Tennessee Down Payment Assistance and First-Time Homebuyer Programs

Tennessee, the 36th largest by area and 15th most populous of the 50 US states, is highly regarded for its diverse landscapes, rich musical heritage, and lively cultural scene. The state is home to several vibrant cities contributing to its unique character, none more so than Nashville.

Nashville distinguishes itself as the state capital and as a focal point showcasing Tennessee’s flourishing industries, including real estate. The city has experienced a significant boom in its housing market in recent years, propelled by job growth, low cost of living, and an influx of millennials drawn to its blend of urban living and Southern allure.

What sets Tennessee apart in terms of real estate, aside from the apparent affordability, is its wide range of housing styles, from historic Southern homes in cities like Nashville and Memphis to grand estates and more modern condominiums and apartments scattered across different parts of the state. Over the past 12 months, about 117,327 of these residential properties have been sold, with a median home price of $325,000 for single-family homes, according to data from Attom.

The state’s dynamic economy, fueled by industries like healthcare, entertainment, and technology, continues to attract investors and drive demand for real estate. As such, residents can explore a thriving housing market that caters to a wide range of preferences and, most importantly, budgets.

Looking for assistance in a specific part of Tennessee?

This page explores the full spectrum of assistance options accessible to homebuyers in Tennessee, including both statewide and local resources. For tailored information on down payment assistance in your area, refer to the local resource provided here:

• Clarksville
• Memphis
• Knoxville

Down payment assistance programs in Tennessee

While Tennessee features a few federal assistance programs, there aren’t as many specialized local assistance programs open to residents as other states, perhaps due to the moderate cost of homeownership in the state. However, cities like Clarksville, Memphis, and Knoxville allow first-time homebuyers to explore down payment assistance if needed.

Great Choice Home Loan Programs

The Tennessee Housing Development Agency created the Great Choice Home Loan programs to make homeownership available and more affordable for Tennesseans of middle to moderate-income levels. The first-time homebuyer assistance option is a forgivable second mortgage that helps cover down payment and closing costs.

Assistance type: Forgivable loan

Sponsor: Tennessee Housing Development Agency (THDA)

Assistance amount: 96.5% of the total price of the property

Minimum borrower contribution: 3.5% of purchase price

Eligibility requirements

• Eligible applicants must have a credit score of at least 640
• Applicants must complete a homebuyer education class before applying for down payment assistance.
• Applicants must also fulfill the household income and purchase price limit based on their counties. Here is a complete chart of income and purchase price limits.

The Housing Fund Down Payment Assistance Program

This down payment assistance program is another statewide initiative aimed at helping eligible homebuyers in Tennessee overcome financial barriers to homeownership. Administered by the Housing Fund, this program offers individuals and families loans to cover a portion of the down payment, prepaid, and closing costs associated with purchasing a home.

Assistance type: Deferred payment loan

Sponsor: The Housing Fund

Assistance amount: $35,000

Minimum borrower contribution: 1% of the purchase price

Eligibility requirements

• The property must serve as the buyer’s primary residence.
• Specific requirements regarding income limits and credit standards vary depending on the region.
• Applicants must complete a homebuyer education program provided by a THDA-certified counselor. The Housing Fund also allows online homebuyer education through eHome America when combined with a one-hour one-on-one counseling session.

The Tennessee Down Payment Partnership

The Tennessee Down Payment Partnership program also provides first-time home buyers with their down payment or closing costs in the form of deferred loans. These loans are due on sale and will only be repaid when the property is sold; the repaid down payment will then be made available for another first-time homebuyer.

Assistance type: Deferred payment loan

Sponsor: Affordable Housing Resource

Eligibility requirements

• Eligible applicants’ annual income, in combination with household size, must be at or below the 80% income limit set by the US Department of Housing and Urban Development (HUD).
• Applicants must also use a first mortgage from one of the recognized financial partners of Affordable Housing Resource Inc.

City of Clarksville First Time Home-Buyers Program

The City of Clarksville, through the Office of Housing and Community Development, recognizes the need to provide first-time homebuyers with assistance in paying initial, upfront costs in a mortgage transaction. As such, the First Time Home-Buyers Program is designed to help income-eligible applicants with down payment and closing costs assistance to purchase their first homes within the City of Clarksville. Down payment assistance is provided as forgivable second mortgages as long as applicants live in the house for at least five years and one month.

Assistance type: Forgivable second mortgage

Sponsor: City of Clarksville Office of Housing and Community Development

Assistance amount: 3.5% of sales price up to a maximum of $5,000.

Purchase price limit: $271,050

Minimum borrower contribution: 1% of the purchase price

Eligibility requirements:

• Only families within 50 percent to 80 percent of the area median income for Clarksville are eligible for this program.
• The program is only available for first-time homebuyers without a primary residence in the last three years. However, there are exceptions made for displaced homemakers or single parents.
• Applicants are required to attend a homebuyer education class.

City of Memphis Down Payment Assistance Programs

The City of Memphis’ Division of Housing and Community Development (HCD) also offers financial assistance to its citizens through the Down Payment Assistance Program (DPA), which helps meet the financial requirements of becoming a homeowner. Residents of Memphis can opt for the Citywide program (CWDPA), Memphis Housing Authority Program (MHA DPA), Section 8 Homeownership Assistance Program (SHAPE DPA), and the Targeted Area program (TADPA).

Assistance type: Deferred payment loan

Sponsor: City of Memphis’ Housing and Community Development

Assistance amount: 10% of the purchase price, not exceeding $25,000.

Purchase price limit: $189,000 for existing homes and $243,000 for new constructions.

Minimum borrower contribution: The lesser of $500 or 1% of the purchase price

Eligibility requirements:

• First-time homeowners with income not exceeding 80% AMI 
• Applicants must complete HUD-certified housing counseling
• Applicants must maintain the property as the primary residence for a 5-year affordability period.

Knoxville Downpayment Assistance Program 

The City of Knoxville’s down payment assistance program eases the financial burden of down payments and closing costs. However, this program operates under unique conditions. First and most importantly, funds are only available for homes that are or will be developed by either Home Source East Tennessee, Neighborhood Housing Inc., or East Tennessee Housing Development Corporation.

Assistance type: Deferred payment loan

Sponsor: City of Knoxville

Eligibility requirements:

• Eligible applicants must be within the low-income limit.
• Applicants must complete a homebuyer education class by any one of three recognized providers.

Tennessee down payment assistance program FAQ

Here are some of the most frequently asked questions from first-time Tennessee homebuyers looking for down payment assistance.

Does Tennessee have a first-time buyer program?

Yes, Tennessee provides several first-time homebuyer programs. Tennesseans can explore state-wide options like the Great Choice Home Loan program, the Housing Fund Down Payment Assistance program, or the Tennessee Down Payment Partnership program. Alongside these federal programs, Clarksville, Memphis, and Knoxville residents also have access to local assistance programs designed specifically for their respective counties.

How to buy a house for the first time in Tennessee?

If you’re looking to get a house for the first time in Tennessee, the first step is to clean up your credit. This step includes calculating your household annual income and obtaining a copy of your credit score; be sure to review your credit report for any errors and disputes.

Various downpayment assistance programs in Tennessee come with unique requirements. Find out these requirements and ensure you qualify for the assistance program. Stairs Financial provides all the information to help streamline the process of identifying what programs you are eligible for.

What is the minimum down payment in Tennessee?

The minimum down payment in Tennessee aligns with typical rates seen in other states. Conventional loans generally require a minimum down payment of 3% of the purchase price; FHA loans may rise to about 3.5%. Nevertheless, some loan options offer the chance to buy a home with zero down payment.

Can you get Biden first-time home buyer assistance in Tennessee?

The Biden first-time homebuyer assistance program is still a bill with the 2023-2024 Congress and has yet to become law. However, national programs like the $25,000 Down Payment Toward Equity Act will also be available in Tennessee when it goes into effect.

What type of Tennessee first-time homebuyer assistance is available?

Most Tennessee first-time homebuyer assistance programs come in the form of down payment assistance loans. Some of these loans are forgivable or deferrable under the criteria that applicants live in the home for a minimum number of years.

What is the Tennessee first-time homebuyer income limit?

The income limit for first-time homebuyers in Tennessee can vary depending on the county and household size; however, it’s usually 80% of the area median income in most cases. Some programs may offer higher income limits or determine an applicant’s eligibility by metrics other than area median income.

What are some requirements for first-time home buyers in Tennessee?

Some standard requirements for first-time homebuyers in Tennessee include;

• Applicants should not have owned a home within a certain period, mainly about three years.
• The property purchased must serve as the applicant’s primary residence
• Applicants must have a minimum credit score between 620 and 640.

How do I qualify for the Tennessee first-time home buyer programs?

The most significant qualifying requirement for Tennessee is the annual income limit. Most programs also include other requirements like the debt-to-income ratio, maximum home price, minimum credit score, and completion of a homebuyer’s education course.

Disclaimer: This article is for informational purposes only and should not be considered as legal or financial advice. Please consult an attorney, mortgage lender, or CPA for guidance on your specific situation.