Tennessee first-time homebuyer grants and down payment assistance (2026)

Great Choice is a bond loan first, down payment help second

The Great Choice Home Loan is a 30-year fixed-rate FHA, VA or USDA Rural Development mortgage funded by mortgage revenue bonds ⁠³. Bond funding brings federal limits on first-time status, income and price, plus federal recapture tax if you sell within nine years. THDA reimburses recapture tax paid by buyers who purchased on or after May 1, 2021; you calculate it on IRS Form 8828 and send THDA the filed return and proof of payment ⁠³. The home must be your primary residence and you must move in within 60 days of closing ⁠³.

The Freddie Mac HFA Advantage loan is the conventional alternative. It is not bond-funded, so it has no first-time buyer requirement and no recapture tax. Income is measured by the borrowers’ qualifying income instead of household income ⁠¹⁰. Its limit is the Great Choice figure for a 3+ person household in your county, whatever your household size ⁠³⁠⁴. It requires 3% down and a Loan Product Advisor “Accept” with no manual underwriting ⁠³.

THDA’s Originating Agents Guide lists six current programs and no Mortgage Credit Certificate, so there is no statewide MCC in 2026 ⁠³.

Four ways to take Great Choice Plus, and what each costs

Great Choice Plus and Homeownership for Heroes Plus offer the same four options. All are second deeds of trust, and all are due in full when the first mortgage is paid off or refinanced ⁠³:

Scroll the table sideways to see every column.

The 5% option tops out at $15,000 on homes priced above $300,000 ⁠⁵. Heroes rates on the same sheet were 6.250%, or 6.375% with the $10,000 option ⁠⁵.

Forgiveness is all-or-nothing: sell or refinance before year 10 and you repay the whole amount ⁠¹. Over a 30-year loan, the $10,000 option’s extra quarter point of interest can add up to more than the extra $4,000, so ask your lender to compare total payments both ways. No cash back is allowed beyond reimbursement of documented up-front costs such as earnest money or the class fee, and THDA sets no minimum cash investment for Plus loans ⁠³. If another agency also puts a subordinate lien on the home, THDA limits its own help to the $6,000 No Payment option or the $25,000 new construction loan ⁠³.

HFA Advantage Plus offers only two choices: $6,000 forgiven after 10 years, or up to 5% (max $15,000) repaid over 30 years ⁠¹⁰. The HFA Advantage first mortgage was 7.375% on Oct. 19, 2026 ⁠⁵.

The $500,000 price cap and THDA’s county income limits

THDA’s acquisition cost limit is $500,000 in every Tennessee county ⁠⁴. Income limits differ by county and come in two columns: 1-2 persons and 3 or more ⁠⁴. The lowest limits, $94,900 and $109,200, apply in many rural counties such as Benton, Coffee and Obion. The highest, $139,320 and $162,540, apply around Nashville ⁠⁴. The 43 fully targeted counties, marked T on the chart, mostly use $113,880 and $132,860 ⁠⁴.

Scroll the table sideways to see every column.

To find your county’s figures, open THDA’s Acquisition Cost and Income Limits chart (dated 08.01.2026) and read across from your county name ⁠⁴.

THDA leaves out income of household members who are not liable on the mortgage, but counts earnings on liquid assets above $5,000 ⁠³.

Who can skip the three-year first-time buyer rule

For Great Choice, you must not have had an ownership interest in your primary residence in the 36 months before you apply ⁠³. A married applicant’s spouse must meet the same test even if the spouse is not on the loan ⁠³. There are three exceptions:

• Targeted counties. All of Campbell, Cannon, Carroll, Claiborne, Cocke, Fayette, Greene, Hawkins, Tipton, Union and 33 other counties are targeted areas, where the rule does not apply ⁠⁶.
• Targeted census tracts. In 21 other counties, marked * on the chart and including Shelby, Davidson, Knox and Hamilton, only listed tracts are targeted. THDA publishes the tract numbers and an address-search map ⁠⁴⁠⁶.
• Veterans. A veteran with a DD-214, or a DD-4 for re-enlisted members, can sign the Veteran Exemption Application Declaration. The veteran’s spouse then does not have to meet the three-year test ⁠³.

Homeownership for Heroes is for active-duty military, National Guard members and veterans, EMTs and paramedics, firefighters, K-12 teachers and principals in full-time positions, state and local law enforcement officers, and public safety dispatchers ⁠². It waives the first-time rule only for qualified military and veterans, and it is limited to FHA, USDA and VA loans ⁠². On the Oct. 19, 2026 rate sheet, the Heroes rate was half a point below Great Choice ⁠⁵.

Credit score, DTI and underwriting rules THDA adds

THDA requires a 640 score for everyone on the loan application ⁠². Its Originating Agents Guide sets three underwriting tiers for Great Choice, Heroes and Plus loans ⁠³:

1. Automated approval (Approve/Eligible)

   A 640 minimum score and a 45% maximum debt-to-income ratio. THDA can still ask for more documents or deny a file with “layered risk,” such as a housing ratio over 36%, scores below 660 or no reserves.

2. Manual underwriting with a score

   A 43% maximum DTI and one month of house payments in reserves that cannot be a gift. You must also have a verified rental history or a two-year job history.

3. No credit score

   Manual underwriting on nontraditional credit, a 41% maximum DTI and two months of reserves that cannot be a gift.

THDA will not approve a loan with a co-signer. HFA Advantage credit and DTI follow Freddie Mac’s Loan Product Advisor ⁠³.

Homebuyer education: only THDA-accepted courses count

Every borrower on a THDA loan must finish homebuyer education, including repeat buyers ⁠³. The certificate must come from a THDA-approved provider or a HUD-approved counseling agency, be dated before the note and be less than 12 months old ⁠³. Online students also need a one-hour one-on-one follow-up session ⁠³. THDA accepts three curricula: Realizing the American Dream, Finally Home and eHome America. It does not accept CreditSmart, HomeReady or Framework, so a free online certificate you earned for another loan may not count ⁠⁷.

• Classroom course. At least 6 hours, in person or virtual, using Realizing the American Dream. Each agency sets its fee, between $25 and $100 per household ⁠⁷⁠⁸.
• Online course. eHome America at $100 per household, followed by a required one-hour session with a counselor from the agency you chose. You get the certificate after both ⁠⁸. Employees of State of Tennessee agencies and other STEP IN employers can get a discount code ⁠⁷.

Agencies with Spanish-speaking counselors are marked “Spanish” on THDA’s list of approved agencies ⁠⁷.

Chattanooga, Memphis and Nashville: what local governments add

• Chattanooga Down Payment Assistance Program. Up to $15,000 as a 0% deferred, forgivable second lien with no payments ⁠¹². The full balance is forgiven at the end of a 30-year term, with no partial forgiveness. You repay all of it if you sell, do a cash-out refinance or stop living in the home ⁠¹². Combined with THDA’s $6,000 it can reach $21,000 ⁠¹¹. You must be a first-time buyer with income at or below 120% of AMI. The FY2026 limits, effective June 1, 2026, are $93,500 for two people and $116,900 for four ⁠¹¹. The home must be inside city limits and cost $400,000 or less. You also need a 620 score (or the first mortgage’s minimum, if higher), a DTI of 45% or less, $1,000 of your own money (not a gift), a home inspection, THDA-approved education and a city-approved lender ⁠¹¹⁠¹².
• Memphis Office of Down Payment Assistance. The city lists six programs. Citywide DPA and MHA DPA, for current or displaced Memphis Housing Authority residents, are capped at 80% of AMI. HIPC allows up to 200% of AMI in 15 designated areas. HIPP (police), HIPF (firefighters) and MSCS (school employees) have no income limit ⁠¹³. The city’s page does not publish award amounts, loan terms or funding status, and the income and price chart it links is labeled with 2023 HUD limits. Call 901-636-7300 before counting on it ⁠¹³.
• Nashville. Metro Nashville’s Barnes Housing Trust Fund pays nonprofit developers, not individual buyers. Its Round 16 awards of $40.2 million, announced Oct. 6, 2026, fund 1,106 homes, and homebuyer units must be affordable at or below 80% of AMI ($92,900 for a family of four) ⁠¹⁴. The nonprofit Housing Fund makes repayable down payment loans of $5,000 to $35,000 at 5% fixed, for incomes up to 120% of Nashville AMI ⁠¹⁵.

Shelby County and Knoxville pages blocked access on Oct. 20, 2026; ask those offices for current terms.

Getting a THDA loan through an approved lender, step by step

1. Check your county limits

   Find your county on THDA’s Aug. 1, 2026 chart. If you have owned a home in the last three years, check whether your county or census tract is targeted ⁠⁴⁠⁶.

2. Take the homebuyer class early

   Sign up for a classroom course on THDA’s calendar or the eHome America course, and finish the counseling session ⁠⁸.

3. Pick a THDA-approved lender

   Use THDA’s Find a Lender page. Only approved lenders can register and lock a THDA loan ⁠⁵⁠⁹.

4. Gather documents

   Bring your latest signed tax return with W-2s (or an IRS transcript), pay stubs, two years of job history and bank statements; veterans using the exemption add a DD-214 or DD-4 ⁠³.

5. Choose your Plus option at rate lock

   The second loan is locked together with the first mortgage. Locks last 60 days for existing homes and 120 days for new construction ⁠³⁠⁵.

6. Sign THDA’s disclosures and close

   Sign the Application Declaration and recapture notice at application, and keep your second-lien note for any later sale or refinance ⁠³.

If one lender turns you down, another approved lender can review your file, and a THDA-approved counselor can help with credit ⁠². Other states’ programs are compared on the first-time homebuyer grants page, and other Tennessee guides are on the Tennessee page.