Looking to Buy in Tennessee? THDA Offers Down Payment Help

If you haven’t owned a home in the past three years, the Great Choice program might be your starting point. It’s a 30-year fixed rate mortgage with a predictable monthly payment, and a second loan helps cover down payment and closing costs.

First-time homebuyer status means no home ownership in three years, though THDA makes exceptions for veterans and people buying in certain areas. A homebuyer education class is required before closing, and income needs to fall within limits that vary by county and household size.

Important details:

• Primary residence only
• 640 minimum credit score
• Compatible with FHA, VA, and USDA loans
• Move in within 60 days of closing
• Single-family homes, townhouses, or up to four units (as long as one is owner-occupied)

Here’s how it worked for Sarah, a Knoxville teacher. She  saved $8,000 over four years of renting and found a $180,000 townhouse near work. Close, but not quite there: between the down payment ($6,300 at 3.5% for an FHA loan) and closing costs (around $5,000), she needed more than she had.

With Great Choice, a second loan covers part of the down payment and closing costs. Sarah’s $8,000 handles the rest. She moves into the townhouse instead of spending another year paying rent to save up the difference. The fixed rate keeps her monthly payment from jumping around, which matters when budgeting carefully on a teaching salary.

Great Choice Plus adds up to 5% of the home’s purchase price (capped at $15,000) for down payment or closing costs. There are two ways to structure this assistance.

One approach is a second loan at the same interest rate as the primary mortgage. Both loans have monthly payments for 30 years, which means higher monthly costs but the loan gets paid down from day one.

The other approach is a deferred loan that maxes out at $6,000 with 0% interest. Repayment only happens when the home is sold, refinanced, or after 30 years, with no monthly payments in the meantime. If keeping monthly payments low is a priority, this option is worth considering.

This program targets people serving Tennessee communities. If someone is active military, National Guard, a veteran, or a first responder (police, fire, EMT, paramedic), they qualify for a 0.50% interest rate reduction compared to Great Choice.

The half-point reduction saves around $60 monthly on a $200,000 mortgage, which totals more than $21,000 over 30 years.

Documentation requirements vary by role. Military members and veterans can use a DD-214 or military ID. First responders need a current license or certification and documentation showing Tennessee employment or work at a Tennessee military base.

Heroes Plus combines the rate reduction with down payment assistance. The catch is it only works with conventional loans, not FHA, VA, or USDA. The 0.50% interest rate discount remains, along with the choice between a loan with monthly payments (up to 5% of sales price, capped at $15,000) or the deferred loan (up to $6,000 with no monthly payments).

Eligible borrowers benefit from both lower costs at closing and reduced monthly payments throughout the loan.

Marcus works as a firefighter in Nashville. He recently started with a new department and found a $225,000 house, but most of his savings went toward job transition costs. His salary covers what the monthly mortgage would be, but he’s short on the $11,000 needed for down payment and closing costs.

Heroes helps in two ways: $11,250 in assistance (5% of the purchase price) covers most of the upfront costs, and the 0.50% rate reduction lowers his monthly payment by roughly $70. Over the full loan term, that rate discount saves more than $25,000.

Without these options, Marcus would rent for another six to eight months at about $1,600 per month, delaying homeownership while his savings recover.

HFA Advantage stands out because repeat buyers qualify. Most THDA programs require first-time buyer status, but this one doesn’t. It targets low to moderate income families and offers reduced mortgage insurance rates that cut monthly costs. The down payment is 3%.

Homebuyer education remains a requirement, along with meeting income limits for the county. Credit and financial criteria follow conventional loan standards.

Key features:

• No first-time buyer requirement
• 3% down payment
• Reduced mortgage insurance
• Primary residence requirement
• $400,000 purchase price cap

Jennifer and Mike own a home in Memphis. Well, they did. They sold their starter place three years back and have been renting while they save up for more space. Two kids and daycare bills mean saving goes slowly. They’ve got about $9,000, and they found a $280,000 house in a school district they like. The down payment is $8,400 at 3%, and they still need to cover closing costs.

Because they’ve owned a home before, they don’t fit the first-time buyer category most THDA programs require. HFA Advantage doesn’t have that limitation. The program’s reduced mortgage insurance brings their monthly cost down compared to a standard conventional loan. With just 3% down, their $9,000 handles the down payment and closing costs. They get into the house now, which matters when timing lines up with their kids’ school years.

Down payment assistance can stack with HFA Advantage using the same two structures: a loan with monthly payments (up to 5% of sales price, $15,000 cap) or a deferred loan (up to $6,000 at 0% interest, no monthly payments).

This works for people who aren’t first-time buyers but still need help with upfront costs. Maybe you owned a home years ago, or you’re upgrading to a larger house and your equity isn’t enough to cover the new down payment.

Primary Residence Requirement

All THDA programs require the home to be a primary residence. Move-in happens within 60 days of closing. These programs exist to help families create stable housing, not to support investment properties or second homes.

Homebuyer Education

Homebuyer education is mandatory. The course covers budgeting, home maintenance, and the realities of homeownership. THDA-approved providers offer the classes, and most are available online.

Understanding the Deferred Loan

The deferred loan option works simply. Borrowers who choose this have a $6,000 loan at 0% interest with no monthly payments. It stays in place for as long as they own and live in the home.

Repayment happens in three scenarios: selling, refinancing, or after 30 years. Most people sell or refinance before three decades pass, typically with considerable equity built up by then. The $6,000 comes from that equity at closing, not as a separate payment.

This keeps monthly costs down while equity builds and homeowners get settled in their community.

Income Limits

Income limits apply because these programs serve low to moderate income households. Each Tennessee county has different limits, and THDA counts total household income from everyone 18 and older. County-specific limits are on THDA’s website or available by contacting DSLD Mortgage.

Property Types and Restrictions

Single-family homes, townhouses, and properties with up to four units (one must be owner-occupied) all qualify. New construction and existing homes work. Mobile homes and investment properties don’t. Maximum purchase price is $400,000.

Federal Recapture Tax

Federal recapture tax could apply to THDA loans in specific situations: selling within nine years, making significant profit, and earning substantially more at sale than at purchase. Most people never pay it, but THDA covers the details during the application.

DSLD Mortgage verifies all requirements and helps identify the best program fit. Here’s what to expect:

Confirm the basics. Income within county limits? Three years without homeownership , or a qualifying exception? Move-in within 60 days? Credit score at 640 or higher?

Start the application with DSLD Mortgage. We identify which THDA program matches the situation and explain current rates, plus help calculate affordable payment amounts based on income and expenses.

Complete homebuyer education before closing. THDA-approved courses take a few hours, and most are available online.

Work with a real estate agent to house hunt. Properties need to fall within THDA’s price limits, and agents should understand THDA program requirements and restrictions.

Apply once there’s a signed purchase agreement. DSLD Mortgage completes the application and submits it to THDA for approval, providing guidance throughout.

Great Choice works for first-time buyers and anyone who hasn’t owned a home in three years. Need more upfront help? Great Choice Plus provides it. Service members and first responders have access to Homeownership for Heroes, which reduces the interest rate and monthly payment throughout the loan. Heroes Plus combines that discount with down payment assistance for conventional loan borrowers.

Repeat buyers can turn to Freddie Mac HFA Advantage since it doesn’t require first-time buyer status. Add HFA Advantage Plus for down payment help. These programs all solve the same problem: gathering enough cash for closing. Contact DSLD Mortgage to identify the right fit.