THDA Great Choice Loan Program 2026: Complete Tennessee First-Time Buyer Guide
If you are a first-time home buyer in Tennessee, the THDA Great Choice loan program is one of the most powerful tools available to you — and one of the least understood. The Tennessee Housing Development Agency offers a 30-year fixed-rate mortgage with up to $15,000 in down payment assistance, and the program is specifically designed for low-to-moderate-income buyers who might otherwise struggle to come up with the cash needed to close on a home. If you are buying in Coffee County, Franklin County, or anywhere in Middle Tennessee, this guide will walk you through exactly how the program works, what the current limits are, and how to use it to your advantage in 2026.
What Is the THDA Great Choice Loan?
The Great Choice Home Loan is a 30-year, fixed-rate mortgage originated through THDA-approved lenders across Tennessee. The loans are insured by FHA, USDA Rural Development, or VA — meaning THDA is not replacing those loan types but rather wrapping them in a state-administered program that adds competitive interest rates and access to down payment assistance.
The key advantages over going directly to a conventional or FHA lender without THDA are the below-market interest rates THDA often secures through its bond financing, the structured down payment assistance programs (Great Choice Plus), and the homebuyer education requirement that — while it adds a step — genuinely prepares first-time buyers for the financial realities of homeownership.
Down Payment Assistance: Two Options
This is where the program gets powerful. If you qualify for a Great Choice loan, you can also apply for Great Choice Plus down payment assistance. There are two options, and which one works best depends on your financial situation.
Deferred Option: Up to $6,000 toward your down payment and closing costs. This is a second loan with 0% interest and no monthly payments. At the end of 30 years, the loan is forgiven entirely. Read that again: if you stay in the home for the full mortgage term, you never pay it back. Even if you sell or refinance earlier, you only owe the remaining balance on a zero-interest loan — not a penalty.
For a buyer purchasing a $225,000 home in Decherd or Tullahoma with an FHA loan requiring 3.5% down ($7,875), the $6,000 deferred assistance covers more than 75% of the down payment. Your out-of-pocket drops to roughly $1,875 plus whatever closing costs are not covered — a meaningful difference for a first-time buyer.
Amortizing Option: Up to 5% of the purchase price, with a maximum of $15,000. This is a second loan at the same interest rate as your first mortgage, with monthly payments. On a $300,000 home, that is $15,000 in assistance. The tradeoff: you are making payments on it, so your total monthly housing cost is higher than with the deferred option. But for buyers who need more than $6,000 to get in the door — especially in the $300,000–$400,000 price range — the amortizing option puts homeownership within reach when it otherwise would not be.
2026 Income and Purchase Price Limits
THDA updates these limits periodically. As of the May 18, 2026 update, here are the limits for the counties in our service area.
Coffee County (Tullahoma, Manchester):
Acquisition limit: $500,000. Income limit: $92,300 for 1–2 person households, $106,960 for 3+ persons.
Franklin County (Winchester, Decherd, Estill Springs, Cowan, Huntland) — Targeted County:
Acquisition limit: $500,000. Income limit: $110,760 for 1–2 person households, $129,220 for 3+ persons.
Moore County (Lynchburg) — Targeted County:
Acquisition limit: $500,000. Income limit: $98,474 for 1–2 person households, $113,245 for 3+ persons.
Lincoln County:
Acquisition limit: $500,000. Income limit: $110,760 for 1–2 person households, $129,220 for 3+ persons.
The $500,000 acquisition limit is well above the median home price in every market I serve. In practice, most Great Choice buyers in our area are purchasing homes in the $175,000–$350,000 range, where the program's down payment assistance makes the biggest difference.
What "Targeted County" Means for You
Franklin County and Moore County are designated as THDA "Targeted" counties. That designation waives the first-time homebuyer requirement — meaning even repeat buyers can use the Great Choice program in those counties. If you already own a home or have owned one in the past three years, you can still qualify for a Great Choice loan when purchasing in Winchester, Decherd, Cowan, Huntland, or Estill Springs. That is a significant advantage that most buyers — and many agents — do not know about.
Eligibility Requirements
Here is what you need to qualify for a THDA Great Choice loan in 2026.
Credit score: Minimum 640 for all borrowers on the application. This is slightly higher than the 580 minimum for standard FHA, but THDA's rates and down payment assistance more than compensate.
Income: Your total household income — everyone living in the home, not just the borrowers on the loan — must fall within the county limits listed above. THDA counts all household income including wages, self-employment, Social Security, disability, child support, and other regular income sources.
Purchase price: The home cannot exceed the county acquisition limit ($500,000 across all Middle Tennessee counties).
First-time buyer: You must not have owned a home used as your principal residence in the past three years. This requirement is waived in Targeted counties (Franklin, Moore, and several others).
Occupancy: The home must be your primary residence. No investment properties, second homes, or business properties.
Loan insurance: The underlying loan must be insured or guaranteed by FHA, USDA, VA, or acceptable private mortgage insurance for conventional loans above 78% LTV.
Homebuyer education: Required for all Great Choice and Great Choice Plus loans. You must complete an approved homebuyer education course before closing. These courses cover budgeting, mortgage mechanics, home maintenance, and the real costs of ownership. They are available in person and online through THDA-approved providers. I consider this a feature, not a burden — the buyers I have worked with who completed the education course went into closing better prepared and more confident.
How THDA Compares to Going Straight FHA
This is the question I get most from first-time buyers: why not just get an FHA loan through a regular lender and skip the THDA process?
Three reasons.
Interest rate. THDA typically offers rates that are competitive with or below market FHA rates because THDA finances its loan pool through tax-exempt mortgage revenue bonds. Even a quarter-point difference on a $250,000 loan saves roughly $40/month or $14,400 over 30 years.
Down payment assistance. A standard FHA lender does not come with $6,000–$15,000 in down payment help attached. That is THDA's unique advantage — especially for buyers who have strong income and credit but have not had time to accumulate savings.
Structured preparation. The required homebuyer education and the THDA-approved lender network mean that Great Choice borrowers go through a slightly more rigorous process — and that process produces better outcomes. Default rates on THDA loans are historically lower than standard FHA, which tells you the preparation works.
The tradeoff: the process takes slightly longer because THDA is an additional layer between you and closing. Your lender submits the loan to THDA for review and purchase, which adds processing time. In a competitive market where sellers are comparing multiple offers, the THDA timeline can occasionally be a disadvantage. I help my buyers mitigate that by getting the THDA pre-approval locked in early and communicating the loan structure clearly to listing agents.
Step-by-Step: How to Use THDA Great Choice
Step 1: Check your eligibility. Review the income limits for your county and household size. Check your credit score — all borrowers need a 640 minimum. Confirm you have not owned a primary residence in the past three years (or that you are buying in a Targeted county).
Step 2: Find a THDA-approved lender. Not every mortgage lender participates in the THDA program. You must work with a THDA-approved lender. THDA maintains a searchable directory at thda.org. I can recommend approved lenders who are experienced with the program in our market.
Step 3: Complete homebuyer education. This can be done online or in person through a THDA-approved provider. Plan to complete this early in the process — it is required before closing, and some lenders prefer it done before pre-approval.
Step 4: Get pre-approved. Your THDA-approved lender will run your full application, verify income and assets, pull credit, and issue a pre-approval letter. This letter tells sellers you are a qualified, funded buyer — not a maybe.
Step 5: Find your home and make an offer. This is where I come in. We search the market, tour properties, and write a competitive offer. I will make sure the listing agent understands your THDA financing and that it does not create unnecessary concern.
Step 6: Close. Your lender processes the loan through THDA, the down payment assistance is applied at closing, and you get the keys. The deferred DPA does not increase your monthly payment. The amortizing option adds a second payment that your lender will quote for you in advance.
Real Math: THDA Great Choice on a Tullahoma Home
Here is what the numbers look like on a representative purchase in our market.
Purchase price: $275,000 (three-bedroom, two-bath in a Tullahoma neighborhood)
Loan type: FHA via THDA Great Choice
Down payment: 3.5% = $9,625
Great Choice Plus (Deferred): $6,000 applied to down payment
Your out-of-pocket for down payment: $3,625
Loan amount: $265,375
Estimated rate: ~6.0% (THDA rates vary; this is illustrative)
Estimated P&I: ~$1,591/month
FHA MIP: ~$153/month
Property tax: ~$150/month (Coffee County estimate)
Insurance: ~$110/month
Total estimated monthly payment: ~$2,004/month
Without the $6,000 DPA, you would need $9,625 cash for the down payment alone plus closing costs. With it, you need $3,625 plus closing costs — and the seller can contribute up to 6% toward closing costs on an FHA loan, potentially reducing your total out-of-pocket to under $4,000.
Common THDA Mistakes to Avoid
Waiting too long to start. The THDA process has more steps than a standard FHA loan. Start 60–90 days before your target purchase date, not 30.
Not checking the household income definition. THDA counts all income from everyone living in the home, not just the people on the mortgage. A working adult child or a roommate who will live with you counts toward the income limit.
Assuming your lender is THDA-approved. Not all are. Verify before you start the application process.
Skipping homebuyer education until the last minute. Complete it early. Some courses take 4–8 hours, and scheduling can be limited.
Not knowing about the recapture tax. If you sell your THDA-financed home within the first nine years, you may owe a federal recapture tax if your income has increased significantly and you sell at a profit. This is a federal rule, not a THDA rule, and it applies to all state housing finance agency loans. Your lender should explain the recapture provision, and in most cases the actual tax owed is modest or zero — but know it exists.
FAQ
Can I use THDA for a manufactured home?
Yes. THDA's Great Choice program allows manufactured homes that are classified as real property — meaning they must be on a permanent foundation and titled as real estate, not personal property. THDA has specific guidelines for manufactured homes including minimum square footage and age requirements.
Can I combine THDA with USDA or VA?
Yes. THDA Great Choice loans can be insured by FHA, USDA, or VA. That means a VA-eligible buyer in a USDA-eligible area like Decherd or Huntland could potentially use THDA's rate and DPA on top of VA's zero-down benefit.
Is there an income limit for THDA?
Yes. For Coffee County: $92,300 (1–2 persons) or $106,960 (3+ persons). For Franklin County: $110,760 (1–2 persons) or $129,220 (3+ persons). These are household income limits, not just borrower income.
Do I have to be a first-time buyer?
Generally yes — you cannot have owned a primary residence in the past three years. But this requirement is waived in Targeted counties, which include Franklin County and Moore County in our service area.
How long does the THDA process take?
Plan for 45–60 days from application to closing, slightly longer than a standard FHA timeline due to THDA's review layer. Getting pre-approved early minimizes delays.
Ready to Explore THDA for Your First Home?
If you think you might qualify for THDA's Great Choice program, I will connect you with an approved lender, walk you through the homebuyer education options, and help you find the right home in your budget — whether that is in Tullahoma, Winchester, Manchester, or one of the smaller Franklin County towns where your dollar goes farthest.
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