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6 THDA Loan & Down Payment Assistance Requirements

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Owning a home is a goal for many Tennesseans. Renting is expensive and doesn’t come with the same tax benefits as homeownership, but it can be a challenge to save money for a down payment or closing costs while paying your regular expenses. The good news is there’s help available.

The Tennessee Housing Development Agency (THDA) provides loan and down payment assistance to qualified home buyers in Tennessee. Here are six THDA loan and down payment assistance requirements.

What is THDA?

The Tennessee Housing Development Authority got its start in 1973 with the goal of putting the dream of homeownership within reach for as many Tennesseans as possible.

The THDA’s Great Choice loan program offers assistance for first-time home buyers, military veterans, and for repeat home buyers.

Like the Federal Housing Authority (FHA) and the United States Department of Agriculture (USDA), both of which have home loan programs, the THDA is not a direct lender. Instead, they purchase home loans from approved lenders.

At Leaders Credit Union, we are proud to be a THDA lender.

What Programs Does THDA Offer?

THDA offers several programs to help Tennessee residents buy a home. Here’s an overview:

  1. Great Choice. The Great Choice program offers fixed rate, 30-year home mortgage loans with affordable rates.
  2. Great Choice Plus. The Great Choice Plus program provides assistance for down payments and closing costs with two options:
    • The deferred option provides $6,000 in assistance in the form of a forgivable second mortgage loan. Payments are deferred and if you keep your home until the end of your mortgage term, you will not need to repay it. If you sell your home, you will be required to repay the THDA.
    • The amortizing option provides up to 6% of the purchase price of your home in the form of a repayable second mortgage at the same interest rate as your first mortgage. Payments must be made monthly.
  3. Homeownership for the Brave. THDA offers a .5% reduction on the already-low Great Choice mortgage rates for active duty military service members and military veterans.

THDA also provides an array of services to help homeowners, including:

  • Emergency Repair
  • Foreclosure Prevention
  • Low-Income Home Energy Assistance
  • Weatherization Assistance
  • Home Modifications and Ramps

Anybody in Tennessee who qualifies can take advantage of these programs.

THDA Loan & Down Payment Assistance Requirements

Now, let’s review the specific requirements to get a THDA loan or down payment assistance to help you buy a home.

#1: Credit Score Requirement 

The first requirement for any THDA loan is that all applicants must have a minimum credit score of 640 to qualify. According to FICO, a score of 640 is considered Fair, with scores between 670 and 739 considered Good.

If your credit score is below 640, you can improve it by making on-time payments and paying down any credit card debt to reduce your credit utilization. You may want to talk to your THDA counselor about options to increase your score, too – more on that in the next section.

#2: Homebuyer Education Requirement

The second requirement for THDA loans and assistance programs is completion of THDA’s Homebuyer Education course. The information provided in the course has been shown to reduce the risk of foreclosure by 42%.

Homebuyer Education courses are available in person or online. When you pay for the course, you’ll also receive a one-on-one session with a THDA counselor. By law, the course may not cost more than $99 and there is assistance available through the STEP In Program if you work for a participating employer. STEP In corporations include:

  • State of Tennessee (Government Agencies & Departments)
  • Allied Dispatch Solutions
  • Del Conca
  • Mid-South Maintenance

If you work for one of these employers, you will pay only $25 for your course.

The course will help you understand how to qualify for a home loan, which questions to ask when looking for a house to buy, how to protect & maintain your home, and the best way to manage your finances once you are a homeowner.

After you complete your course, you will receive a Certificate of Completion that is good for 12 months. You will need to present your Certificate of Completion to your loan officer. 

THDA recommends taking the course before you begin the buying process, but you can take it at any time before you apply for your mortgage.

#3: Income Requirement

THDA mortgages and down payment assistance are available to Tennessee residents with income below specified thresholds. The income caps vary from county to county, with higher caps for counties with higher average income.

As of this writing, the highest cap is $101,160 for households with 1 or 2 earners, or $118,020 for 3+ earners, which applies to Cannon, Cheatham, Davidson, Dickson, Robinson, Rutherford, Sumner, Williamson, and Wilson counties. The caps in counties served by Leaders Credit Unions are as follows:

  • Chester: $70,949 for 1-2 earners; $81,591 for 3+ earners
  • Dyer: $82,320 for 1-2 earners; $96,040 for 3+ earners
  • Haywood: $82,320 for 1-2 earners; $96,040 for 3+ earners
  • Lake: $82,320 for 1-2 earners; $96,040 for 3+ earners
  • Lauderdale: $82,320 for 1-2 earners; $96,040 for 3+ earners
  • Madison: $70,949 for 1-2 earners; $81,591 for 3+ earners
  • McNairy: $68,600 for 1-2 earners; $78,960 for 3+ earners

People living in certain parts of Carroll, Crockett, Fayette, Gibson, Hardeman, Henderson, Henry, Shelby, Tipton, and Weakley Counties may also be Leaders Credit Union members. If you live in one of these counties and are a Leaders Credit Union member, you can look up the income limitations for THDA loans and programs here.

#4: Acquisition Cost Limits

The next requirement for a THDA loan is the acquisition cost limit. What that means is that any home you purchase with a THDA loan must have a value at or below the price outlined by the THDA.

Here are the limits for West Tennessee counties:

  • Chester: $300,000
  • Dyer: $350,000
  • Haywood: $350,000
  • Lake: $350,000
  • Lauderdale: $300,000
  • Madison: $300,000
  • McNairy: $300,000

The highest acquisition limit for THDA loans is $375,000 as of 2022. You can find a chart with the acquisition limit for every county in Tennessee here.

#5: Requirements for Repeat Home Buyers

Most THDA loans go to first-time homebuyers in Tennessee, but there are loans and assistance available for repeat homebuyers too. To qualify, you must meet one of the following requirements:

  • You have not lived in a home you own for at least three years
  • You are buying in one of 43 targeted counties or a designated area of 15 additional counties
  • You qualify for the Homeownership for the Brave program, which makes home loans available for qualified military households and veterans.

If you meet one of the above criteria, you can still get THDA loans and assistance as a repeat buyer.

#6: Homeownership for the Brave Requirements

THDA makes the Homeownership for the Brave program available to qualified military service members and their families. You must meet one of the following requirements:

  • Active duty service members, including the National Guard
  • Veterans (unless dishonorably discharged)
  • Reservists with at least 180 days of active duty service
  • Spouses of qualified service members, reservists, and veterans (including surviving spouses)

As we mentioned above, THDA’s military loans have lower interest rates and the first-time buyer requirements are waived.

What is THDA Down Payment Assistance?

In addition to its Great Choice home loan program, THDA offers Great Choice Plus, a down payment assistance program.

For many Tennessee residents, buying a home is out of reach because they don’t have the money to make a sizable down payment or pay the closing costs. The good news is that you can get assistance in the form of a second mortgage from THDA to help you pay either your down payment or your closing costs.

There are two options. We’ve mentioned them already but we’ll go into a bit more detail now.

Deferred Option (No Payments)

With the deferred option, THDA provides $6,000 in assistance as a forgivable second mortgage on your house. With the deferred option, you’ll get a 0% interest rate and payments are deferred until the end of your 30-year mortgage term. If you live in the home for 30 years, the loan will be forgiven and you will not be required to make any payments.

The only circumstances when you would need to repay a deferred THDA loan would be if you sold or refinanced your home before the 30-year term ended. In that case, the loan will be due in full and you will need to repay it.

Amortizing Option (Payment)

With the amortizing option, THDA provides 6% of the sales price as a second mortgage loan. For example, if you bought a $300,000 home, you could qualify for up to $18,000 in assistance. The second loan would have the same 30-year term as your first mortgage, and it will also have the same interest rate as your first mortgage.

With the amortizing option, you will be required to make monthly payments for the term of the loan. If you sell or refinance your home, the loan will need to be paid. The amortizing loan can be used as down payment assistance or to pay your closing costs.

Do You Qualify for THDA Loans or Down Payment Assistance?

Many of our Leaders Credit Union members may qualify for THDA loans or down payment assistance. With a THDA loan, you can achieve your dream of homeownership and get on the path to financial success.

Do you need help with a THDA loan or other financial assistance? Click here to apply.