Wondering how to buy a home in Chattanooga without a big down payment? If you’re trying to balance rising prices with a realistic budget, Tennessee Housing Development Agency (THDA) programs may open the door. You want clear answers on who qualifies, how the process works, and what it takes to make a strong offer.
In this guide, you’ll learn the essentials: what THDA loans are, who typically qualifies in Hamilton County, and the exact steps to apply and close with confidence. You’ll also get tips to craft a THDA-ready offer that sellers will take seriously. Let’s dive in.
What is a THDA loan?
THDA offers statewide homeownership programs through participating private lenders. In Hamilton County, that means you can apply with a local lender that originates a THDA-backed, 30-year fixed-rate mortgage and, if eligible, you may add down payment assistance as a second mortgage to help with your upfront costs.
Key points to understand:
- You apply with a THDA-participating lender. THDA sets the program rules, and the lender underwrites your loan to those rules.
- The first mortgage is a fixed-rate, 30-year loan designed to support affordability for eligible buyers.
- THDA may offer down payment assistance (DPA) as a second mortgage that helps cover down payment and closing costs. Terms and amounts can change, so always confirm current details with THDA and your lender.
- Many buyers using DPA must complete homebuyer education from an approved provider before closing.
THDA programs are statewide, but income limits, purchase-price limits, and participating lender lists are specific to each county. If you plan to buy in Chattanooga or anywhere in Hamilton County, make sure you review the county-specific limits before you shop.
Who qualifies in Hamilton County
THDA eligibility involves several parallel checks. You must meet all of them to qualify. Always confirm the latest figures and rules directly with THDA and your lender.
Borrower basics
- Primary residence: You must live in the home as your primary residence.
- Income limits: Your household income must be at or below THDA’s income limit for Hamilton County. Limits vary by household size.
- Purchase-price limits: The home’s contract price must fall within THDA limits for the county and program.
- Credit and DTI: Lenders apply credit score and debt-to-income standards. THDA may have minimums or overlays as well.
- Homebuyer education: If you use DPA, plan to complete an approved homebuyer education course before closing.
- Participating lender: You must work with a lender approved by THDA to originate the loan.
First-time vs. repeat buyers
THDA programs often focus on first-time buyers, commonly defined as buyers who have not owned a primary residence within the past three years. Some programs may allow exceptions for certain buyers or targeted areas. Veterans may also have different pathways. Check the current THDA rules to confirm where you fit.
Property rules
- Eligible property types typically include single-family homes, certain condos, and PUDs. Condo projects may require approval.
- Not for investment or second homes: Most THDA programs exclude rentals and vacation homes.
- Occupancy: You must plan to occupy the home after closing per program rules.
How to apply step by step
Use this step-by-step plan to prepare a competitive, THDA-ready offer in Chattanooga.
- Confirm current program details
- Review THDA’s official information for Hamilton County income and purchase-price limits. Confirm how THDA defines a first-time buyer and note any current exceptions.
- Choose a THDA-participating lender
- THDA loans must be originated by approved lenders. When you interview lenders, ask about minimum credit score, DTI caps, documentation, whether THDA DPA can be paired with your first mortgage, and expected timeline from application to closing.
- Get fully preapproved
- A true preapproval is stronger than a prequalification. Your lender reviews your credit, income, and assets and issues a letter stating you are conditionally approved, subject to property conditions such as appraisal. Ask the lender to note that you plan to use THDA in the final loan package.
- Complete homebuyer education
- If you will use THDA DPA, complete an approved homebuyer education course. Some are online and some are in-person. Schedule this early. You will need the certificate before closing.
- Shop and write a THDA-ready offer
- Write your offer with a financing contingency that covers both the first mortgage and THDA requirements. In multiple-offer situations, discuss contingency timing with your agent and lender so you remain competitive.
- It helps to be transparent that you are using THDA DPA. The lender and title company can explain the second mortgage at closing so the seller understands the process.
- Coordinate dates so the lender can order the appraisal and move through underwriting without delay.
- Submit the full loan application
- Provide all documents quickly. Your lender packages the first mortgage and any THDA DPA and moves to underwriting. The appraisal must support the purchase price and comply with program limits.
- Close on your home
- At closing, you sign the first mortgage and, if applicable, the THDA second mortgage for DPA. Your homebuyer education certificate must be in your file.
Documents checklist
Gather these items early to speed up your THDA application:
- Government-issued photo ID and Social Security numbers for all borrowers.
- Last 2 years of federal tax returns, W-2s and/or 1099s.
- Recent pay stubs covering at least 30 days and, if needed, employer verification.
- Bank statements for the last 2–3 months for checking and savings.
- Statements for retirement and investment accounts if used for reserves or funds to close.
- Gift letter and source documentation if receiving gift funds.
- Homebuyer education completion certificate if using DPA.
- Signed purchase agreement and any addenda or seller concessions.
Writing a THDA-ready offer in Chattanooga
You want the seller to feel confident in your financing and timing. Here’s how you can help your offer stand out while using THDA:
- Lead with a strong preapproval. A letter from a THDA-participating lender reassures the seller.
- Be clear about DPA. The DPA is a standard second mortgage recorded at closing. Ask your lender or title company to explain this to the listing agent if questions arise.
- Set realistic timelines. THDA paperwork can add a bit of time. Align appraisal and financing contingency dates with your lender’s expectations.
- Avoid surprises. Do not exceed the THDA purchase-price limit. If the home’s price is above the cap, you cannot use THDA funds for that purchase.
Common pitfalls to avoid
- Outgrowing the limits: If your target price is above the THDA purchase-price cap, the program will not apply. Confirm limits before touring homes.
- Missing documentation: Incomplete income or asset records can stall underwriting. Send documents promptly and in full.
- Skipping education: If DPA is part of your plan, complete homebuyer education early. You will need the certificate to close.
- Tight contingencies: In a competitive market, it is tempting to shorten financing timelines. Only do this if your lender is confident they can meet the dates.
- Assuming repeat-buyer eligibility: If you owned a home within the past three years, verify whether you qualify under current THDA exceptions before you write an offer.
After you buy: refinance and resale
If you used THDA DPA, the assistance is recorded as a subordinate lien. It often becomes due when you sell, refinance, or pay off the first mortgage. If you refinance later, your new lender may need THDA to subordinate the DPA. Policies and any fees can change, so speak with your lender and review THDA’s current rules before you refinance.
For tax questions related to assistance, consider speaking with a qualified tax professional.
Next steps
If you think a THDA loan could be right for you in Chattanooga, start by confirming the latest Hamilton County income and purchase-price limits, then speak with a THDA-participating lender about preapproval. When you are ready to shop, work with a local team that understands how to structure THDA-backed offers, manage timelines, and keep your closing on track.
Have questions about neighborhoods, pricing, or how to write a competitive offer with THDA financing? Reach out to Grace Frank for local guidance and a clear path to your next home.
FAQs
What is a THDA loan for Chattanooga buyers?
- THDA offers a 30-year fixed-rate mortgage through participating lenders, with optional down payment assistance as a second mortgage for eligible buyers in Hamilton County.
Who counts as a first-time buyer under THDA rules?
- First-time buyers are generally those who have not owned a primary residence in the past three years, though some programs allow exceptions. Confirm current THDA definitions.
Are condos in Hamilton County eligible for THDA financing?
- Condos may be eligible, but some projects require approval and all must meet THDA property and occupancy rules. Check property eligibility with your lender.
How do income and purchase-price limits work for Hamilton County?
- THDA sets county-specific limits that vary by household size and program. Your income and the home’s price must both fall within those Hamilton County limits.
Do I have to take homebuyer education to use THDA assistance?
- If you use THDA down payment assistance, you typically must complete an approved homebuyer education course and provide the certificate before closing.
Can I combine THDA with other assistance programs?
- Some programs can be combined, but you must verify compatibility and lender rules. Ask your lender about stacking options and any overlays.
