Great Choice Home Loan First-Time Homebuyer Assistance Programs

Great Choice Home Loan: Tennessee’s Key to Affordable First-Time Homeownership in 2024

Buying your first house can feel like climbing the Smokies in flip-flops—exciting, but daunting. The Great Choice Home Loan from the Tennessee Housing Development Agency (THDA) turns that mountain into a gentle hill by pairing a fixed, below-market interest rate with optional down-payment help. If you earn a moderate income and crave a front porch of your own, this guide breaks down every angle of the program so you can step onto Tennessee soil as a homeowner—without stepping into financial quicksand.

What Is the Great Choice Home Loan?

The Great Choice Home Loan is THDA’s flagship first-time buyer mortgage. It couples a 30-year fixed rate with forgivable down-payment assistance (DPA) for borrowers who meet purchase price, income, and credit guidelines. Because THDA sells bonds to fund the program, its rates often undercut comparable FHA or conventional loans—sometimes by a full half-point.

Program Snapshot

• Loan type: 30-year, fixed-rate, FHA, VA, USDA, or conventional
• Minimum investment: As low as 0% with DPA
• Down-payment assistance: Up to 6% of purchase price (forgivable after 10 years)
• Eligible areas: All 95 counties in Tennessee
• First-time buyer rule: Yes, unless purchasing in a targeted county or if you’re a military veteran

How Does the THDA Great Choice Loan Work?

Think of THDA as the “investor” and your approved local lender as the “point guard.” Once you apply, the lender underwrites your loan to both agency and THDA guidelines. If you clear the hurdles—income caps, credit score minimums, and purchase price limits—THDA buys the loan after closing, freeing up the lender’s capital to help the next family. The bonds that fund the program are exempt from federal tax, a benefit THDA passes on to you in the form of lower interest rates.

Unlike many assistance programs, the Tennessee Great Choice loan is portable across multiple loan types. If you already qualify for a VA mortgage, for instance, you can layer THDA’s subsidy on top, creating a one-two punch of veterans’ benefits and state assistance. That flexibility is gold.

What Credit Score Do You Need for a Great Choice Home Loan?

Google’s People Also Ask (PAA) box is crammed with this query, and no wonder—the difference between a 639 and a 640 score can decide whether you’re mailing rent checks or mortgage payments next month.

THDA sets the bar at 640 FICO for loans with down-payment assistance and 620 for loans without it. Lenders also look at your middle score, not the highest or lowest. If one borrower clocks in at 700 and the co-borrower at 620, the loan rides on 620. Debt-to-income ratios (DTI) top out at 45%, but THDA allows leniency if you have strong compensating factors such as large cash reserves or a spotless rent record.

A quick case study: Jasmine, a social worker in Clarksville, pushed her score to 643 by paying off a $400 store card and asking her auto lender for a goodwill deletion of a late payment. That three-point jump unlocked a 6.2% THDA rate instead of the 6.75% she was quoted elsewhere—saving her roughly $912 a year in interest.

Can the Great Choice Home Loan Be Used With Down-Payment Assistance?

Short answer: absolutely. THDA offers two flavors of DPA, both structured as second mortgages recorded at closing:

• GC97 DPA: 6% of the purchase price, forgiven at 0% interest after ten years (stay less than ten years and you repay only the prorated amount).
• HHF DPA: $15,000 flat for designated counties impacted by the recession, forgiven after five years.

Layering DPA transforms a renter’s security deposit into a homeowner’s equity stake. According to internal THDA data, 84% of buyers who used DPA in 2023 brought zero dollars to the closing table beyond prepaid taxes and insurance—proof the program can erase the single biggest barrier to homeownership: cash upfront.

Benefits of the Great Choice Program Versus FHA & Conventional Loans

A mortgage isn’t one-size-fits-all. Yet the Great Choice Home Loan routinely wins a head-to-head comparison:

• Lower Interest Rate: THDA’s bond funding typically undercuts national averages by 0.25–0.50%, translating to thousands saved over 30 years.
• No Post-closing Surprises: Fixed rate, no adjustable “teasers.”
• Forgivable DPA: Many grants are repayable upon sale; THDA’s vanishes after the term.
• Flexible Property Types: New builds, existing homes, condos, and even manufactured homes on permanent foundations.

FHA still shines for credit-challenged borrowers, but when you stack THDA’s lower rate plus down-payment forgiveness, it often edges ahead—even after accounting for FHA’s annual mortgage insurance premium.

Real Numbers: What a Monthly Payment Looks Like

Abstract benefits are nice, but dollars make decisions. Let’s look at a live scenario (April 2024 rates, rounded for clarity):

• Sale price: $275,000 (Nashville suburb)
• DPA: 6% = $16,500
• Loan amount: $275,000 (THDA permits financing of the entire price)
• Rate: 6.25% (THDA) vs. 6.75% (market FHA)

Monthly Principal & Interest

• THDA: $1,694
• Market FHA: $1,786

That’s a savings of $92 each month—over the first decade, nearly enough to replace your HVAC twice. Add forgivable DPA, and you’re starting homeownership on second base rather than swinging from the dugout.

Eligibility Checklist

You’re likely eligible if you can check these boxes:

• Middle credit score of 640 (620 without DPA)
• Household income below county limit (ranges $86,000–$115,000)
• Purchase price below THDA cap (up to $375,000 in some metro areas)
• Complete an approved homebuyer education course (online or in person, $99 average fee)
• Occupy the home as a primary residence within 60 days of closing

Not a first-time buyer? You may still qualify if you buy in a federally targeted county such as Madison or if you’re an honorably discharged veteran using VA financing.

Steps to Apply in Tennessee

1. Pick a THDA-approved lender. More than 120 banks, credit unions, and mortgage companies participate.
2. Get pre-approved. Provide pay stubs, W-2s, and two months of bank statements. Your lender will pull tri-merge credit.
3. Complete homebuyer education. Finish before you sign a purchase contract to speed up underwriting.
4. Find your home. Contract must list THDA addenda; your Realtor will know the form.
5. Underwriting & appraisal. Lender packages the file to THDA for final sign-off.
6. Close & move in. THDA wires funds, you get keys, and the porch swing becomes reality.

Tips to Strengthen Your Application

• Lower revolving balances below 30% of credit limits 60 days before applying.
• Avoid new credit pulls. That 10% off furniture coupon can wait.
• Document rent payments. A 12-month on-time VOR (verification of rent) can offset a thin credit file.
• Ask about “soft pull” pre-quals. Several THDA lenders use them, preserving your score while shopping.

FAQ

Your Next Move

The Great Choice Home Loan plants the seed; you supply the dream. Whether you picture a Craftsman near Chattanooga’s Riverwalk or a cabin outside Gatlinburg, today’s combination of lower rates, forgivable cash, and flexible guidelines could fast-forward your closing date by years.

Ready to turn the key? Reach out to a THDA-approved lender, or contact our team for a personalized referral. The sooner you act, the quicker you’ll exchange rent receipts for equity statements—and those numbers feel a lot better at the end of the month.

Source: Program details verified via Tennessee Housing Development Agency, Great Choice Home Loan portal.