THDA Loans- Great Advantage Program

Of the 3 different THDA loans (TN Housing Development Agency) available, the Great Advantage program falls right in the middle,  in terms of the financial assistance offered and interest rate.  This program is ideal for the first time buyer who might already have some or most of  their down payment and closing costs in the bank, but who still need a little help.  THDA loans are typically based on an FHA loan, so a borrower would need a 3.5% down payment.  Whereas the Great Start (GS) program offers a 4% grant to qualified buyers for down payement or closing costs, the Great Advantage (GA) program offers a 2% grant.  While the assistance is  less, the interest rate is over .25% lower than than the Great Start Program. Currently the GA program rate is only 5.05% which is right in line with market FHA rates.  This is particularly impressive when you consider you’d get a $3000 grant for a $150,000 loan amount. 

Like the GS program, qualified borrowers would need to complete an 8 hour homebuyer education class prior to closing.  For more information about THDA Loans, see my other articles on the subject.

THDA Loans- Great Start Program

The THDA loan program which offers the most financial assistance to first-time buyers in TN is the Great Start Mortgage Program.  Just like the Great Advantage and Great Rate Programs, it is usually an FHA loan, but it can also be a VA or USDA loan (which are both 100% programs). 

Here is how it works:  a borrower meets both the guidelines of FHA and the eligibility requirements of THDA loans, but needs help for closing costs or down payment.  Since FHA loans require a 3.5% down payment, this loan works great because it essentially offers the highest possible assistance (4% grant money) to the borrower.  This grant can cover the down payment, the closings costs, or both, and is calculated by taking 4% of the FHA loan amount.  When combined with the allowed 6% max seller financing concessions, it would allow the borrower to potentially have a no-down payment loan, along with all closing costs and prepaid items covered. (Note: FHA will most likely lower the max seller concession to 3% in early summer 2010)

The interest rate for the Great Start loan is currently 5.35%, based on a 30 fixed loan.  As a matter of fact, all THDA loans are 30 fixed terms, and the rate for this program is just modestly above the market FHA rate, which is excellent when you consider the grant.  Rates on these loans don’t change as often as regular FHA loans, as the rates are determined by the TN Housing Development Agency and their bond issuance.  In other words, the THDA loan rate is the same regardless of which lender you choose.

With the demise of 80/20 combination loans, 100% subprime loans, and the seller-funded down payment assistance programs like Ameridream, the THDA Great Start program is currently only 1 of 3 loan programs, including the USDA Rural and VA program, which offers a buyer the ability to have no money down as well as partially or fully covered closing costs (with seller help).  A few more very important points: the home must be a primary residence,  the borrower(s) must be first-time buyers (not owned a home in the last 3 years) or must be purchasing a home in a targeted county, must take a Homebuyer Education class before closing, and may be subject to Federal recapture tax  (doesn’t affect most buyers).  Please see my other articles for more general information on the awesome THDA loan program.