THDA Great Choice Plus + FHA Loan in Tennessee
Most first-time Tennessee buyers pair THDA with an FHA loan. FHA needs 3.5% down, and Great Choice Plus can cover that plus closing costs, often with a second that is forgiven at 10 years. Here is how the two fit together.
Why FHA is the common THDA pairing
FHA is the workhorse for first-time buyers in Tennessee, because it allows a 3.5% down payment and is more forgiving on credit than conventional financing. THDA’s Great Choice program is built to sit on top of an FHA first mortgage, so Great Choice Plus steps in to cover that 3.5% down payment and much of the closing costs. Put together, a buyer with a 640 score can get into a Memphis, Knoxville, or Chattanooga home without draining savings.
How the FHA loan and the DPA second stack
Two loans work together. The FHA first mortgage is your primary loan, with its usual mortgage insurance. Great Choice Plus is a separate second that funds the down payment and closing costs at the table. Choose the no-payment option and that second is $6,000 or $10,000 at zero percent with no monthly payment, forgiven at the end of 10 years unless you sell or refinance early. Choose the amortizing option and it is up to 5% of the price, capped at $15,000, with a monthly payment. The FHA loan behaves like any FHA loan either way.
Forgivable or amortizing with an FHA loan?
For FHA buyers watching their monthly budget, the forgivable second is usually the better fit, it adds no monthly payment and disappears at 10 years. The amortizing option gives more assistance (up to 5% of the price) but adds a payment. There is no single right answer. I lay both out side by side on the forgivable vs. amortizing page.
Program facts verified August 2026 against THDA and HUD FHA guidance. This is not a commitment to lend. Related: DPA + VA loan · County limits.
Common questions
Can THDA Great Choice Plus cover an FHA down payment?
Yes. FHA requires a 3.5% minimum down payment, and THDA's Great Choice Plus second can cover that plus most closing costs. The forgivable option ($6,000 or $10,000, forgiven at 10 years) adds no monthly payment.
What credit score do I need for an FHA loan with THDA?
THDA requires a minimum 640 credit score and a maximum 45% DTI for the Great Choice first mortgage and the Great Choice Plus second, whether the first mortgage is FHA, VA, or USDA.
Do I make a payment on the THDA second with an FHA loan?
It depends. The forgivable $6,000 or $10,000 second has no monthly payment and is forgiven at 10 years. The amortizing option (up to 5%, max $15,000) has a monthly payment over 30 years.
Ready to see your options?
Tell us your county, credit range, and price target, and we’ll map your Tennessee path in a no-pressure 20-minute call. No obligation.