THDA, Tennessee Housing Development Agency, has this month introduced their anticipated second mortgage program. The program is to be used in conjuction with the stimulus tax credit for first time home buyers. The purpose is to assist potential home owners by providing a no interest loan. THDA recommends that borrowers use their tax credit to pay the loan off, when the credit refund is received.

Some details:

The THDA second mortgage is for the down payment. It is only available with an FHA loan closed with the THDA Great Rate or THDA Great Advantage programs.

The minimum credit score is 620 and THDA's maximum income limits apply.

The program is offered to first time home buyers.

If the borrower decides not to repay the second mortgage with their tax refund, payments can be made.
The loan is interest free until June 1, 2010. At that time the loan will have a 10 year term. The interest rate is 1% above the first mortgage rate.

For the THDA Great Rate program, the current interest rate is 5.55%.

For the THDA Great Advantage program, the current interest rate is 5.85%.

The second mortgage can be used for downpayment or for closing cost, but it in the amount of the 3.5% FHA minimum down payment. The second mortgage can be used with other sources of closing funds that are acceptable to FHA: gift funds, seller paid costs, and of course the 2% grant from the THDA Great Advantage program.

More details on the THDA programs are posted here.

If you have any questions about eligibily for this program, please call.