Down Payment Assistance in Tennessee 2026: Grants & Loans

Saving a down payment is the single biggest hurdle most Tennessee buyers face. The good news: you rarely have to cover the whole thing yourself. Between the Tennessee Housing Development Agency (THDA), federal loan programs, and a handful of city and county funds, eligible buyers can cut their out-of-pocket cash to a few thousand dollars — and sometimes close to zero.

This guide breaks down what is actually available in 2026, the real dollar amounts straight from THDA, who qualifies, and the exact steps to apply. Every figure here is dated and traced to a primary source: THDA, HUD, the FHFA, and the VA.

How much down payment do Tennessee buyers really need?

The median home price in Tennessee sits around $340,000 in 2026. On an FHA loan, the minimum down payment is 3.5% for borrowers with a credit score of 580 or higher — roughly $11,900 on a median-priced home. Conventional loans through Fannie Mae HomeReady or Freddie Mac Home Possible can go as low as 3% down (about $10,200) for qualified buyers.

Down payment assistance (DPA) is designed to close that gap. Most Tennessee DPA comes as a second mortgage — either forgivable over time or repaid alongside your primary loan — rather than a literal cash grant. Understanding the structure matters as much as the dollar amount, because it determines whether and when you ever pay the money back.

Here is a quick way to think about the four structures you will encounter. A forgivable second mortgage charges no interest and is written off after you live in the home for a set number of years — you never repay it if you stay. A deferred second mortgage also requires no monthly payment but becomes due when you sell, refinance, or move out. An amortizing second mortgage is a real loan with monthly payments, just at a fixed rate over a long term. And a true grant, the rarest type, is money you keep outright. Tennessee’s flagship state assistance uses the first two structures, which is why it costs most buyers little to nothing over the life of the loan.

Before you start, it helps to know how much house you can afford and to run the numbers in a closing cost calculator, since DPA can often be applied to closing costs as well as the down payment.

Keep in mind that the down payment is only part of the cash you need at closing. Closing costs in Tennessee typically run 2% to 5% of the purchase price — think appraisal, title, lender fees, and prepaid taxes and insurance. On a $340,000 home that is roughly $6,800 to $17,000 on top of the down payment. Several DPA programs let you direct assistance toward these costs, which is often the smarter move for buyers who already have some down payment saved but are short on the rest.

Tennessee Housing Development Agency (THDA) programs

THDA is the state’s housing finance agency and the backbone of down payment help in Tennessee. Its assistance attaches to the Great Choice Home Loan, a 30-year fixed-rate first mortgage with a below-market interest rate. You cannot get the DPA on its own — it pairs with a Great Choice first mortgage originated through a THDA-approved lender. Full current terms live on THDA’s own Down Payment Assistance page.

Great Choice Home Loan

The Great Choice Home Loan is the foundation. It is a 30-year, fixed-rate mortgage (FHA, VA, USDA-RD, or conventional) with a competitive interest rate. THDA-approved lenders generally look for a credit score around 640, though THDA does not publish a minimum on its eligibility page — confirm the current floor with your lender. Income and acquisition-cost (purchase price) limits apply and vary by county. It is geared toward first-time buyers, though THDA defines a first-time buyer as someone who has not owned and occupied a primary residence in the past three years, and that requirement is waived in federally targeted areas and for qualifying veterans.

Great Choice Plus — the down payment assistance

Great Choice Plus is the down payment and closing-cost assistance that layers on top of the Great Choice first mortgage. As of 2026, THDA offers two options, and you choose one:

• Deferred Option: up to $6,000 or up to $10,000 as a forgivable second mortgage at 0% interest with no monthly payments — your THDA-approved lender confirms which tier you qualify for; THDA’s public program page does not spell out the dividing line. The loan is forgiven at the end of the 10-year term. If you sell or refinance before the 10 years are up, the balance is due in full.
• Amortizing Option: Up to 5% of the sales price, capped at $15,000, as a second mortgage. This one has monthly payments over a 30-year term at the same interest rate as your first mortgage.

The deferred option is the cleaner deal for buyers who plan to stay in the home past the 10-year mark — there are no payments and the balance disappears at year 10. The amortizing option puts more cash on the table up front (up to $15,000) but you repay it monthly, so weigh it against your budget.

Homeownership for Heroes

Formerly marketed as “Homeownership for the Brave,” this program has been renamed Homeownership for Heroes. It covers active-duty military, veterans, National Guard members, reservists, and eligible surviving spouses, plus firefighters, EMTs, paramedics, and state and local law enforcement — and since May 5, 2026, THDA extended eligibility to full-time K-12 classroom teachers. Eligible borrowers get 0.5% (half a percentage point) off the standard Great Choice interest rate and can still take the Great Choice Plus assistance on top, so a qualifying buyer may access down payment or closing-cost help through the same second-mortgage options above. There is no first-time-buyer requirement. See THDA’s eligibility requirements page and the announcement on teacher eligibility for the current list of qualifying professions. The 30-year fixed-rate structure still applies; the credit-score floor is lender-set, as noted above.

THDA program comparison

THDA income and acquisition-cost limits are set county by county. For 2026, household income limits run higher in metro counties — for example, the limit is materially higher in Davidson County (Nashville) than in many rural counties, and a 3+ person household typically gets a higher cap than a 1–2 person household in the same county. Acquisition-cost limits (the maximum purchase price) likewise vary by county and are tied to federal targeting rules. Always confirm the current figure for your specific county on the THDA limits chart before you apply, because qualifying at $80,000 in one county may not translate to the next. This is the single most common reason a buyer thinks they qualify and then finds out at application that they are a few thousand dollars over the line — so pull the chart for your county first, not last.

Federal loan programs available in Tennessee

THDA assistance rides on top of a federally backed or conventional first mortgage. Knowing your loan type shapes how much you put down and how DPA stacks. For current pricing, check today’s mortgage rates.

FHA loans

FHA is the most common base loan paired with THDA DPA in Tennessee. The minimum down payment is 3.5% with a credit score of 580+. FHA charges mortgage insurance: 1.75% upfront plus an annual premium (commonly around 0.55%, though this varies by loan term and LTV — confirm with your lender) paid monthly. For 2026, the FHA loan floor — the limit in most Tennessee counties — is $541,287, with a ceiling of $1,249,125 in the highest-cost areas. Those figures come straight from HUD’s 2026 loan-limit announcement (ML 2025-23).

To put the insurance cost in real terms, a buyer purchasing a $340,000 home with FHA financing pays roughly $5,950 in upfront mortgage insurance (rolled into the loan) and about $1,870 per year — around $156 a month — in annual premiums. That cost is the trade-off for the low 3.5% down payment, and it is worth weighing against a conventional loan with PMI if your credit is strong. When you pair FHA with THDA’s Great Choice Plus deferred assistance, the 3.5% down can be largely covered, which is what brings some Tennessee buyers close to zero cash at the closing table.

Conventional loans

Fannie Mae HomeReady and Freddie Mac Home Possible allow 3% down for qualified buyers, and THDA’s Great Choice can be originated as a conventional loan. Private mortgage insurance (PMI) applies below 20% equity and can be cancelled once you reach roughly 78% loan-to-value. The 2026 conforming baseline loan limit is $832,750 — up $26,250 from 2025 — rising to $1,249,125 in high-cost areas (150% of baseline), set by the FHFA’s 2026 conforming loan limit release, which cites a 3.26% national home-price increase between Q3 2024 and Q3 2025.

VA loans

For veterans, active-duty service members, and eligible surviving spouses, VA loans require zero down payment and carry no monthly mortgage insurance. There is a one-time VA funding fee, generally cited around 2.15% of the loan for first-time use and 3.3% for subsequent use (confirm current tiers on VA.gov, as this schedule adjusts periodically). The fee is reduced with a down payment of 5% or more (and again at 10% or more), and waived entirely for veterans receiving compensation for a service-connected disability. Because VA already covers the down payment, buyers often direct THDA assistance toward closing costs instead — one of the most affordable combinations available in the state.

USDA loans (rural areas)

USDA Rural Development loans offer zero down in eligible rural and many suburban parts of Tennessee, with income limits generally around 115% of area median income. Check the USDA eligibility map for your address. Not every THDA program pairs with USDA, so confirm with your lender.

HUD homebuyer programs

Two niche HUD options can stretch your dollars further. Good Neighbor Next Door gives law enforcement officers, firefighters, EMTs, and pre-K–12 teachers a 50% discount on eligible HUD-owned homes in revitalization areas, with a 36-month owner-occupancy commitment. The $100 Down Program lets FHA buyers purchase certain HUD-owned foreclosures (listed on HUDHomeStore.com) for just $100 down. Both depend on current HUD inventory, which varies.

City and county down payment assistance

Local programs can stack on top of THDA help, often adding $5,000 to $25,000 depending on where you buy. Funding for these is usually first-come, first-served, so availability changes throughout the year.

• Nashville — Barnes Housing Trust Fund: A deferred-payment second mortgage aimed at buyers earning below 80% of area median income (AMI), created to address Nashville’s rapid price growth. Maximum amounts and funding cycles change, so verify current availability with Metro Nashville.
• City of Memphis — Homebuyer Incentive Program (HIP): up to 10% of the sales price, not to exceed $10,000, toward down payment and reasonable closing costs. Open to first-time buyers and to current renters who do not own other property.
• Shelby County Down Payment Assistance: up to $6,000 as a 3% loan with a term of up to 15 years. The buyer must contribute at least $500 of their own funds, the purchase price is capped at $300,000, and total debt ratio must not exceed 45%.
• Knoxville — Community Development DPA: up to $25,000 as a forgivable loan for first-time buyers at or below 80% AMI. Available only on homes built by one of the City’s partner developers — Home Source East Tennessee, Neighborhood Housing Inc., or East Tennessee Housing Development Corporation. The developer restriction, not the dollar cap, is what actually governs access.
• Chattanooga Neighborhood Enterprise: Offers down payment assistance alongside homebuyer coaching for area buyers.

Because these are locally administered, the exact caps and income rules shift — treat the figures above as typical ranges and confirm with the city or county housing office before counting on them. Local funds also tend to come from federal pass-through sources like HOME and CDBG, which means dollars are budgeted in cycles and can be exhausted mid-year. If a city program is the difference-maker for your budget, get on it early in the funding year and ask the housing office directly when their next allocation opens.

One practical tip: layering a local program on top of THDA’s Great Choice Plus is allowed in many cases, but the combined assistance cannot exceed your actual down payment and closing-cost needs, and both your lender and the local agency have to sign off. Your THDA-approved loan officer is usually the best person to map out a realistic stack for your county and price point.

Eligibility: what it takes to qualify

DPA programs in Tennessee generally screen on four things.

Income. Most programs cap household income between 80% and 120% of AMI, and THDA sets its own county-specific limits. Metro counties allow higher incomes than rural ones.

Credit score. THDA-approved lenders generally look for a score around 640. THDA does not publish an official credit-score floor on its DPA or eligibility pages — the working minimum is set by your lender, and some local programs accept lower scores while others want 660+. A higher score also lands you a better first-mortgage rate regardless of DPA.

Homebuyer education. Nearly every program requires a HUD-approved homebuyer education course — typically 6 to 8 hours, often online, costing $50 to $100, with a certificate valid for 12 to 24 months. Providers include eHome America and Framework.

Primary residence. The home must be your primary residence, not an investment or vacation property. Forgivable and deferred loans usually require you to keep it as your primary home for a set period to avoid repayment.

For a fuller picture of state-specific buyer help, see our guide to first-time home buyer programs in Tennessee.

How to apply for down payment assistance in Tennessee

1. Confirm eligibility. Check your county’s THDA income and acquisition-cost limits, your credit score (lenders typically want around 640, though THDA sets no published floor), and the purchase-price cap.
2. Complete homebuyer education. Finish a HUD-approved course and keep the certificate.
3. Find a THDA-approved lender. DPA is originated through participating lenders only — use THDA’s lender list.
4. Apply for the loan and DPA together. Get pre-approved and apply for the Great Choice mortgage and Great Choice Plus assistance simultaneously. Expect to provide tax returns, pay stubs, bank statements, and ID.
5. Close on your home. DPA funds are disbursed at closing. Plan on roughly 45 to 75 days from application to closing.

A few common missteps to avoid: waiting too long while first-come funds run dry, skipping the education requirement, applying to only one program, and overlooking the forgiveness or repayment terms tied to your second mortgage.

Combining DPA with your loan type

DPA layers differently depending on your first mortgage. With FHA, the 3.5% down plus DPA can bring you close to zero cash to close, though you still carry FHA mortgage insurance. With VA, the loan is already zero-down, so DPA typically covers closing costs. With conventional financing, HomeReady or Home Possible at 3% down works well for credit scores around 680+ where PMI eventually cancels. To see the full cost picture, walk through our mortgage closing costs breakdown and the broader down payment assistance guide.

Before you sign anything, it’s also worth understanding the downside case. Our Tennessee foreclosure process guide walks through what happens if a loan goes into default, which is useful context when you’re weighing an amortizing second mortgage against a deferred one. Once your DPA numbers are set, compare rates and fees with our best mortgage lenders in Tennessee roundup, and budget for the ongoing cost of ownership with our Tennessee homeowner insurance guide.

Ready to start house hunting? Head to the buy hub or explore everything on our Tennessee state page.

Buying near a state line or comparing markets? See how assistance stacks up in neighboring and similar states with our guides to down payment assistance in North Carolina, down payment assistance in Ohio, and down payment assistance in Nevada.

Frequently Asked Questions

How much down payment assistance can I get in Tennessee in 2026?

Through THDA’s Great Choice Plus program you can choose either $6,000 or $10,000 as a 0% deferred second mortgage forgiven at the end of a 10-year term, or up to 5% of the sales price (maximum $15,000) as an amortizing second mortgage with monthly payments. Local city and county programs in Nashville, Memphis, Knoxville, and Chattanooga can add roughly $5,000 to $25,000 more if you qualify and your lender participates.

Do I have to pay back down payment assistance in Tennessee?

It depends on the option. The $6,000 or $10,000 Great Choice Plus deferred loan carries no payments and is forgiven at the end of the 10-year term, but it comes due in full if you sell or refinance before then. The amortizing option (up to $15,000) is repaid monthly over 30 years at your first-mortgage rate. Some local programs are deferred and due only on sale, refinance, or move.

What credit score do I need for THDA down payment assistance?

THDA-approved lenders generally look for a credit score around 640 for the Great Choice Home Loan and Great Choice Plus assistance, though THDA does not publish an official minimum on its DPA or eligibility pages — the working floor is set by your lender. Some local Tennessee DPA programs set their own minimums, which can be lower or higher. A stronger score also improves your first-mortgage rate.

Do I have to be a first-time homebuyer to qualify?

For most THDA Great Choice programs, yes — but THDA defines a first-time buyer as someone who hasn’t owned and occupied a primary residence in the past three years. That requirement is waived in federally targeted areas and for buyers using Homeownership for Heroes, which is open to repeat buyers.

Can I combine state and local down payment assistance programs?

Often, yes. You can frequently stack a THDA Great Choice Plus second mortgage with a local city or county program, as long as your lender participates in both and the total assistance stays within program limits. Confirm layering rules with your THDA-approved lender before you apply.

How long does the down payment assistance process take?

Plan on roughly 45 to 75 days from application to closing — about the same as a standard mortgage. THDA assistance is approved alongside your Great Choice loan, so it generally doesn’t add separate delays, though local programs may tack on a week or two.