Buying a house in today's market feels like trying to run a marathon in hiking boots. It’s heavy. It’s slow. And honestly, the prices are enough to make anyone want to just stay in a rental forever. But for people in Tennessee, there’s this specific thing called the Great Choice Home Loan that pops up in every conversation with a local lender.
It isn't some generic bank product. It's a state-sponsored program from the Tennessee Housing Development Agency (THDA). Basically, if you aren't sitting on a mountain of cash but you have a steady job and decent credit, this is often the only realistic path to a front door key.
People get confused. They think "Great Choice" is just a marketing slogan. It’s not. It is a specific financial instrument designed to bridge the gap between "I can afford a monthly payment" and "I don't have $20,000 for a down payment."
What a Great Choice Home Loan Really Looks Like
Let's be real. Most people don't have 20% to put down. On a $350,000 house, that's $70,000. In Nashville or Knoxville? Forget about it. The Great Choice Home Loan is essentially a 30-year, fixed-rate mortgage. It’s usually an FHA, VA, or USDA loan, but it’s wrapped in the THDA’s specific terms.
The interest rate is set by the state. Sometimes that rate is a tiny bit higher than the "absolute lowest" you see on some sketchy website, but there's a reason for that. That slightly higher rate pays for the massive benefit: the down payment assistance.
You've got two main paths here. The first is a deferred option. You get $6,000. It sits there. You don't pay interest on it. You don't make monthly payments on it. But—and this is the part people miss—you have to pay it back when you sell the house or finish paying off your primary mortgage. It’s a second lien. It’s not "free" money, but it’s "use it now" money.
Then there’s the second option. This one is an amortizing loan. Instead of a flat $6,000, you can get up to 6% of the purchase price. But you pay this back over 15 years at the same interest rate as your main mortgage. It’s an extra monthly payment. It's more money upfront, sure, but it means you're actually building equity in that second chunk of debt every month.
The Credit Score Reality Check
You'll hear people say you need "perfect" credit. You don't. For a Great Choice Home Loan, the THDA generally looks for a middle credit score of at least 640.
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That’s the floor.
If you’re at 639? You're out. If you're at 750? You're golden, but you won't necessarily get a better rate than the person at 640. That’s the "Great Choice" equalizer. It levels the playing field for the middle class.
However, debt-to-income (DTI) ratios still matter. THDA is conservative. They don't want to put you in a house that you're going to lose in eighteen months. Usually, they want your total monthly debt payments—including the new house, your car, those annoying student loans, and credit cards—to be under 45% of your gross monthly income. Sometimes they'll stretch to 50% if your credit is high, but don't count on it.
The Income Limits Nobody Likes to Talk About
This is where it gets tricky. You can’t make "too much" money.
THDA has household income limits. These aren't just about you; they’re about everyone living in the house who is over 18. If you’re a couple and you both work, you have to add those incomes together. If that number exceeds the limit for your specific county, you’re disqualified.
For example, in high-cost areas like Davidson County (Nashville) or Williamson County, the limits are significantly higher than in rural Greene County. In 2024 and 2025, we've seen these limits fluctuate to keep up with inflation, often hovering around $100,000 to $120,000 for a small household in the big cities. In smaller towns, it might be closer to $80,000 or $90,000.
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It’s a "Goldilocks" situation. You have to earn enough to afford the mortgage, but not so much that the state thinks you don't need their help.
The Homebuyer Education Requirement
You can't just sign a paper and get the money. THDA requires you to take a homebuyer education course.
Honestly? Most people dread this. They think it’s going to be a boring lecture about how to change a lightbulb. But it’s actually useful. It covers how to read a closing disclosure so you don't get ripped off by "junk fees" from a lender. It explains what a title company actually does.
You can do it online via eHome America, or you can go to an in-person class. The in-person ones are usually better because you can ask a real human why your property taxes are so high in Shelby County.
Why Some Sellers Hate It (And How to Fix It)
We have to be honest here. In a hyper-competitive market, some sellers see a "THDA Great Choice" offer and get nervous.
Why? Because they think it means the buyer is "broke" or that the appraisal will be too strict.
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FHA appraisals, which often go hand-in-hand with Great Choice Home Loan products, have "safety and soundness" requirements. If the house has peeling lead-based paint or a roof that's literally falling off, the appraiser will flag it. The seller has to fix it before the deal can close.
To win an offer with this loan, you need a lender who can call the listing agent and say, "Hey, this buyer is fully vetted. The THDA process is smooth. We will close on time." Without that, you might lose out to a cash offer or a conventional loan with 20% down.
The "Recapture Tax" Scaring People for No Reason
There is this thing called a Federal Recapture Tax. It sounds terrifying.
It basically says if you sell the house within nine years, make a huge profit, and your income has increased significantly, the IRS might want some of that THDA benefit back.
But here is the reality: It is incredibly rare. You have to hit three specific criteria at the same time to actually owe it. Most people who use a Great Choice Home Loan end up being exempt because their income didn't jump by 5% compounded annually, or they didn't make enough of a capital gain. Don't let the "tax" talk scare you away from a $6,000 boost today.
Practical Steps to Get Started
If you're serious about this, stop scrolling Zillow. Zillow is a fantasy land. You need to talk to a THDA-approved lender first. Not every bank does these. Big national banks often won't touch them because the paperwork is specific to Tennessee. You want a local lender who knows the THDA portal like the back of their hand.
- Check your middle credit score. If it’s below 640, spend three months paying down credit cards to 30% utilization. That's the fastest way to bump the score.
- Find a THDA-approved lender. Look for people who have "THDA Top Producer" awards. They do these in their sleep.
- Get your "pre-approval" specifically for Great Choice. This tells you exactly what your price limit is.
- Sign up for the Homebuyer Education class early. Don't wait until you're under contract and stressed out.
- Save at least $2,000 to $3,000. Even with "100% financing" or down payment assistance, you still have to pay for the home inspection and the appraisal upfront. Those are out-of-pocket costs that the loan doesn't cover.
The Great Choice Home Loan isn't a magic wand. It’s a tool. If you use it right, you stop paying your landlord's mortgage and start paying your own. In five years, when the house has hopefully appreciated, you'll be glad you dealt with the extra THDA paperwork.
Check the current income limits for your specific county on the THDA website. They change, and you don't want to base your budget on old data. Once you know your limit, you know your playground. Find a Realtor who isn't afraid of THDA loans, and go find a house that actually fits your life. It’s a grind, but it’s doable.