First-Time Home Buyers in Tennessee

Who qualifies as a first-time buyer?

For most programs, a "first-time buyer" is someone who has not owned a primary residence in the past three years. This means you may qualify as a first-time buyer even if you owned a home years ago. Divorced individuals who owned a home with a former spouse may also qualify.

THDA Great Choice Home Loan

The Tennessee Housing Development Agency (THDA) offers the Great Choice Home Loan program for first-time buyers and qualifying repeat buyers. Key features:

• 30-year fixed-rate mortgage at a below-market rate
• Down payment assistance of up to 6% of the loan amount as a second mortgage (deferred or amortizing)
• Available with FHA, VA, USDA, or conventional financing
• Income limits vary by county and household size
• Purchase price limits apply
• Homebuyer education course required

THDA programs are available through approved lenders statewide. Morgan Hardy is familiar with the program requirements and can walk you through the application process.

Best loan programs for first-time buyers

First-time buyers typically have the most options, since many programs are specifically designed for them:

• FHA loans: The most popular first-time buyer program nationally. 3.5% down, flexible credit requirements, and widely available. The tradeoff is lifetime mortgage insurance for most borrowers.
• Conventional HomeReady/Home Possible: 3% down with income limits. Better long-term cost than FHA for borrowers with credit above 680 since PMI is cancellable.
• VA loans: Zero down, no PMI, competitive rates. The best available option for eligible veterans — even first-time buyers.
• USDA loans: Zero down for eligible rural and suburban properties. Much of Tennessee outside major metros qualifies.

Common first-time buyer mistakes

• Shopping for homes before getting preapproved: You may fall in love with a home you can't afford, or lose it to another buyer while you're still getting your financing in order.
• Opening new credit accounts before closing: New credit inquiries and accounts can lower your score and change your DTI, potentially affecting your approval.
• Forgetting about closing costs: Many first-time buyers budget for the down payment but are surprised by closing costs. Budget 2–4% of the purchase price on top of your down payment.
• Assuming you need 20% down: Most first-time buyers put down far less. Don't wait years to save 20% if you're otherwise ready to buy.
• Not comparing lenders: Rates and fees vary between lenders. Even a 0.25% rate difference on a $300,000 loan is worth thousands over the life of the loan.