Buying your first home in Tennessee can feel a lot more within reach than it does in a lot of the country. The Volunteer State is still one of the more affordable places to become a homeowner, there’s no state income tax on your wages, and the state runs a genuinely helpful set of programs for first-time buyers. That said, “affordable” depends heavily on where you’re looking. Nashville and its fast-growing suburbs have climbed well above the rest of the state in recent years, so a budget that goes a long way in Chattanooga, Knoxville, the Tri-Cities, or rural West Tennessee may feel tight in Davidson or Williamson County. This guide walks you through it like a friend would: what the state offers, which loan makes sense for your situation, what you’ll actually need to bring to the table, and how the buying process works step by step.
If you’re just getting oriented, it’s worth reading our broader first-time buyer guide alongside this one. Here, we’re focused on the Tennessee-specific pieces, so let’s start with the program that matters most.
The headline program: Tennessee Housing Development Agency (THDA)
Almost every conversation about first-time buyer help in Tennessee starts with THDA, the Tennessee Housing Development Agency. THDA is a state-chartered agency, not a lender, so you don’t apply with them directly. Instead, they set the rules and provide the money, and you work with one of their approved lenders to actually get the loan. Think of THDA as the program designer and your lender as the person who fills out the paperwork with you.
Great Choice Home Loan
The flagship product is the Great Choice Home Loan. It’s a 30-year, fixed-rate mortgage, meaning your interest rate and principal-and-interest payment never change for the life of the loan. Great Choice loans are backed by the usual government programs, most commonly FHA, but also USDA Rural Development or VA depending on your situation, so the underlying rules (like the 3.5% minimum down payment on FHA) come along with them.
A few things that make Great Choice appealing: the interest rate is set by the state and tends to be competitive, you can’t be charged discount points to “buy down” the rate, the loan is assumable if a future buyer qualifies, and there’s no prepayment penalty if you want to pay it off early. Most lenders look for a minimum credit score around 640 to qualify.
Great Choice Plus down payment assistance
Here’s the part first-time buyers really care about. If you qualify for a Great Choice Home Loan, you can pair it with Great Choice Plus, which is down payment and closing-cost assistance delivered as a second mortgage. THDA currently offers two flavors, and it’s worth understanding the difference because they behave very differently over time.
- The deferred option (no monthly payment). This provides assistance in the form of a forgivable second mortgage with a 0% interest rate and no monthly payment. It’s forgiven at the end of a 10-year term, so if you stay in the home and keep your first mortgage in good standing, you never pay it back. The catch: if you sell or refinance before that 10-year mark, the balance becomes due in full. This is the option most first-time buyers gravitate toward.
- The amortizing option (with a monthly payment). This provides up to 5% of the home’s sales price, with a maximum of around $15,000, structured as a 30-year second loan you pay off alongside your first mortgage. The interest rate matches your first mortgage rate. You’d choose this if you need more dollars than the deferred option offers and you’re comfortable with the extra monthly payment.
The exact deferred-option amount THDA offers can shift with their funding cycles (recent structures have offered up to $6,000, and in some cases higher tiers), so confirm the current figure with your approved lender or at thda.org before you count on a specific number. The important takeaway is that this money is real, it’s meaningful against a Tennessee down payment, and for the forgivable option you may never repay a dime of it if you stay put. Our overview of down payment assistance explains how these second-mortgage structures work in plain English if you want the fuller picture.
Homeownership for the Brave (military and veterans)
If you’re an active-duty service member, veteran, or in some cases a surviving spouse, THDA offers Homeownership for the Brave. The headline benefit is a reduction of roughly 0.5% (half a percentage point) off the already-competitive Great Choice interest rate. On a 30-year loan, half a point adds up to real money over time. This program can also be paired with Great Choice Plus down payment assistance, and the first-time buyer requirement is waived for eligible veterans, which we’ll explain more below. If you’ve served, this is almost always worth asking your lender about first.
Income limits and eligibility
THDA loans are designed for low- and moderate-income buyers, so there are limits, but they’re more generous than a lot of people assume. Two limits matter:
- Household income limit. Your total household income can’t exceed a cap that varies by county and by household size (larger households get higher limits). A higher-cost county like Davidson or Williamson typically has a higher ceiling than a rural county.
- Acquisition (purchase price) limit. THDA is meant for modest homes, so the price of the home you’re buying can’t exceed a limit that also varies by county.
Because these numbers change periodically and differ so much county to county, we’re not going to print a figure here that might be stale by the time you read it. THDA publishes a current “Household Income and Sales Price Limits” chart at thda.org, and any approved lender can check your specific county in a minute. That’s the honest, accurate way to confirm where you stand.
On the first-time buyer requirement: THDA generally defines a first-time buyer as someone who hasn’t owned and lived in their primary residence at any point in the past three years. So if you owned a home years ago but have been renting since, you may still qualify. That requirement is waived entirely in designated “Targeted” areas (certain counties and census tracts the state is trying to encourage investment in) and for eligible veterans. All homes must be your principal residence, though a property with up to four units can qualify if you live in one of them.
The homebuyer education requirement
One rule to plan around: THDA requires a homebuyer education course on all Great Choice, Great Choice Plus, and veteran loans. This isn’t busywork designed to slow you down, it’s a genuinely useful class that walks through budgeting, credit, the mortgage process, and how to protect your investment after closing. THDA maintains a network of approved counselors and offers both in-person and online options. Build it into your timeline early so it doesn’t hold up your closing at the last minute.
Which loan is right for you?
THDA assistance rides on top of a regular mortgage, so you still have to pick the underlying loan type. Here’s how the four main options tend to shake out for Tennessee buyers.
FHA loans
FHA is the workhorse behind most Great Choice loans, and for good reason. It allows a down payment as low as 3.5% and is forgiving on credit, which makes it a natural fit for first-time buyers who don’t have a big pile of savings or a long credit history. The tradeoff is mortgage insurance: FHA charges an upfront premium plus an annual premium that sticks around for most of the loan’s life. For many buyers that’s a fair price for getting in the door. Learn more in our FHA loan guide.
USDA loans
Tennessee has a lot of rural and small-town geography, and that’s exactly where USDA loans shine. Backed by the U.S. Department of Agriculture, they offer 0% down for homes in eligible rural and many suburban-fringe areas, which covers a surprising amount of the state once you get outside the major metros. There are income limits, but for buyers targeting the right areas it’s one of the best deals around. Our USDA loan guide covers eligibility and how to check whether an address qualifies.
VA loans
If you’re a veteran, active-duty service member, or eligible surviving spouse, a VA loan is usually the strongest option on the table: 0% down, no monthly mortgage insurance, and competitive rates. Pair a VA loan with THDA’s Homeownership for the Brave rate discount and you’re stacking two of the best benefits available to Tennessee buyers. This is the first thing to explore if you’ve served.
Conventional loans
Conventional loans aren’t backed by a government agency and typically want stronger credit, but they have a big advantage: once you reach 20% equity, you can drop private mortgage insurance entirely, which FHA usually won’t let you do. If you have solid credit and can manage a slightly larger down payment, a conventional loan can be cheaper over the long run. THDA does offer conventional Great Choice options, so you don’t have to give up the down payment assistance to go this route.
What homes cost and what you’ll need
Let’s talk about the real numbers you’ll face, honestly and without pretending we can predict a median price for your exact ZIP code. Tennessee remains relatively affordable compared with the national picture, but the gap between markets is large. Nashville and its collar counties (Williamson, Rutherford, Sumner, Wilson) run meaningfully higher than the statewide average, while Memphis, Chattanooga, Knoxville, Clarksville, the Tri-Cities, and rural counties generally offer more house for the money. Whatever your target market, plan your budget around actual listings there rather than a statewide figure.
Beyond the down payment, budget for closing costs, which typically run about 2% to 5% of the purchase price. These cover things like lender fees, the appraisal, title insurance, and prepaid items such as homeowners insurance and property taxes. This is exactly where down payment assistance earns its keep: Great Choice Plus can be applied to closing costs, not just the down payment, so it can shrink the amount of cash you need on closing day. If you’re fuzzy on how that works, our down payment assistance explainer breaks it down.
Two Tennessee-specific bright spots on the ongoing-cost side. First, Tennessee has no state income tax on wages, which leaves more room in your monthly budget for a mortgage than in many states. Second, property taxes in Tennessee tend to be on the lower end nationally, though the exact rate is set locally and varies by county and city, so check the specific county’s rate for any home you’re seriously considering. Lower carrying costs are a real part of why Tennessee is an attractive place to buy your first home.
One more honest note: THDA loans carry a federal “recapture tax” provision that can apply if you sell within the first nine years, earn substantially more income by then, and make a gain on the sale. In practice it affects relatively few borrowers and is often small or zero, but you should know it exists so it’s not a surprise. Your lender can explain how it might apply to you.
The buying process in Tennessee
Here’s the sequence most Tennessee first-time buyers follow, with a couple of recent rule changes you’ll want to understand before you start touring homes.
First, a change that affects everyone. As of August 17, 2024, a national settlement involving the National Association of REALTORS (NAR) changed how buyers work with agents. Two things matter for you: you’ll now sign a written buyer agreement with your agent before touring homes, and that agreement spells out how your agent gets paid. Buyer-agent compensation is no longer advertised on the MLS, and it’s fully negotiable, between you, your agent, and potentially the seller. It’s not scary, but it does mean you should read that agreement carefully and understand what you’re agreeing to pay. We unpack the details in our NAR settlement explainer.
With that context, here’s the typical path:
- Check your credit and budget. Know your score and figure out a comfortable monthly payment before you fall in love with a house.
- Get pre-approved with a THDA-approved lender. This tells you how much you can borrow and signals to sellers that you’re serious. Ask specifically about Great Choice and Great Choice Plus while you’re at it.
- Complete your THDA homebuyer education course. Start this early since it’s required for the assistance programs.
- Find a real estate agent and sign your buyer agreement. A good local agent who knows your target county is worth their weight in gold. See our guide to finding a real estate agent.
- Shop, make an offer, and negotiate. Your agent helps you land on a price and terms and, potentially, negotiate seller help with closing costs.
- Inspection and appraisal. Never skip the inspection. The appraisal protects your lender (and you) by confirming the home’s value.
- Close. You’ll sign a stack of documents, your assistance funds are applied, and you get the keys.
For a step-by-step walkthrough that goes deeper on each stage, see our full home buying process guide. And if you want to compare programs in other states, our state-by-state directory has a guide for each.
Tennessee first-time buyer FAQ
Do I have to be a first-time buyer to use THDA?
Usually, but the definition is friendlier than it sounds. THDA counts you as a first-time buyer if you haven’t owned and lived in your primary home in the past three years. And the requirement is waived completely in designated “Targeted” areas and for eligible veterans, so it’s worth checking even if you’ve owned before.
How much down payment assistance can I actually get?
Great Choice Plus offers two options: a forgivable deferred second mortgage with no monthly payment (forgiven after 10 years if you stay), and an amortizing option worth up to 5% of the sales price (capped around $15,000) that you repay monthly. The exact deferred amount can change with THDA’s funding, so confirm the current figure with an approved lender or at thda.org.
Do I ever have to pay back the down payment assistance?
It depends on which option you choose. The deferred option is forgiven at the end of its 10-year term, so if you keep the home and your first mortgage in good standing, you don’t repay it, but if you sell or refinance before then, the full balance comes due. The amortizing option is a real loan you pay back monthly from day one.
Is Nashville too expensive to buy my first home?
Not necessarily, but it’s the most challenging market in the state. Prices in Davidson and Williamson counties run well above the Tennessee average, so many first-time buyers look to surrounding counties or nearby metros like Clarksville or Murfreesboro for more room in their budget. THDA’s income and price limits are also higher in higher-cost counties, so the programs are calibrated to help.
Does Tennessee’s lack of income tax help me buy?
Indirectly, yes. Tennessee doesn’t tax wage income, which leaves more of your paycheck available for a mortgage payment and everyday costs. Combined with generally modest property taxes, that lower overall cost of living is a real advantage when you’re stretching to afford a first home.
What credit score do I need for a THDA loan?
Most lenders look for a minimum score around 640 for Great Choice loans, though the exact requirement can vary by lender and loan type. If you’re not there yet, your required homebuyer education class and a conversation with a lender can help you map out a plan to get your credit ready.
Sources: Tennessee Housing Development Agency (THDA, thda.org), including its Great Choice Home Loan, Down Payment Assistance, and Eligibility Requirements pages; the U.S. Department of Housing and Urban Development (HUD) for FHA guidelines; the U.S. Department of Agriculture (USDA) for rural loan eligibility; and the National Association of REALTORS (NAR) for details on the August 17, 2024 settlement. Program amounts, income limits, and purchase-price limits change periodically and vary by county, so always confirm current figures with a THDA-approved lender or at thda.org before making decisions. This guide is educational and not financial advice. Last reviewed July 2026.
More Tennessee first-time buyer resources
Ready to go deeper? Our complete guide to Tennessee first-time home buyer programs breaks down every state loan, down payment assistance option, and tax credit available to first-time buyers here.
More Tennessee city guides
Buying in a specific Tennessee metro? See our first-time buyer guides for Nashville and Memphis, each covering the city’s own local down payment programs.
Looking specifically for grants in Tennessee?
If you want to zero in on grant and forgivable money — the help you do not pay back — see our focused guide to first-time home buyer grants in Tennessee.