Tennessee First-Time Home Buyer Programs

Thousands of home buyers are looking to buy a home in Tennessee in 2025 with decreased inflation, reduced mortgage rates and attractive TN home buying grants. We published this Tennessee first-time home buyer guide so consumers can get help finding home buying grants with statewide and local down payment assistance and lending incentives that make homeownership more possible this year.

Tennessee’s housing market, with a median home price of $380,700 in February 2025, presents challenges for first-time home buyers, particularly in fast-growing areas like Nashville, Chattanooga, and Knoxville. The median down payment in Tennessee was $49,500 for single-family homes in December 2024, a significant barrier for many. Fortunately, the state offers a robust array of programs through the Tennessee Housing Development Agency (THDA), local initiatives, and federal mortgage options to make homeownership more accessible.

Top Tennessee First-Time Home Buyer Programs in 2025

The THDA oversees Tennessee’s primary home buyer programs, offering 30-year fixed-rate mortgages paired with DPA and tax credits. (FHA, VA, USDA, or conventional)

Most Tennessee home buyer programs require a minimum credit score of 640 (620 for some USDA loans), a debt-to-income (DTI) ratio of 45–50%, completion of a THDA-approved homebuyer education course, and a minimum borrower contribution of 1% of the purchase price.

The income and home purchase price limits vary by county and household size, with a maximum loan amount of $806,500.

1. THDA Great Choice Home Loan

The Great Choice Home Loan provides 30-year fixed-rate mortgages for first-time buyers, veterans, or those purchasing in targeted areas (e.g., zip codes like 37037, 37115, 37207). It supports conventional, VA, USDA and FHA loans, with a minimum down payment of 3.5% for FHA or 3% for conventional HFA Advantage loans (22% down for other conventional loans). Tennessee borrowers can finance up to 96.5% of the home’s value. Key requirements include:

• Income limits (e.g., $88,200–$126,200 by county).

• Purchase price limits (e.g., $349,525–$484,350).

• Homebuyer education course.

This TN first time homebuyer program also supports off-site manufactured homes. Details at THDA Great Choice.

2. THDA Great Choice Plus

The Great Choice Plus program offers DPA for borrowers approved for a Great Choice Home Loan, available as:

• Deferred Option: A $6,000 forgivable second mortgage at 0% interest, forgiven at the end of the 30-year first mortgage term unless the home is sold or refinanced.

• Amortizing Option: Up to 5% of the purchase price (max $15,000) as a 30-year second mortgage with the same interest rate as the first mortgage, requiring monthly payments.

Both options cover down payment or closing costs and require a THDA education course. Learn more at THDA Great Choice Plus.

3. THDA Homeownership for Heroes

This program, part of Great Choice, offers a 0.5% interest rate reduction on 30-year fixed-rate FHA, USDA, or VA loans for active-duty military, veterans, National Guard, reservists, law enforcement officers, EMTs, paramedics, or firefighters. Non-military applicants must be first-time buyers. It pairs with Great Choice Plus DPA ($6,000 or $15,000 options). Most Tennessee lenders are requiring a 640 credit score and income/purchase price limits. See THDA Homeownership for Heroes.

4. THDA HFA Advantage and HFA Advantage Plus

The HFA Advantage program offers conventional loans with a 3% down payment for first-time or repeat buyers, regardless of location, with reduced private mortgage insurance (PMI) premiums. HFA Advantage Plus adds DPA identical to Great Choice Plus: a $6,000 deferred or $15,000 amortizing second mortgage. TN lenders require a 640 credit score and homebuyer education in most cases. Details at THDA HFA Advantage.

5. THDA Take Credit Mortgage Credit Certificate (MCC)

The Take Credit MCC provides a federal tax credit of up to 30% of annual mortgage interest (capped at $2,000) for the life of the loan, as long as the home remains the primary residence. It’s available to first-time buyers (unless in targeted areas) but cannot be paired with a Great Choice loan. Income and purchase price limits apply, and a homebuyer education course is required.

6. The Housing Fund Down Payment Assistance

The Housing Fund, a nonprofit, offers DPA loans up to $35,000 for down payment, closing costs, or prepaids for low- to moderate-income buyers (up to 120% AMI). The loan, at a 5% fixed rate, requires monthly repayments and must pair with an FHA-approved first mortgage lender. A THDA-certified homebuyer education course and one-on-one counseling are mandatory. The home must be the primary residence. Learn more at The Housing Fund DPA.

7. THDA Hardest Hit Fund (HHF) Down Payment Assistance

The HHF DPA provides assistance for first-time buyers in economically distressed zip codes (e.g., 37208, 37406, 38127), offering up to $15,000 as a 10-year forgivable loan at 0% interest with no monthly payments. The home must be an existing property (no new construction), and buyers must use a Great Choice loan and complete a homebuyer education course. Details at THDA HHF DPA.

Local First-Time Home Buyer Incentives

1. City of Memphis Down Payment Assistance Program

Memphis’s Division of Housing and Community Development (HCD) offers up to $25,000 (or 10% of the purchase price) as a forgivable, deferred-payment loan for first-time buyers. Specialized programs include:

• Homebuyer Incentive Program Citizens (HIPC): For buyers in 15 designated areas, with income up to 200% AMI.

• Homebuyer Incentive Program Police (HIPP): For Memphis police officers with one year of service, no income limit, citywide.

• Homebuyer Incentive Program Firemen (HIPF): For firefighters with one year of service, no income limit, citywide.

• Homebuyer Incentive Program Memphis Shelby County Schools (MSCS): For MSCS employees with two years of service, no income limit, citywide.

The applications are through approved DPA lenders. See Memphis DPA.

2. City of Clarksville First-Time Homebuyers Program

Clarksville’s Office of Housing and Community Development offers up to $10,000 in DPA and closing cost assistance for income-eligible first-time buyers purchasing within city limits. The assistance is a deferred loan, with income limits based on HUD guidelines. Contact Clarksville Housing.

3. Chattanooga Neighborhood Enterprise (CNE) Lending Services

CNE provides up to $25,000 in DPA as a 15-year second mortgage with the same interest rate as the first mortgage for buyers in Bledsoe, Bradley, Grundy, Hamilton, Marion, McMinn, Meigs, Polk, Rhea, or Sequatchie counties. It supports ITIN loans and requires a homebuyer education course. Details at CNE Lending.

4. Nashville The Housing Fund Programs

The Housing Fund in Nashville offers DPA up to $35,000 for low- to moderate-income buyers (up to 120% AMI) and a Shared Equity Program for those at or below 80% AMI, ensuring affordable resale prices. Both require an FHA-approved first mortgage and THDA-certified education. Visit The Housing Fund.

5. Knoxville Down Payment Assistance Program

Knoxville’s program, currently limited to homes developed by Home Source East Tennessee, Neighborhood Housing Inc., or East Tennessee Housing Development Corporation, offers up to $25,000 in DPA for low-income buyers (80% AMI or less). Funding availability fluctuates, so confirm status at (865) 215-2865 or Knoxville Housing.

6. Affordable Housing Resources (AHR) NeighborhoodLIFT (Nashville)

The NeighborhoodLIFT program provides up to $15,000 in DPA as a forgivable loan (20% forgiven annually over five years) for first-time or repeat buyers in Nashville. Income limits apply, and a homebuyer education course is required. Contact AHR NeighborhoodLIFT.

Top Tennessee Lenders for Home Buyer Grants

Here are ten eight local lenders for accessing these grants, based on THDA approval and program participation.

1. Mortgage Investors Group: Provides THDA’s $6,000 deferred DPA and Clarksville’s $10,000 grant. Mortgage Investors Group

2. First Community Mortgage: Facilitates THDA’s Heroes program and Chattanooga’s $25,000 CNE DPA. First Community Mortgage

3. Pinnacle Financial Partners: Offers THDA’s MCC and The Housing Fund’s $35,000 DPA. Pinnacle Financial Partners

4. Guaranteed Rate: Supports Knoxville’s $25,000 DPA and THDA’s $15,000 HHF. Guaranteed Rate

5. Bank of Tennessee: Provides THDA’s HFA Advantage Plus and local Memphis grants. Bank of Tennessee

6. Regions Bank: Offers THDA’s $15,000 amortizing loan and Nashville’s Shared Equity. Regions Bank

7. FirstBank: Supports THDA’s Great Choice and Clarksville’s DPA for veterans. FirstBank

8. Movement Mortgage: Facilitates THDA’s Heroes and Chattanooga’s CNE ITIN loans. Movement Mortgage

These Tennessee mortgage lenders require a 640 credit score, homebuyer education, and income eligibility. Contact them to confirm funding and maximize assistance.

Case Study 1: The Harper Family in Memphis

The Harpers, a family of three earning $65,000 annually, aimed to buy a $200,000 home in Memphis’s 38111 zip code. As Tennessee first-time buyers, they qualified for the THDA Great Choice Home Loan with an FHA mortgage requiring a 3.5% down payment ($7,000). They secured a $10,000 Great Choice Plus Amortizing second mortgage (5% of the purchase price) to cover the down payment and $2,000 in closing costs, with monthly payments matching their first mortgage’s rate. The Memphis HIPC program provided an additional $20,000 forgivable loan, as their home was in a designated area. After completing a THDA-approved online education course via eHome America, they closed in March 2025. The MCC saved them $1,800 annually on taxes. The combined assistance minimized upfront costs, allowing them to focus on building equity.

Case Study 2: Jamal Carter in Clarksville

Jamal, a veteran earning $50,000, wanted a $250,000 home in Clarksville. Through the THDA Homeownership for Heroes, he secured a VA loan with no down payment and a 0.5% rate reduction. He received a $6,000 Great Choice Plus Deferred loan at 0% interest for closing costs, forgivable after 30 years. The City of Clarksville FTHB Program added a $10,000 deferred loan, covering additional closing costs and prepaids. After completing a THDA education course, Jamal closed in April 2025. The New American Funding Pathway provided an extra $6,000, fully covering his upfront costs. The forgivable and deferred loans, combined with no down payment, enabled Jamal to purchase his home without depleting his savings, providing stability for his future.

Tips for Tennessee First-Time Home Buyer Loans

1. Get Pre-Approved: Work with a THDA-approved lender to determine your budget and strengthen offers. Find lenders at THDA Lenders.

2. Combine Programs: Pair THDA’s Great Choice Plus with local DPA (e.g., Memphis HIPC or Clarksville) or national programs like Chenoa for maximum assistance.

3. Complete Education Courses: THDA requires courses like eHome America or Framework ($75, available online). See THDA Homebuyer Education.

4. Check Targeted Areas: First-time buyer requirements may be waived in THDA’s designated zip codes. Check THDA Targeted Areas.

5. Monitor Credit and DTI: Aim for a 640+ credit score and DTI below 45–50%. Use tools like LendingTree Spring for free credit monitoring.

Tennessee’s housing prices rose 5.5% in 2024, with a 71.27% increase over five years, particularly in Knoxville (93.39% growth). Competitive markets require quick action, and DPA funding, like Knoxville’s program, can be limited or paused. Most THDA second mortgages require repayment upon sale or refinance, and HHF is restricted to specific zip codes. USDA financing is limited to rural areas, and VA loans require military eligibility. Buyers should verify funding availability and review repayment terms, as some local programs (e.g., Clarksville’s) are deferred but not forgivable.

Takeaway on TN First Time Home Buyers

Tennessee’s 2025 first-time home buyer programs, led by THDA’s Great Choice, Homeownership for Heroes, and HFA Advantage, alongside local initiatives in Memphis, Clarksville, Chattanooga, and Nashville, provide critical support for overcoming high upfront costs. Grants, forgivable loans, and tax credits, combined with competitive mortgage rates, make homeownership achievable for low- to moderate-income buyers. By leveraging these resources, completing required education, and working with approved lenders, first-time buyers can navigate Tennessee’s competitive mortgage market and secure their dream home.

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