Most People in Tennessee Have No Idea This Program Exists
I talk to buyers every week who have been saving for years trying to hit a down payment number they think they need. They're sitting on $8,000 or $10,000 and feel like they're still not close enough. And I have to tell them: there's a state program that could cover most of what you're missing, and nobody told you about it.
That program is THDA — the Tennessee Housing Development Agency. It's been around for decades. It's not a gimmick. It's state money, and a lot of it goes unused every year because buyers don't know to ask for it.
What THDA Actually Is
THDA is a state agency that exists specifically to help Tennessee residents buy homes. Their main product is called the Great Choice Home Loan. It's a 30-year fixed-rate mortgage with a below-market interest rate. The rate is set by THDA and doesn't change — no adjustable rate, no balloon payment, no surprises five years in.
Most Great Choice loans are FHA or USDA-backed, which means you can put as little as 3.5% down. And if you need help with that down payment, there's a second program layered on top called Great Choice Plus.
The Down Payment Assistance: Two Options
Great Choice Plus is the part most buyers care about. There are two ways it works:
Option 1 — Deferred (No Monthly Payment): You can borrow up to $10,000 as a second loan at 0% interest. You make no payments on it. The loan is forgiven completely at the end of 10 years. The only catch is that if you sell or refinance before those 10 years are up, you have to pay it back in full at that point.
Option 2 — Amortizing (Monthly Payment): You can borrow up to 5% of the purchase price, maxing out at $15,000. This one has a monthly payment — it's a 30-year amortizing loan at the same rate as your first mortgage. If you need more money up front and can handle a slightly higher monthly payment, this is how you get it.
Neither of these is free money in the strictest sense, but the deferred option is about as close as it gets. A 0% loan that disappears after 10 years is a real deal.
Who Qualifies
Credit score: Everyone on the loan application needs at least a 640. Not just the primary borrower — everyone. If one person is at 620, the loan doesn't work. If you're close but not there, THDA has approved counselors who can help you get your score up before you apply.
Income limits: Your total household income has to fall under the limit for your county. These limits were updated in May 2026. For the Nashville metro — Davidson, Williamson, Rutherford, Sumner, Wilson, and Robertson counties — the limit is $137,760 for a household of 1 or 2 people, and $160,720 for 3 or more. That covers a wide range of buyers. You don't have to be low income to qualify.
Purchase price: The home has to be $500,000 or under. That applies statewide. In most of Middle Tennessee, that still gives you a lot of options — especially if you're looking in Murfreesboro, Smyrna, Lebanon, Gallatin, or the outer Nashville suburbs.
First-time buyer requirement: Most THDA loans require you to be a first-time homebuyer, meaning you haven't owned a home in the last three years. But there are exceptions. If you're buying in one of Tennessee's 43 targeted counties, or in certain census tracts within other counties, the first-time buyer requirement is waived. Military and veterans also get the waiver statewide.
The Homeownership for Heroes Program
If you're active-duty military, a veteran, a firefighter, an EMT, a law enforcement officer, or a K-12 teacher in a Tennessee public or private school, THDA has a separate track called Homeownership for Heroes. You get a reduced interest rate on top of the standard Great Choice rate. The first-time buyer requirement is waived everywhere in the state, not just targeted counties. And if you're using a VA or USDA loan, you can borrow up to 100% of the purchase price.
If you fall into any of those categories and you're not using this program, you're leaving money on the table.
The Homebuyer Education Requirement
To use Great Choice Plus down payment assistance, you have to complete a THDA-approved homebuyer education course. It costs $100, or $30 if your employer participates in the STEP In program (state government employees qualify). You can do it online or in a classroom setting.
I know some buyers see this as a hurdle. I'd push back on that. An independent study found that buyers who complete the course are 42% less likely to go into foreclosure. That's not a small number. The course covers budgeting, understanding your loan documents, what to expect at closing, and what to do if you hit financial trouble after you buy. It's worth the afternoon.
One important note: the certificate expires after 12 months. Sign up early in the process so you're not scrambling to redo it right before closing.
How This Works in Practice
Here's a real-world example. Say you're buying a $350,000 home in Murfreesboro. With an FHA loan, your minimum down payment is 3.5%, which is $12,250. If you use the Great Choice Plus amortizing option, you can borrow up to $15,000 — which covers your entire down payment and leaves a little for closing costs. Your out-of-pocket at closing could be close to zero, depending on how the deal is structured.
That's not a theoretical scenario. That's what this program is designed to do.
What THDA Doesn't Cover
A few things to know going in. THDA loans are not the fastest loans to close. Because they involve a state agency and a second loan, there's more paperwork and more coordination. If you're in a competitive bidding situation where the seller wants to close in 21 days, a THDA loan may not be the right tool. It's better suited for buyers who have a little more time and flexibility.
Also, not every lender is approved to do THDA loans. You have to work with a THDA-approved lender. I am one. If you're working with someone who isn't, they can't offer you this program even if you qualify.
The Bottom Line
If you're buying in Tennessee and your household income is under $137,760 in the Nashville metro — or under the limit for your specific county — you should at least know what THDA offers before you decide how to structure your loan. It might not be the right fit for your situation. But you should make that call with the full picture in front of you, not because nobody told you the program existed.
If you want to know whether you qualify and what the numbers would look like, reach out and we'll run it. Takes about 10 minutes.
One more thing: if your credit score is under 640, or you've owned a home before, or you need more than $15,000 in assistance, THDA may not be the right fit. There's another program worth knowing about. Read about The Housing Fund -- a nonprofit that goes up to $35,000 and doesn't require first-time buyer status.
