THDA mortgages are typically intended for low to moderate-income buyers. With these loans, a borrower’s household income cannot exceed certain limits, which are based on the size of the household and the county in which the property is located.

THDA mortgages are intended for modestly sized homes… The cost of acquisition for an existing or new property cannot exceed certain limits determined by the county that the property is in.

All mortgages must be insured or guaranteed by VA, FHA, RD, or some other type of qualified private mortgage insurance company for conventional loans with a loan-to-value ratio higher than 78%.

Typically, THDA mortgages are made available to first-time homebuyers. This pertains to anyone who has not occupied a home that they owned as their primary residence over the past 3 years. Every individual obligated on the loan must fit the category of a first-time homebuyers. The first-time homebuyer requirement is waived when the property being purchased is located in a county designated as a “Targeted” area.

THDA mortgages are made available only to those who will use the property as their primary residence. A property can be up to 4 units, providing the borrower occupies one of the units as his/her principal residence. Rental income from any additional units will count as income towards the borrower’s household income limit. A THDA mortgage cannot be used for purchasing investment property, for a property for a business, or for a second home.

Common mortgage conditions:

  • All mortgages are for terms of 30 years at a fixed rate. Borrowers may not “buy down” the mortgage rate by paying discount points.
  • All mortgages are assumable, subject to the new buyer meeting THDA qualifying terms listed above, and a borrower may pre-pay mortgage principal without penalty.
  • All mortgages require some type of minimum investment by the borrower and that the borrower have some minimum reserves, based on the kind of mortgage insurance or guarantee.
  • Homebuyer education/counseling is encouraged but not necessarily required on Great Choice loan. However, Homebuyer education is required on Great Choice Plus and Homeownership for the Brave loans.
  • All mortgages are subject to federal recapture provisions if the property is sold within the first 9 years. A down payment may be required for some loan types and there are typically costs associated with closing a loan. The costs required to be paid by the borrower at closing may come from the borrower, as a gift, the seller, or as required or permitted by the loan type.

Learn more about THDA loans at the Tennessee Housing Development Agency official website