Tennessee First-Time Home Buyer: 2022 Programs and Grants

What to know about buying a house in Tennessee

As a Tennessee first-time home buyer, you may be in line for valuable help from your state, county, or city. That could include home buyer education, special mortgage programs, and even down payment assistance.

Ready to take your first step toward becoming a homeowner? Here’s what to do.

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Tennessee home buyer overview

The median sales price in Tennessee was $357,000 in May 2022, according to data from Tennessee Realtors. That reflected a rise of 23.1% year over year, which was significantly higher than national average (14.7% in May).

Tennessee home buyer stats

Average Home Sale Price in TN1	$357,000
Minimum Down Payment in TN (3%)	$10,710
20% Down Payment in TN	$71,400
Average Credit Score in TN2	701
Maximum TN Home Buyer Grant3	6% of sale price statewide (THDA repayable loan)

Down payment amounts are based on the state’s most recently available average home sale price. “Minimum” down payment assumes 3% down on a conventional mortgage with a minimum credit score of 620.

If you’re eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the U.S. Department of Agriculture), you may not need any down payment at all.

First-time home buyer loans in Tennessee

If you’re a first–time home buyer in Tennessee with a 20% down payment, you can get a conventional loan with a low interest rate. And you never have to pay for private mortgage insurance (PMI).

Of course, few first–time buyers have saved enough for 20% down. But the good news is, you don’t need that much. Not by a long shot.

Borrowers can often get into a new home with as little as 3% or even 0% down using one of these low–down–payment mortgage programs:

• Conventional 97: From Freddie Mac or Fannie Mae. 3% down payment and 620 minimum FICO score. You can usually stop paying mortgage insurance after a few years once you reach 20% home equity
• FHA loan: Backed by the Federal Housing Administration. 3.5% down and a 580 minimum credit score. But you’re on the hook for mortgage insurance premiums (MIP) until you refinance to a different loan type, move, or pay off your mortgage
• VA loan: Only for veterans and service members. Zero down payment is required. Minimum credit score varies by lender but often 620. No ongoing mortgage insurance premiums after closing. These are arguably the best mortgages available, so apply if you’re eligible
• USDA loan: For those on low–to–moderate incomes buying in designated rural areas. Zero down payment required. Credit score requirements vary by lender but often 640. Low mortgage insurance rates
• Tennessee Housing Development Agency loans: May include access to competitive interest rates and down payment assistance. More information below

Note that government loan programs (including the FHA, VA, and USDA home loans) require you to buy a primary residence. That means you can’t use these loans for a vacation home or investment property.

Most loan programs even let you use gifted money or down payment assistance (DPA) to cover the down payment and closing costs. So if you’re eligible, you could potentially get into your new house with minimal cash out of pocket.

If you’re not sure which program to choose for your first mortgage loan, your lender can help you find the right match based on your finances and home buying goals.

Tennessee first-time home buyer programs

The Tennessee Housing Development Agency (THDA) offers a range of support to Tennessee first-time home buyers. That includes home buyer education, a range of mortgage loans, and down payment assistance.

Great Choice Home Loan program

Tennessee’s Great Choice Home Loan program offers home buyers a 30-year fixed-rate loan option, mostly based on FHA or USDA loans.

The Great Choice home loan program is intended for buyers with low or moderate incomes who are purchasing sensibly priced homes. To qualify, you’ll need to:

Homeownership for the Brave program

Homeownership for the Brave is a specialty loan program that can be used with a VA loan and requires zero down payment. Naturally, these are reserved exclusively for veterans and service members or their surviving spouses.

If you’re interested in one of these loan types, your next step is to download The THDA’s Handbook for Homebuyers.

Next, contact an approved lender from that THDA list (link above). Tell the agent that you’re interested in a Great Choice home loan and they should quickly establish whether or not you’re a qualifying buyer. If you are, your lender will walk you through the entire process.

Tennessee first-time home buyer grants

THDA offers a down payment assistance program called Great Choice Plus. This is a second mortgage that comes in two varieties: a deferred loan or an amortizing loan. These Great Choice Plus DPAs must be used with a Great Choice home loan.

1. Deferred DPA option: Offers loan amounts of up to $6,000 toward your down payment and/or closing costs. This loan requires no monthly payments and charges 0% interest. At the end of 30 years, your loan is forgiven in full. However, if you sell your home or refinance your mortgage before the 30 years are up, you’ll have to repay the whole amount
2. Amortizing DPA option: With this DPA loan, you can borrow up to 6% of the sales price. But you have to pay down the loan each month over 15 years. And you’ll pay the same interest rate that your first mortgage charges

The DPA you choose will likely depend on how much you need to borrow to cover your down payment and closing costs. It may also depend on how long you plan to remain in your next home.

Or you may choose neither. Before you decide, check out other down payment assistance programs that might cover your city or county. And pick the one that meets your needs best.

Your real estate agent or Realtor can help you identify down payment and closing cost assistance programs in your area. We’ve also provided useful links to Tennessee home buying assistance below.

Buying a home in Tennessee’s major cities

Home prices in Tennessee’s biggest cities vary quite a bit. On average, market conditions in Memphis are slightly more friendly to first-time home buyers than those in Nashville and Knoxville.

Nashville first-time home buyers

In April 2022, the median list price of homes in Nashville was $448,500, which was an increase of 21.2% year–over–year according to Realtor.com.

If you want to buy a home at that median price, your down payment options might fall between:

• $13,460 for 3% down payment
• $89,700 for 20% down payment

Nashville’s Metropolitan Development and Housing Agency seems to offer down payment assistance, but few details are available on its website. So contact the agency for more information.

Affordable Housing Resources (AHR) offers down payment assistance of up to $15,000 to qualifying borrowers in Nashville. That’s part of the NeighborhoodLift nationwide program and there are caps on the household income allowed. However, it says, “Income limits are higher for military service members, veterans, law enforcement officers, Pre-K-12th grade teachers, firefighters, and emergency medical technicians.”

Unfortunately, it doesn’t specify whether funds take the form of a second mortgage loan or grant. But you can call (615) 251-0025 to find out.

Memphis first-time home buyers

In April 2022, the median list price of homes in Memphis was $180,000, which was an increase of 12.6% year–over–year according to Realtor.com.

If you want to buy a home at that median sales price, your down payment options might fall between:

• $5,400 for 3% down payment
• $36,000 for 20% down payment

The City of Memphis Division of Housing and Community Development (HCD) can provide down payment assistance of up to $10,000 to eligible borrowers. There are various conditions — including income limits and home price caps — which you can discover by downloading its fact sheet. There are no income caps for teachers and those working in the police or fire departments.

Unfortunately, the HCD doesn’t reveal whether the assistance takes the form of a grant or loan. So contact the department for clarification at [email protected] or call (901) 636-7474.

Knoxville first-time home buyers

In April 2022, the median list price of homes in Knoxville was $349,000, which was an increase of 29.3% year–over–year according to Realtor.com.

If you want to buy a home at that median price, your down payment options might fall between:

• $10,470 for 3% down payment
• $69,800 for 20% down payment

The city of Knoxville does offer a down payment assistance program. However, at the time this was written, the City of Knoxville’s website said, “APPLICATIONS ARE CLOSED FOR THIS PROGRAM,” except for those wishing to purchase a home that’s developed by Home Source East Tennessee, Neighborhood Housing, Inc. and East Tennessee Housing Development Corporation.

That may have changed by the time you read this, so it’s worth checking whether the program is up and running when you want to buy. If you wish to know more, call (865) 215-2865.

Where to find home buying help in Tennessee

All the organizations we’ve listed above should provide advice freely to any first–time home buyer in the state of Tennessee or within their areas.

In addition to our selection, the U.S. Department of Housing and Urban Development (HUD) provides a few lists for statewide, regional, and local resources:

Statewide first-time home buyer resources in Tennessee

You can also find a list of resources by county and city on HUD’s webpage for Tennessee first-time home buyers, including:

What are today’s mortgage rates in Tennessee?

You can see today’s live mortgage rates in Tennessee here.

Experiment with a mortgage affordability calculator to see how down payment, interest rates, homeowners insurance, and property taxes will all affect your monthly mortgage payment.

When you’re ready to start the home buying process, make sure you get personalized rate quotes from at least three mortgage lenders.

Don’t just look at advertised rates online; actually apply for preapproval and compare the interest rates and fees you’re offered. That’s the only way to know you’re getting the best deal possible on your new home loan.

¹Source: Tennessee REALTOR Housing Market Report

²Source: Experian.com study of 2021 and 2020 data

³Based on a review of the state’s available DPA grants at the time this was written