If you’re a first time home buyer Tennessee, congratulations! This is an exciting time in your life, but if you’re not properly informed on the various loan programs, down payment assistance options, and loan types, you could miss out on some serious help. Our goal is to help every first time home buyer TN to go into the process confident about the region’s real estate market, the median sales price, and which programs the state and local cities have to offer.
Whether you’re buying a house in Chattanooga or in another Hamilton County city, we have all the necessary information you’ll need when it comes to first-time home purchases!
First Time Home Buyer Tennessee Tax Credits & Tennessee Down Payment Assistance
The Volunteer State is home to countless first time homebuyer programs to help first-time home-buying residents with the down payment on their new home. Who qualifies for down payment assistance in TN? Typically, to qualify for down payment assistance through these programs, you must be purchasing your first home. Or, you haven’t purchased one in the past three years. If there are exceptions, they will be noted.
THDA Mortgage Credit Certificate – Mortgage Credit Certificate (MCC) Program in Tennessee
According to the Tennessee Housing Development Agency, if you’re a Tennessee first time home buyer, you qualify for a Mortgage Credit Certificate (MCC). An MCC is a credit certificate that lets you claim a federal income tax credit for a portion of the mortgage interest you’re paying on your new home. To access this benefit, you must apply through a THDA-approved lender and meet program eligibility requirements.
To claim these benefits as a first time home buyer Tennessee, you must obtain and complete an IRS Form 8396. You will also need to gather your MCC document, which includes the certificate number, credit rate (percentage), and issuance date. Your Form 1098 will have the amount of mortgage interest you paid during the year.
Overview of necessary documents:
- IRS Form 8396 – found on the IRS website
- MCC document – Issued by the Tennessee Housing Development Agency
- Form 1098 – Issued by mortgage lender
TN MCC Eligibility Requirements
This program still has a handful of requirements that you should note.
- There are income and purchase price limits that apply; these will vary by county.
- There are homebuyer education classes you must complete. For example, the home buyer education course for this program is found on the THDA website.
- Income limits apply and vary by county.
- You must meet purchase price limits, which are typically set near the median list price for the area.
- Most applicants must be first-time buyers (no homeownership in the past 3 years), unless you’re a Tennessee veteran or purchasing in a targeted county.
- Generally, you must be a first-time homebuyer, meaning this is the first home you’ve bought or owned in the past three years.
Typically, you have to be a first time home buyer (or someone who hasn’t purchased a home in the last three years), but this program does have some exceptions. For example, if you’re an active military dutyman or live in a specific area, you may qualify for this program.
Great Choice Plus – Forgivable Loan / Deferred Option
Great Choice Plus is a forgivable loan offered by the THDA and is available throughout Tennessee. You can borrow up to $6,000 (at 0% interest) to use towards a down payment or closing costs. The loan is forgiven after 30 years, or once the loan is paid off. If the home is sold or refinanced, you will owe the $6,000. This is one of the top down payment assistance options in Tennessee!
Great Choice Plus – Amortizing Option
Do you need down payment assistance in Tennessee? Great Choice Plus also has an amortizing option for those who need more support than down payment assistance or closing cost help. This option pays out up to 5% of the home price (max $15,000), but must be repaid monthly over 30 years at the same interest rate as the first mortgage.
Chattanooga Neighborhood Enterprise (CNE) – Deferred Payment Loan
If you plan to live in Chattanooga, you may want to consider this loan assistance program for first time home buyers. The CNE aims to provide affordable housing for any first time home buyer Tennessee, while promoting diversity in neighborhoods and across various financial brackets.
If you go through the CNE’s home-buying assistance program, you can get up to $25,000 in down payment/closing cost assistance. This program is structured as a second mortgage and can be repaid over the span of 15 years.
First Time Home Buyer Loans in Tennessee – What Programs Are Available for First Time Home Buyers in TN?
There are quite a few first time home buyer loans TN; whether you’re considering USDA or FHA loans, you have options.
THDA Great Choice Home Loan
There is only one state-specific first time home buyer loan in Tennessee, which is available through the Tennessee Housing Division Authority, and is called the Great Choice Home Loan. It features a 30-year fixed interest rate, down payment assistance options, and is designed to make homeownership more affordable for first-time buyers across the state.
You don’t have to be a first time home buyer, but it is designed to help first time home buyers in Tennessee.
Homeownership for Heroes – Available to Law Enforcement Officers, EMTs, Paramedics, Firefighters, & Others
Through the TDHA Great Choice Home Loan program, law enforcement, firefighters, EMTs, paramedics, and Tennessee veterans received a 0.5% interest rate reduction. This ½ percent decrease can greatly reduce your monthly payments. This program does not require repayment.
FHA Loan For First Time Home Buyer Tennessee
FHA loans are backed by the Federal Housing Administration, and are popular among first-time buyers thanks to their low 3.5% minimum down payment and more flexible credit standards. For example, there is a low down payment of 3.5%; however, borrowers are subject to Department of Veterans Affairs debt to income ratio standards of 43% or less.
The typical credit score standard for FHA loans is 500, but in order to qualify for the 3.5% down payment, lenders typically require a credit score of 580 or higher.
FHA Loan Requirements Tennessee
- Minimum credit score of 580: If you want to be eligible for the 3.5% down payment amount, your credit score should be above 580. Credit scores between 500-579 may still qualify for the loan, but will likely need to make a larger down payment of 10%.
- Down payment sources: The down payment you use must be sourced from your own funds, gifted by a family member, or obtained through an eligible down payment assistance program.
- Debt-to-income (DTI) ratio: Your maximum DTI must be 43% or lower (with some exceptions).
- Employment and income: You must have a stable employer that verifies your employment. For example, at least two years of consistent employment in the same field, verified with documents like W-2 forms, tax returns, and pay stubs.
- Mortgage insurance: You must have private mortgage insurance.
Property requirements to note:
- Primary residence: The property purchased with an FHA loan must be your primary residence and cannot be used as an investment, vacation, or business property.
- FHA appraisal and inspection: The home must undergo an FHA-approved appraisal to ensure it meets minimum property standards.
Loan limits to note:
- County-specific limits: FHA loan limits vary by county and are updated annually. Most Tennessee counties adhere to the standard single-family loan limit of $524,225 in 2025. However, some high-cost counties in Tennessee have higher limits, such as Cannon County and Macon County, with limits up to $989,000 for single-family homes. You can find specific limits for your area using the HUD online tool.
USDA Loan – First Time Home Buyer TN No Down Payment
USDA loans are available in many rural and suburban areas around Tennessee; they offer 100% financing with no down payment required. Income limits and property location requirements apply.
Although you don’t have to be a first time homebuyer to qualify for a USDA loan, it’s popular among first time home buyers Tennessee for its flexible and down payment assistance.
HUD Good Neighbor Next Door Program – Helps Public Servants Purchase Their First Home
If you’re a police officer, firefighter, emergency medical technician, or teacher, you may be eligible for the HUD Good Neighbor Program. This program helps people in specific professions better qualify for mortgages in particular areas. For example, borrowers can receive 50% off a home if it’s located within a HUD “Revitalization Area”.
Other Popular First Time Home Buyer Loans in Tennessee
Alongside THDA-specific loans, several national loan programs are available:
- VA Loan – Exclusive to veterans and active-duty service members. VA loans require no down payment, no private mortgage insurance, and feature competitive rates for Tennessee veterans.
- Conventional Mortgage – Available through private lenders, typically with higher credit requirements but more long-term flexibility.
Common Questions First Time Home Buyers in TN Have
Are First Time Home Buyer Programs Worth It?
Yes, oftentimes, depending on the circumstances, utilizing first time homebuyer assistance programs is worth it, as they save you money, have less strict requirements, and are ideal for people with lower credit scores.
What Is a First Time Home Buyers Program?
First time homebuyers often qualify for unique loans and programs to help them purchase a home before they would be eligible for a conventional loan.
Who Is Considered a First Time Home Buyer in TN?
To be considered a first time homebuyer in TN, you must be buying a home for the first time in three years, meet all income and purchase price limits, have a credit score of around 640, complete a homebuyer education course, and meet the specific loan and mortgage requirements.
Do You Have to Pay Back Down Payment Assistance in Tennessee?
Whether or not you have to pay back your down payment assistance depends on the specific program. Many times, they are forgiven over time, or must be repaid if you sell the home.
Are You a First Time Home Buyer Tennessee? Let Us Move You In
These first time home buyer Tennessee programs offer competitive interest rates to people who have low credit scores and a not-so-great rental history. They’re flexible with debt-to-income ratios, ensuring even people with less-than-par borrowing tendencies have a chance to own a home.
When you’re ready to move into the new home you just bought, call the top Chattanooga movers, All Out Moving, at (423) 716-3025.
