Updated: Sep 28, 2022
The Volunteer State is booming. Over the past few years, and particularly during the COVID-19 pandemic, Americans have been relocating in mass to Tennessee. In fact, a 2021 United Van Lines study found that Tennessee was actually the 6th most popular state that Americans are relocating to. And the reasons for this are wide.
COVID related relocations, migrations to state income tax free states, and other macro trends explain only part of the story. Tennessee is also a highly desirable place to live! It is home to seasonable weather, mild winters, great barbecue, and the best country music scene in the entire country.
All of these factors have led home prices to surge. And while there are signs of the market starting to moderate for the first time since before the pandemic began, homes are still pricy. Thankfully, Tennessee, like most other states out there, has a number of programs out there to spur first time homeownership statewide.
Buying a home in Tennessee
We mentioned the thousands of Americans moving to Tennessee each week from all over the country.
Of course, this has led to rapidly increasing home prices, though the market has started to regulate as of late. As of June 2022, the average home in Tennessee cost $299,571, an increase of 27.1% since May 2021, according to Zillow.
But the average home prices vary greatly by county and metro area. For example:
The average home price in Nashville is $455,304
Chattanooga - $274,318
Memphis - $153,894
Murfreesboro - $426,288
As you can see, prices vary greatly across different metro areas in the state.
First-time home buyer programs in Tennessee
The Tennessee Housing Development Agency (THDA) offers a number of programs for first-time buyers across the state, including:
Great Choice Home Loan
Homeownership for the Brave
1. THDA Great Choice Home Loan Program
The Great Choice Home Loan offers 30-year fixed rate mortgages to home buyers that are first-time, repeat, or Veteran buyers. THDA Great Choice is intended to help low to moderate income Tennesseans to buy homes statewide. The program allows qualifying borrowers to use the following types of home loans:
THDA Great Choice requires a minimum credit score of 640 and requires you to satisfy the following eligibility criteria:
Have an income within program limits (vary by county)
Buy a home within program limits (also varies by county)
Complete a THDA-approved home buyer education course
Have the minimum down payment needed per mortgage type (3.5% for FHA, 3% for Conventional 97)
There are also two possible extensions of the program, THDA Great Choice Plus-Amortizing and Great Choice Plus-Deferred, that offer down payment assistance to Tennessee buyers. More on this in a minute.
THDA Great Choice income limits
This program, just like many other across the country, carries income limits that are established on a county level. Households with 1-2 people generally require you to make no more than $77,800-$113,160, while households with 3+ people carry limits of $89,470-$132,020.
Click here for a full list by county.
THDA Great Choice purchase price limits
As far as how much you can spend on your home, you'll need to stay within homes with purchase prices up to $300,000-$375,000, again dependent on county. Counties with higher home prices are more likely to carry higher price limits, while those in lower-priced rural areas will carry the $300,000 limit.
2. THDA Homeownership for the Brave
The next THDA program, Homeownership for the Brave, is available to United States military members and their spouses. Through the program, you'll be able to get a 50 basis point discount on a mortgage loan for your new home. For example, if prevailing mortgage rates are 5% at the time in which you apply for a loan, you'll be able to take a mortgage at 4.5%. If you finance $300,000 for example, this interest rate deduction would save you $90 per month, assuming a thirty-year fixed rate mortgage.
More specifically, Homeownership for the Brave is open to:
Active Duty Military
Active Duty Reservists and members of the National Guard if they've served 180+ days of active duty
Spouses/Surviving Spouses of Veterans
Other eligibility criteria are easy to follow and include:
A minimum FICO credit score of 640
A debt-to-income ratio below 45%
Complete a home buyer education course by a THDA-approved source
The program is compatible with FHA, VA, USDA, and Conventional mortgage programs.
Tennessee down payment assistance programs
The THDA, as well as other organizations, also offer various down payment assistance programs. Like we mentioned earlier, two of these programs are an extension of the Great Choice program.
THDA Great Choice Plus - Amortizing or Deferred
Under this extension of the program, eligible home buyers may opt to take a second mortgage on their new homes in order to receive the down payment assistance needed to make homeownership viable.
Under the Amortizing program, you'll be able to take a second 15-year mortgage worth up to 6% of the home's purchase price. So if you buy a home for $300,000, your maximum second mortgage could be $18,000.
This second mortgage will carry fixed monthly payments at the same interest rate as your first mortgage. In the event that you sell your home or refinance your home, the home's second mortgage will become due immediately.
You may also opt to use the Tennessee Great Choice Deferred program, which also puts a second mortgage on your home, but the loan is deferred, meaning you will not need to make monthly payments towards it. Instead, you can opt to borrow a maximum of $6,000, which will be forgiven when you successfully repay your first mortgage. You will only need to repay the amount borrowed in the event that you sell your property or refinance before you've paid off your first mortgage in full.
How to participate in a first-time home buyer program in TN
Participating in any of the above THDA programs is really easy to do. In fact, you only need to follow a handful of steps to get started.
The first thing that you'll want to do is to find a THDA-qualified lender to help you navigate the process. There are some big banks that you can use, like Mutual of Omaha and SunTrust, as well as some more local lenders, like Vanderbilt Mortgage and Finance.
After you find a lender, your next step is to qualify for the program and loan type that you intend to use, whether it be an FHA, VA, Conventional, Conventional 97, or other qualifying loan type. You may opt to get preapproved for a mortgage so that you can move quickly once you find a house you'd like to buy.
Don't forget that you'll need to complete a home buyer education course, complete with a one-hour live consultation with a homeownership counselor.
Get our Tennessee mortgage calculator
TN's first-time home buyer programs are great, but they don't provide you much insight as to what your monthly mortgage payments will be. So to help you out, we built a calculator that will help you understand exactly how much home you may be able to afford.
All you have to do is provide us with your:
Projected home purchase price
Loan interest rate
Down payment percentage
Of course, you don't need to already have all of this information to use the calculator. Instead, use our tool as a guide to help you understand what type of homes you should be considering.
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