A program that kicked off in March offers $15,000 in down payment assistance to certain qualified home buyers in a Clinton area zip code and 54 other zip codes across Tennessee.
The down payment assistance is available through the Hardest Hit Fund Down Payment Assistance program, a federal program administered in the Volunteer State by the Tennessee Housing Development Agency, or THDA.
The help is available in Anderson County in the 37716 zip code. That zip code includes an area north and east of Oak Ridge, extending to Clinton and beyond along State Route 61 and north and south of the highway.
To qualify, home buyers must purchase an existing home in one of the 55 targeted zip codes. The purchase requires a THDA Great Choice Home Loan.
The THDA said the neighborhoods they’ve targeted were hit hard by the economic downturn and have been slower to recover. By stimulating home sales in these areas, the program is designed to protect families already living in those zip codes from blight, falling property values, and the risk of foreclosures, the THDA said.
“Our goal is to provide a shot in the arm to the neighborhoods and housing markets in Tennessee where the effects of the housing crisis have been most difficult to erase,” THDA Executive Director Ralph M. Perrey said in a February press release. “We’re creating a substantial incentive for homeowners to buy in areas that are struggling for sales right now. Increased market activity in these areas will help stabilize property values for existing homeowners, thereby reducing the risk they will fall into delinquency or foreclosure.”
There is about $60 million available for the down payment assistance in Tennessee until 2020, with funding coming from the U.S. Treasury’s Hardest Hit Fund. The amount of aid was approved by the U.S. Department of Treasury.
The money available in Tennessee is enough to help about 4,000 home buyers, Perrey said after a presentation to the Rotary Club of Oak Ridge on Thursday afternoon. After kicking off about five weeks ago, the state agency has brought in 150 loans through the program so far, Perrey said.
The $15,000 in down payment assistance cannot be used for new construction. It’s in the form of a forgivable second mortgage loan with a 10-year term. There are no monthly payments on the second mortgage loan, and with a 0 percent interest rate, it does not accrue any interest.
Officials are not trying to help those who want to “flip” homes. Instead, they’re trying to encourage investment, Perrey said. THDA will forgive 20 percent of the second mortgage loan each year starting in year six. So, if a homeowner does not refinance, sell, or move out of their home by the end of the 10th year, the second mortgage loan would be completely forgiven.
But if you sell, refinance, or move out in less than 10 years, you will have to repay some money. Here are the repayment conditions depending upon when you sell, refinance, or move out:
- Years 0-5: You repay $15,000.
- Year 6: You repay $12,000.
- Year 7: You repay $9,000.
- Year 8: You repay $6,000.
- Year 9: You repay $3,000.
- Year 10 of after: You repay $0.
In Anderson County, the current income limits for the Great Choice Loan Program are $61,900 for one to two people and $71,185 for three or more people. The income limits are set by federal officials.
Here is the 37716 zip code in Anderson County:
THDA originally created the Great Choice Home Loan program for first-time homebuyers, but repeat homebuyers can still participate if they meet any of the following qualifications:
- They have not lived in a home they own for at least three years.
- They are buying in one of 58 targeted counties. (Anderson County does not appear to be a targeted county, but please contact THDA for more information.)
- They are buying in a designated neighborhood in 14 additional counties.
- They are participating in the Homeownership for the Brave program for qualified active duty military households and U.S. veterans (and their spouses).
If any of those situations applies to you, then THDA will waive the requirements for you to be a first-time homebuyer—meaning you’re eligible to apply for a Great Choice Home Loan with down payment assistance. (See this Repeat Homebuyers page for more information. Here’s a map of targeted areas for repeat home buyers.)
On Thursday, Perrey said the Hardest Hit Fund started in 2009, and Congress put more money into it than expected. Tennessee is the only state using targeted zip codes to distribute the aid, he said.
The THDA said the down payment assistance is available in the targeted zip codes based on a number of “stress” factors, including foreclosures, short sales, and negative equity rates. On Thursday, Perrey also cited certain Treasury criteria, including decent mortgage activity and the expected benefits of the aid. Some rural areas that have been hit hard economically don’t have enough mortgage activity, Perrey said. About one-third of the targeted zip codes are in the Memphis area.
THDA said it offers the Great Choice Plus down payment assistance to Great Choice-eligible homebuyers who take advantage of the Great Choice Home Loan program outside of these targeted zip codes. However, the Great Choice Plus down payment assistance is limited to 5 percent of the home’s purchase price, and it is not completely forgiven for 30 years.
Click here for the Hardest Hit Fund-Down Payment Assistance page.
Learn more about the THDA, income limits by county, the THDA Down Payment Assistance Program, and much more through the following links:
- THDA consumer website: www.greatchoicetn.com
- Income limits by county: https://s3.amazonaws.com/thda.org/Documents/Business-Partners/Lenders-and-Servicers/Income-Limits.pdf
- Find a THDA lender: http://resources.thda.org/gclenders/lender/lender.html
- THDA Downpayment Assistance Program: https://thda.org/homebuyers/hhf-dpa
- Homebuyer education: http://s3.amazonaws.com/thda.org/Documents/Business-Partners/Homebuyer-Educators/The-Importance-of-Homebuyer-Education.pdf and https://thda.ehomeamerica.org
- Vanderbilt study on Homebuyer Education: https://news.vanderbilt.edu/2016/09/02/study-tennesseans-who-attend-homebuyer-course-less-likely-to-foreclose/
- About THDA: https://thda.org/about-thda/about-thda and https://thda.org/research-planning/program-summary
More information will be added as it becomes available.
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