 2026.
FHA loans carry an upfront mortgage insurance premium of 1.75% of the loan amount plus an annual MIP. According to LendingTree's FHA guide, the annual MIP ranges from 0.15% to 0.75% depending on loan term and LTV. Unlike conventional PMI, FHA MIP on loans with less than 10% down stays for the life of the loan.
USDA loans cover substantial rural Tennessee territory with zero down payment required. The USDA Rural Development guaranteed loan program charges a 1% upfront guarantee fee and 0.35% annual fee. Use the USDA property eligibility map to check a specific address. Major metro cores (Nashville, Memphis, Knoxville, Chattanooga) generally do not qualify, but suburban fringes and smaller cities often do.
VA loans require no down payment and no mortgage insurance. According to, VA sets no minimum credit score, though most Tennessee lenders apply overlays of 580-640. Tennessee National Guard members who have been federally activated should verify eligibility directly with VA or a participating lender.
Key Takeaway: THDA Great Choice wraps FHA/USDA/VA insurance with a state-set rate and DPA access. If your credit score is 580-639, a standalone FHA loan is your most accessible path. Rural buyers should check USDA eligibility before assuming they need a down payment.
How Does Tennessee Down Payment Assistance Work?
Down payment assistance in Tennessee is more accessible than most buyers realize. According to, there are 28 DPA programs in Tennessee, with 71.4% of them carrying available funding as of Q4 2025.
THDA Great Choice Plus is the most widely used. According to, it provides up to 6% of the purchase price as a second mortgage. On a $250,000 home, that equals $15,000 toward your down payment and closing costs.
The second mortgage is structured as either deferred (0% interest, no monthly payment, due when you sell, refinance, or pay off the first mortgage) or amortizing (carries an interest rate with monthly payments). According to MIGOnline, the Great Choice Plus is a 15-year second mortgage at 0% interest with no monthly payments under the deferred structure.
Transparent calculation: On a $250,000 purchase with FHA backing:
- FHA down payment (3.5%): $8,750
- Closing costs (3%): $7,500
- Total needed before DPA: $16,250
- THDA Great Choice Plus (6%): -$15,000
- Out-of-pocket at closing: approximately $1,250
Beyond THDA, two local programs extend coverage for specific markets:
The Housing Fund serves Middle Tennessee buyers with DPA loans up to $35,000 for down payment, prepaids, and closing costs. For loan requests between $10,000 and $35,000, the minimum credit score is 620. The current promotional rate is 5% fixed. Borrowers must contribute at least 1% of the sales price from their own funds.
The City of Clarksville's Home of Your Own program assists first-time buyers purchasing within city limits with down payment and closing cost help. Program funding and maximum assistance amounts vary by cycle, so contact Clarksville's Department of Housing and Community Development for current 2026 figures.
| DPA Program | Max Assistance | Repayment Structure | Eligible Area |
|---|---|---|---|
| THDA Great Choice Plus | 6% of purchase price (~$15,000 on $250K) | Deferred (0% interest) or amortizing; due on sale/refi | All 95 TN counties |
| The Housing Fund | $35,000 | Low-interest second mortgage (currently 5% fixed) | Middle Tennessee |
| Clarksville Home of Your Own | Varies by funding cycle | Deferred second mortgage | Clarksville city limits |
Key Takeaway: THDA Great Choice Plus can cover nearly all of your out-of-pocket costs on a $250,000 purchase. Nashville-area buyers should also check The Housing Fund, which offers up to $35,000 and has a lower credit floor (620) than THDA.
Do You Qualify? Income, Credit, and Purchase Price Limits
Self-qualifying before you call a lender saves time and sets realistic expectations. Run through these five criteria first.
Quick self-check:
- Credit score: 640+ for THDA or USDA; 580+ for standalone FHA; no VA minimum but expect lender overlays of 580-640
- Income: Within THDA county limits (roughly $79,760-$115,240 depending on household size and county)
- Purchase price: At or below THDA's county limit (up to approximately $375,000 in higher-cost counties)
- Debt-to-income ratio: 45% or below (up to 50% with compensating factors per THDA guidelines)
- Homebuyer education: Required for THDA DPA; must be completed through a THDA-approved provider
According to One Bank of Tennessee, state-sponsored mortgage programs typically require a minimum credit score of 640. If your score is 580-639, a standalone FHA loan is your most direct path. According to Houzeo, FHA loans also accept scores as low as 500, though that requires a 10% down payment.
For income limits, the county tier matters significantly. A family of four in Davidson County (Nashville) will have a higher income ceiling than the same family in rural Fentress County, because THDA scales limits to each county's HUD Area Median Income. Always verify the current limits table at thda.org before assuming you're over the limit.
According to, the average credit score in Tennessee was 703 in 2025, meaning most buyers are already above the 640 threshold. If you're below 640, THDA's New Start Loan program offers credit-building resources to help you reach the minimum.
For DTI, Houzeo recommends targeting 36% or lower for the best approval odds, though THDA allows up to 45% as standard.
Key Takeaway: The 640 credit score minimum is the most common disqualifier for THDA programs. If you're at 580-639, pursue a standalone FHA loan while building your score toward 640 for future THDA eligibility.
How Do You Apply for a First-Time Homebuyer Mortgage in Tennessee?
You apply through a THDA-approved lender, not directly through THDA. THDA does not lend money to borrowers; it provides the rate structure and DPA funding through its network of participating lenders.
Step 1: Check income and credit eligibility. Pull your credit reports from all three bureaus and compare your household income against the current THDA limits table for your county.
Step 2: Complete a THDA-approved homebuyer education course. This is required for Great Choice Plus DPA eligibility. According to, course costs range from $50 for in-person to $100 for online via Zoom. The certificate is valid for 12 months from completion, so time it close to when you plan to close.
Step 3: Get pre-approved through a THDA-participating lender. Use the THDA lender search tool to find an approved lender in your area. Brokers licensed in Tennessee who participate in THDA programs, such as Duane Buziak Mortgage Maestro, can walk you through THDA, FHA, USDA, and VA options side by side so you're not guessing which program fits your situation.
Step 4: Find a home within purchase price limits. Work with a real estate agent familiar with THDA requirements. The home must be your primary residence and fall at or below the purchase price limit for that county.
Step 5: Your lender submits the loan for THDA approval. The lender handles the THDA reservation and secondary approval layer.
Step 6: Close. According to the, government-backed loans typically take 30-60 days from application to closing. THDA loans may run toward the longer end due to the additional approval layer.
Documents you'll need at pre-approval:
- Two most recent pay stubs (or 2 years of tax returns if self-employed)
- W-2s from the past two years
- Two months of bank statements
- Government-issued photo ID
- Social Security number for credit pull
Key Takeaway: The homebuyer education certificate is the step most buyers skip until the last minute. Complete it early. It's valid 12 months and required before THDA DPA funds can be reserved.
What Are the Real Costs of Buying a Home in Tennessee?
According to, closing costs in Tennessee average 2-5% of the purchase price. On a $250,000 home, that's $5,000-$12,500.
Full cost walkthrough on a $250,000 FHA purchase:
| Cost Item | Amount |
|---|---|
| FHA down payment (3.5%) | $8,750 |
| Closing costs (3%) | $7,500 |
| Total before DPA | $16,250 |
| THDA Great Choice Plus (6%) | -$15,000 |
| Estimated out-of-pocket | ~$1,250 |
For monthly carrying costs, a $250,000 FHA loan at 6.75% over 30 years produces approximately $1,621/month in principal and interest. Add FHA annual MIP (approximately $115-$140/month on this balance), plus property taxes. According to, Tennessee's average effective property tax rate is 0.66%, one of the lowest in the country. On a $250,000 home, that's approximately $1,650/year or $138/month. Total estimated monthly payment: approximately $1,875-$1,900.
One genuine affordability advantage Tennessee offers: according to the Tennessee Department of Revenue, the state levies no income tax on wages. A buyer earning $75,000 annually keeps roughly $3,000-$5,000 more per year compared to buyers in states with 4-7% income tax rates. That additional take-home pay directly supports mortgage qualification and monthly cash flow.
Closing cost components to budget for separately: home inspection ($300-$500), appraisal ($400-$600), title insurance ($500-$1,000), and recording fees ($50-$150).
According to THDA's program history, the agency has financed over $10 billion in mortgages and helped more than 134,000 Tennessee households since 1974. That track record reflects a program built for exactly the buyers this guide addresses.
Key Takeaway: After THDA Great Choice Plus DPA, a first-time buyer can close on a $250,000 Tennessee home for roughly $1,250 out of pocket. Tennessee's low property taxes and zero state income tax make the ongoing monthly costs more manageable than comparable purchases in higher-tax states.
Working with a THDA-Approved Lender in Tennessee
Finding the right lender matters as much as finding the right program. THDA loans are only available through participating lenders, and not every lender is equally familiar with stacking THDA Great Choice Plus with programs like The Housing Fund or navigating USDA eligibility for rural Tennessee counties.
Duane Buziak Mortgage Maestro is a NMLS-licensed mortgage broker (NMLS: 1110647) operating in Tennessee, Virginia, Georgia, and Florida. As a two-time back-to-back Mortgage Broker of the Year and Scotsman Guide Top Originator, Duane's practice focuses on buyers who've been told no elsewhere, including self-employed borrowers, veterans, and first-time buyers navigating THDA, FHA, USDA, and VA options simultaneously.
Key reasons to work with a broker familiar with Tennessee programs:
- Access to multiple lenders and THDA-participating institutions in one conversation
- Ability to compare THDA Great Choice rates against standalone FHA or conventional options
- Experience with NonQM products (Bank Statement, DSCR, NoRatio) for self-employed buyers who don't fit standard income documentation
- NoTouch Credit inquiry process means your credit isn't hit while you're shopping
Frequently Asked Questions
What credit score do you need for a first-time homebuyer mortgage in Tennessee?
Direct Answer: You need a minimum 640 credit score for THDA Great Choice and USDA loans. FHA loans accept 580 for 3.5% down.
According to, every borrower on the application must meet the 640 minimum. If your score is 580-639, a standalone FHA loan is your most accessible option. Houzeo notes FHA accepts scores as low as 500 with a 10% down payment.
How much down payment assistance can you get in Tennessee?
Direct Answer: THDA Great Choice Plus provides up to 6% of the purchase price, roughly $15,000 on a $250,000 home. The Housing Fund offers up to $35,000 for Middle Tennessee buyers.
According to The Housing Fund, DPA loans up to $35,000 cover down payment, prepaids, and closing costs. LendingTree reports there are 28 DPA programs statewide, with most carrying available funding.
Can you use the THDA Great Choice loan to buy in any Tennessee county?
Direct Answer: Yes. The THDA Great Choice loan is available in all 95 Tennessee counties. Purchase price and income limits vary by county.
According to, repeat buyers (not just first-timers) can also use Great Choice in 43 targeted counties without meeting the first-time buyer requirement.
How does Tennessee's first-time homebuyer program compare to a conventional loan?
Direct Answer: THDA Great Choice offers a state-set fixed rate with DPA access, but carries FHA MIP for the life of the loan. Conventional loans allow PMI removal at 20% equity but require stronger credit and higher down payments without assistance.
According to MIGOnline, the Great Choice program works with FHA, USDA, VA, or conventional loans up to 78% LTV. For buyers with 640+ credit and limited savings, THDA's DPA typically outweighs the long-term MIP cost in the early years of ownership.
What income is too high to qualify for Tennessee first-time homebuyer programs?
Direct Answer: THDA income limits range roughly from $79,760 to $115,240 depending on household size and county. Buyers over these limits can still use standalone FHA, USDA, or VA loans, which carry no income caps.
Davidson County buyers have higher income ceilings than rural county buyers because THDA scales limits to each county's HUD Area Median Income. Verify your specific county's current limits at thda.org.
Is the THDA homebuyer education course required, and how long does it take?
Direct Answer: Yes, it is required for Great Choice Plus DPA eligibility. The course is typically 6-8 hours and costs $50-$100 depending on format.
According to, in-person courses run approximately $50 and online Zoom courses approximately $100. The certificate is valid for 12 months from completion per THDA's education requirements.
Can you qualify as a first-time buyer if you owned a home years ago?
Direct Answer: Yes. If you have not owned a primary residence in the past three years, you qualify as a first-time buyer under HUD's definition, which THDA adopts.
According to, the requirement is simply that you have not lived in a home you own for at least three years. Single parents and displaced homemakers may qualify even with more recent ownership history under specific exceptions.
Ready to Start?
Tennessee's combination of THDA programs, local DPA options, low property taxes, and zero state income tax creates a genuinely favorable environment for first-time buyers in 2026. The median Tennessee sales price was $392,100 as of March 2026 according to The Mortgage Reports, but with THDA Great Choice Plus reducing your out-of-pocket to roughly $1,250 on a $250,000 purchase, the barrier to entry is lower than most buyers assume.
Your next three steps: check your credit score against the 640 THDA threshold, verify your household income against the current county limits at thda.org, and connect with a THDA-participating lender. If you want to compare THDA, FHA, USDA, and VA options side by side with someone licensed in Tennessee, Duane Buziak Mortgage Maestro works with buyers across the state and specializes in situations where the first lender said no.