8 Loan Programs Available to Tennessee First-Time Buyers in 2026 | BuyUnrepped

Tennessee's median home price sits somewhere between $386,700 and $437,500 depending on who's measuring, and 30-year mortgage rates are hovering around 6.25% as of early 2026. The median down payment Tennessee buyers actually brought to closing in late 2025 was $49,500.¹² For most first-time buyers, that's a number that stops them cold.

What most buyers don't know: eight loan programs exist specifically to close that gap. Some eliminate the down payment entirely. Some provide grants or second loans you may never have to repay. Some lower your rate by half a point. And many can be combined with each other or with local grants from cities like Nashville, Knoxville, and Chattanooga.

This guide covers all eight, with the income limits, purchase price caps, credit floors, and geographic requirements you need to know before you apply.

How to Use This Guide

The eight programs fall into three buckets: Tennessee state programs (THDA), federal government-backed loans (FHA, VA, USDA), and conventional programs from Fannie Mae and Freddie Mac. You may qualify for more than one at the same time, and in most cases, that's the point. The strategy section at the end shows how to layer them.

One important note: qualifying for a state program doesn't lock you out of federal programs, and vice versa. A THDA Great Choice loan, for example, is typically FHA-backed, so using the state program is already using both.¹

Program 1: THDA Great Choice Home Loan

Tennessee's Housing Development Agency runs the Great Choice Home Loan program, which is the state's primary first-time buyer mortgage. It's a 30-year fixed-rate loan originated through THDA-approved private lenders, the underlying loan is typically FHA or USDA-backed, which means you get state-level eligibility support on top of federal loan backing.¹

Who qualifies:

First-time buyers (anyone who hasn't owned and occupied a primary home in the past 3 years)
Buyers purchasing in a THDA Targeted Area: specific distressed counties or census tracts where the first-time buyer requirement is waived entirely, allowing repeat buyers to participate²

Credit and down payment:

Minimum 640 credit score for every borrower on the application
Down payment as low as 3.5% (FHA-backed) or 3% (HFA Advantage conventional option)
At least 1% must come from the borrower's own funds: the rest can be from DPA, gifts, or grants

Income and purchase price limits vary by county:

County/Area	Household Income Limit
Most rural counties	$83,800–$88,200
Shelby County (Memphis area)	~$81,000
Davidson County (Nashville)	~$102,500
Nashville-metro ring (Cannon, Cheatham, Davidson, Dickson, Macon, Robertson, Rutherford, Sumner, Williamson, Wilson)	$119,760 (1–2 earners) / $139,720 (3+ earners)

The purchase price cap is $400,000 in most counties, though the exact limit varies, check THDA's published table for your specific county.¹

Homebuyer education is required for all Great Choice loans. Expect to pay $25–$99 for a THDA-approved course. The certificate expires after 12 months, so complete it no more than a year before you plan to close.

The rate isn't subsidized, as of late 2025 it was running around 6.25%, in line with market rates. The real value is access to down payment assistance (Program 2 below) and below-market eligibility for buyers who might otherwise not qualify for conventional financing.

If you're planning to negotiate seller credits to cover your closing costs, the Great Choice program pairs well with FHA's 6% seller concession cap. See our seller concessions guide for how to structure that into your offer.

Homeownership for Heroes

THDA also runs a Homeownership for Heroes variant of the Great Choice loan for qualifying public servants and military members:

Who it covers: active duty, National Guard, retired military, law enforcement officers, EMTs, paramedics, firefighters
Rate reduction: 0.5% below the standard Great Choice rate, on a $300,000 loan, that's roughly $85/month in savings over the life of the loan
No first-time buyer requirement: repeat buyers qualify
Up to 100% financing when paired with VA or USDA; 96.5% with FHA
Compatible with Great Choice Plus DPA (Program 2)¹

Program 2: THDA Great Choice Plus (Down Payment Assistance)

Great Choice Plus is a second loan layered on top of a Great Choice first mortgage. It's not a standalone program, you must qualify for Great Choice first. But once you do, this is how THDA helps cover your down payment and closing costs.¹

Two options:

Option	Amount	Interest Rate	Repayment
Deferred	$6,000	0%	Forgiven at end of 30-year term; repaid only if you sell or refinance before then
Amortizing	Up to 5% of purchase price (max $15,000)	Same as your first mortgage	Monthly payments over 30 years

Which option to choose: The deferred $6,000 is effectively free money if you stay in the home for 30 years, or nearly free, since it only comes due if you sell or refinance first. The amortizing option makes sense if you need more than $6,000 and can absorb the small additional monthly payment.

Real-world example: On a $300,000 purchase, the Great Choice loan requires $10,500 down (3.5%). With the $6,000 deferred DPA applied to the down payment, your out-of-pocket drops to $4,500, before any seller concessions for closing costs.¹

Layer one more: THDA also offers the Take Credit Mortgage Credit Certificate (MCC), which gives you a federal income tax credit worth up to 30% of your annual mortgage interest, capped at $2,000 per year. You claim it every year you own and occupy the home, not a one-time benefit. Stack it with Great Choice and Great Choice Plus and you're working with a meaningful long-term subsidy.

Pair all of this with seller concessions and you could cover most or all of your closing costs out-of-pocket. Our seller concessions guide shows exactly how to structure that ask.

Program 3: FHA Loans in Tennessee

FHA loans are the most accessible federal mortgage option, and the most common choice for first-time buyers with credit scores below 640 who don't qualify for THDA.³

Down payment:

3.5% with a credit score of 580 or higher
10% with a credit score of 500–579

Mortgage insurance: FHA charges an upfront premium of 1.75% of the loan amount (typically rolled into the loan balance) plus an annual MIP of 0.15%–0.75%. The critical difference from conventional loans: FHA's annual MIP is permanent on 30-year loans with less than 10% down. You can't cancel it the way you can cancel PMI, you'd need to refinance into a conventional loan once you have sufficient equity.³

Tennessee's split limit structure: FHA loan limits in Tennessee break into two tiers based on county housing costs:

County Group	2026 FHA Limit (Single-Family)
Standard, most TN counties (Shelby, Knox, Hamilton, Montgomery, and others)	$541,287
High-cost Nashville MSA, 14 counties	$1,029,250

The 14 high-cost counties carrying the $1,029,250 limit are: Cannon, Cheatham, Davidson, Dickson, Hickman, Macon, Maury, Robertson, Rutherford, Smith, Sumner, Trousdale, Williamson, and Wilson.⁴

Who benefits most from FHA in Tennessee:

Buyers with credit scores 580–639: below THDA's 640 floor, FHA is your best option
Buyers who want the 6% seller concession cap (conventional loans with less than 10% down are capped at 3%)
Buyers financing homes in the Nashville MSA above THDA's $400,000 purchase price cap

One key point: most THDA Great Choice loans are FHA-backed. So if you qualify for Great Choice, you're already getting an FHA loan, just with THDA's income eligibility layer and DPA access on top.

Program 4: VA Loans for Tennessee Veterans

If you've served, the VA loan is almost always the best program available to you, and Tennessee adds its own benefit on top of the federal one.

Who qualifies:

Active duty service members
Veterans with an honorable discharge
National Guard and Reserve members (with sufficient service time)
Eligible surviving spouses
Requires a Certificate of Eligibility (COE): get it through VA.gov or your lender

The core benefits:

$0 down payment required
No private mortgage insurance: ever
Competitive interest rates, typically lower than conventional⁵

2026 VA funding fee:

Scenario	First Use	Subsequent Use
0% down	2.15%	3.3%
5%–9.99% down	1.5%	1.5%
10%+ down	1.25%	1.25%
Disabled veteran / Purple Heart / surviving spouse	Exempt	Exempt

The funding fee is a one-time charge, not ongoing MIP, and it can be rolled into the loan. If you have a service-connected disability rating of 10% or more, you're exempt from the fee entirely.⁶

Tennessee-specific bonus: The state offers a property tax exemption on up to the first $100,000 of a primary residence's value for veterans who are at least 10% service-connected disabled, have lost the use of two or more limbs, or are blind in both eyes. Tennessee also has no state income tax, which VA Loan Network notes effectively amplifies the monthly savings that come from having no PMI payment.⁵

2026 loan limits in Tennessee: For borrowers with full VA entitlement, there is no loan limit. For partial-entitlement borrowers, limits apply: $832,750 for standard-cost counties, $1,029,250 for the Nashville metro (Davidson County and surrounding counties).⁵

No first-time buyer requirement. The VA loan is available to eligible veterans on every purchase.

Program 5: USDA Loans for Rural Tennessee

The USDA Section 502 Guaranteed Loan is the least-known program on this list, and one of the most powerful for buyers willing to look outside city cores.

$0 down payment. Full stop.

Coverage: Approximately 90% of Tennessee's land mass qualifies for USDA financing.⁷ The only ineligible areas are the dense urban cores of Nashville, Memphis, Chattanooga, and Knoxville. Many suburban communities just outside those cities still qualify. Examples:

Near Nashville: portions of Murfreesboro, Smyrna, and many smaller surrounding towns
Near Memphis: Bartlett (portions), Collierville (portions), smaller outlying communities
Near Knoxville: Maryville
Near Chattanooga: Cleveland

Eligibility is address-specific: don't rely on city name or ZIP code alone. Always verify the exact property address using the USDA Property Eligibility Map.

2026 income limits (most Tennessee counties):

Household Size	Annual Income Limit
1–4 persons	$119,850
5–8 persons	$158,250

High-cost counties like Davidson and Williamson have higher limits above the standard floor. The limit is based on total household income from all working adults, not just the borrowers on the loan.⁸

Costs:

Upfront guarantee fee: 1.0% of the loan amount (can be rolled into the loan)
Annual mortgage insurance: 0.35%: significantly cheaper than FHA's 0.55%–0.75% annual MIP

Credit: 640 preferred for automated underwriting approval. Scores as low as 580 may qualify through manual underwriting with strong compensating factors.

No first-time buyer requirement. The property must be a primary residence, no investment properties or vacation homes.

USDA allows a 6% seller concession cap, meaning you can ask the seller to cover most or all of your closing costs. Combined with $0 down, it's possible to close with very little out of pocket. See our seller concessions guide for how to negotiate that into your offer.⁷

Program 6: Fannie Mae HomeReady

HomeReady is Fannie Mae's low-down-payment conventional mortgage designed for low-to-moderate income buyers. The key advantage over FHA: mortgage insurance is cancelable.

The basics:

3% minimum down payment
Income must be at or below 80% of the area median income (AMI) for the property's location, this is address-specific, not a county-wide number
Use Fannie Mae's AMI Lookup Tool to check your specific address
Credit floor: As of November 2025, Fannie Mae removed hard minimum credit score thresholds from its official guidelines, approval is now based on overall credit risk. In practice, most lenders still set their own floor around 620⁹
DTI ratio: up to 50%

Mortgage insurance: Required with less than 20% down, but at reduced rates compared to standard conventional PMI. Critically, PMI is cancelable once you reach 20% equity, unlike FHA's permanent MIP. Over a 30-year term, that difference can amount to tens of thousands of dollars.

Homebuyer education is required: a 4–6 hour HUD-approved online course. If you're also applying for a THDA program, the same course counts toward both requirements.

HomeReady is available to both first-time and repeat buyers, as long as income falls within the 80% AMI threshold.

Program 7: Freddie Mac Home Possible

Home Possible is Freddie Mac's version of HomeReady, same income cap, similar down payment, but with a couple of meaningful differences.

3% minimum down payment
Income at or below 80% of AMI for the property address, verify using Freddie Mac's eligibility tool
Credit floor: typically 660 for fixed-rate loans (higher than HomeReady's 620); 680 for adjustable-rate or manufactured housing¹⁰
DTI: up to 45% (manual underwriting)
PMI required with less than 20% down; cancelable at 20% equity

The key differentiator: Home Possible allows income from a boarder or renter in the home to count toward qualifying income. If you're buying a home where you plan to rent out a room, that rental income can help you clear the debt-to-income threshold.

No first-time buyer requirement, repeat buyers who meet the income cap are eligible.

Program 8: Freddie Mac HomeOne

HomeOne fills the gap for first-time buyers who earn too much to qualify for Home Possible or HomeReady.

3% minimum down payment
No income limits
No geographic restrictions
At least one borrower must be a first-time buyer (hasn't owned a primary home in the past 3 years)
If all borrowers are first-timers, at least one must complete an approved homeownership education course¹¹
Credit: no official Freddie Mac minimum (post-November 2025 guideline change), but lenders typically require 620+
PMI required with less than 20% down; cancelable at 20% equity
One-unit primary residence only, single-family home, townhome, or condo

The use case: You make more than 80% AMI, which disqualifies you from HomeReady and Home Possible, but you still want 3% down conventional financing rather than FHA's 3.5% down with permanent MIP. HomeOne is the answer.¹¹

DTI up to 45%.

How These 8 Programs Compare

Program	Min. Down	Credit Floor	Income Limit	Geographic Limit	PMI/MIP	First-Time Only?
THDA Great Choice	3–3.5%	640	Yes (by county)	Tennessee only	FHA/USDA MIP	Yes (waived in Targeted Areas)
THDA Great Choice Plus	Reduces down payment	640	Same as Great Choice	Tennessee only	Via first mortgage	Paired with Great Choice
FHA	3.5% (580+) / 10% (500+)	500	None	None	Permanent MIP	No
VA	0%	None (lender ~580+)	None	None	None	No
USDA	0%	640 preferred	Yes (~$119,850 for 1–4)	Rural/suburban zones	0.35% annual	No
Fannie Mae HomeReady	3%	620	80% AMI	None	Cancelable PMI	No (any buyer ≤80% AMI)
Freddie Mac Home Possible	3%	660	80% AMI	None	Cancelable PMI	No (any buyer ≤80% AMI)
Freddie Mac HomeOne	3%	620 (lender)	None	None	Cancelable PMI	Yes (at least one borrower)

How to read this table: Start with your situation, not the program names.

You're a veteran or active military → Start with VA. No down payment, no PMI, and in Tennessee, potentially no funding fee if you have a disability rating.
You're buying outside a major city → USDA is almost always cheaper long-term than FHA. Zero down and a 0.35% annual MI vs. FHA's 0.55%–0.75% adds up over 30 years.
Your income is below the THDA county cap → Great Choice + Great Choice Plus. You can stack up to $6,000–$15,000 in DPA on top of the first mortgage.
Your income is above the THDA cap but at or below 80% AMI → HomeReady (620+ credit) or Home Possible (660+ credit).
Your income is above 80% AMI and you're a first-time buyer → HomeOne. Same 3% down, no income ceiling.
Your credit score is 500–639 → FHA is the only program on this list that goes below 640. THDA and USDA both require 640.³

Stacking Programs: How to Combine Multiple Sources of Help

Most buyers treat these as an either/or decision. They shouldn't. The programs are designed to layer.

Stack 1, The THDA Full Stack Great Choice first mortgage + Great Choice Plus $6,000 deferred DPA + Take Credit MCC ($2,000/year federal tax credit) + seller concession covering closing costs. On a $250,000 purchase, this combination can bring your out-of-pocket at closing below $5,000, and the MCC credit saves you money on taxes for as long as you own the home.^1,2

Stack 2, The USDA Zero-Down Stack USDA first mortgage ($0 down) + seller concession up to 6% for closing costs. In an eligible Tennessee suburb, this is a legitimate path to closing with almost nothing out of pocket. The 1% upfront guarantee fee rolls into the loan, the only true out-of-pocket items are prepaid expenses and any gap above the seller concession cap.⁷

Stack 3, The VA + Tennessee State Benefit Stack VA loan ($0 down, no PMI) + Tennessee property tax exemption (if you're a qualifying disabled veteran) + seller concession up to 4% for closing costs. Veterans with service-connected disabilities can combine federal savings, state savings, and seller credits into a purchase with dramatically lower carrying costs than any other buyer profile.

Local DPA programs can supplement any of the above:

Nashville: Up to $15,000 through Affordable Housing Resources (AHR)/NeighborhoodLIFT
Knoxville: Up to $25,000 in down payment assistance
Chattanooga: Up to $15,000 through Chattanooga Neighborhood Enterprise
Clarksville: Income-eligible DPA through the Office of Housing and Community Development
Memphis: Down Payment Assistance through the Division of Housing and Community Development

One practical note: the homebuyer education course required for THDA programs also satisfies the education requirement for Fannie Mae HomeReady. Take it once, and you've met the requirement for both.

For a deeper dive on how seller concessions work alongside these programs, see our guide to seller concessions in Tennessee. It covers the limits by loan type and how to write the ask into your purchase agreement.

How BuyUnrepped Helps

Every one of these programs reduces what you pay to get into a home. But there's another cost most first-time buyers overlook: the buyer's agent commission.

At Tennessee's average buyer-agent rate of 2.92%, the commission on a $386,700 home is approximately $11,291.¹² That's money that doesn't go toward your down payment, your closing costs, or any of the programs above. It goes to a buyer's agent, who, by the way, has no ability to help you qualify for a better loan program.

BuyUnrepped is built for Tennessee buyers who want to keep that money. Our flat-fee model means you get Tennessee-specific purchase agreement templates, closing cost calculators, and step-by-step guidance through the entire buying process, without the percentage-based commission.

There's a practical overlap here: knowing your loan program before you make an offer changes what you can negotiate. If you're using FHA, your seller concession ceiling is 6%. If you're using conventional with less than 10% down, it's 3%. If you're using USDA or VA, it's 6% and 4% respectively. Those numbers determine how you write your offer. You shouldn't be figuring that out with an agent, you should walk in knowing it.

Tennessee-specific purchase agreements so your contracts protect you from day one
Closing cost calculators so you know exactly what you're bringing to the table
Step-by-step guidance through FHA, USDA, VA, and THDA-specific transaction requirements
The savings that would otherwise go to a buyer's agent

See how much you could save on your specific purchase or check out our pricing. Have questions? Reach out to our team, we're happy to help.

Conclusion

Tennessee buyers in 2026 have eight credible paths to the closing table. Which one is best depends on where you're buying, what you earn, what your credit looks like, and whether you served in the military.

Start with the comparison table above. If two or more programs apply to your situation, ask a THDA-approved lender how to combine them, that conversation costs nothing and can save you thousands.

And remember: the buyer's agent commission you choose not to pay is its own form of savings, one that doesn't require income verification, a county limit table, or a homebuyer education course.

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