Down Payment Assistance Programs in Tennessee: What Chattanooga Residents Need to Know

For most first-time buyers, the biggest thing standing between them and a home isn't their monthly budget. It's the cash needed up front. The down payment and closing costs can feel like a wall, and rightfully so. A house down payment is the standard in the lending industry, and it can quickly become a barrier to entry when trying to save up for that 20 percent number.

Here's what a lot of Chattanoogans don't realize: you may need far less than you think for a down payment, and there are real programs built to help cover that up-front cost, both statewide and right here at home. Let's walk through what's available and how to use it.

First, what is down payment assistance?

Down payment assistance (DPA) is help covering your down payment and, often, your closing costs. It usually comes as a second loan alongside your main mortgage. Some of these are deferred, meaning you make no monthly payments and may not owe anything unless you sell or refinance. Some are even forgiven over time. Others are repaid monthly at a low rate. The right one depends on your situation, which is exactly the kind of thing a good lender helps you sort out.

Statewide help: the Tennessee Housing Development Agency (THDA)

Tennessee's main source of homebuyer help is THDA. It doesn't lend to homebuyers directly. Instead, it offers below-market mortgages paired with down payment assistance through approved local lenders.

Its flagship is the Great Choice Home Loan, a 30-year fixed-rate mortgage. Pair it with Great Choice Plus, THDA's down payment assistance, and you have two options to choose from:



• A deferred, forgivable option at 0% interest with no monthly payment, forgiven over time as long as you stay in the home.
• An amortizing option that lets you borrow a larger amount, repaid monthly at the same rate as your first mortgage.

THDA also offers Homeownership for the Brave, a reduced-rate option for military members, veterans, and first responders. One requirement worth knowing up front: THDA down payment assistance requires completing a homebuyer education class, which is something CNE provides.

Exact amounts, income limits, and purchase-price limits vary by county and household size, and THDA updates them periodically. Rather than chase a number that may be out of date by the time you apply, confirm the current figures with a THDA-approved lender.

Source: Tennessee Housing Development Agency. CNE shares this as general information; program terms are set by THDA.

Local help: what CNE offers Chattanooga buyers

Here's where being local matters. CNE is a Chattanooga nonprofit that has helped more than 3,400 residents buy their first home, and we bring the pieces together in one place: homebuyer education, down payment assistance, and access to a range of loan products.

CNE offers its own down payment assistance to help qualified buyers cover up-front costs, and we can help you tap statewide programs like THDA's at the same time. We're also excited about a brand-new down payment assistance program offered in partnership with RockPoint Bank, worth asking us about if you're getting started now.

The advantage of working with a local team is simple: instead of guessing which program fits, you sit down with people who know all of them and can match you to the right combination.

Before you apply: a few things to know

• Check your credit score first. There's no magic number, but 640 or above generally opens the widest range of options. Below that, CNE's free financial coaching can help you build a plan to get there.
• “First-time buyer” is broader than it sounds. For many programs, it simply means you haven't owned a home in the past three years.
• Income and price limits apply. These vary by county and household size, so a quick conversation is the fastest way to know where you stand.
• Plan for the education class. It's required for most assistance programs, and it's genuinely useful. CNE offers it.
  

How to get started

You don't have to figure out which program is right on your own. That's the whole point of working with CNE. Reach out, tell us where you are, and we'll help you understand what you qualify for and map the next step, with no pressure.