The Tennessee Housing Development Agency offers mortgages to moderate and middle-income households that meet certain qualifications.
“Typically a lender — if you have a credit score below 640 — they can’t work with you. We can go down to 620. Typically if you have a debt-to-income ratio of 43 percent, if you are above that, they can’t work with you very easily. We can go up to 45 percent. Those are two examples of where we have a little more underwriting flexibility,” THDA executive director Ralph Perrey said.
He said many people do not pursue homeownership because they assume they will not be approved.
“Over the last year or so we have really made some strategic changes in the kind of mortgage products that we offer,” Perrey said.
“We want people to know if they are thinking about homeownership that we have a competitively priced product, that we have available downpayment and closing cost assistance, [and] that because we are the state’s finance housing agency, we can offer lenders some underwriting flexibilities.”
The income qualification limits for the mortgage program vary depending on location. In Bradley County, residents can make up to $62,000 for an individual or couple. For families, the income maximum is $72,520. These maximums are determined at the federal level, based on the state agency’s mortgage revenue bonds.
“The earnings that we generate from that program let us fund a variety of other housing-related activities [such as grants],” Perrey said.
The maximum housing sale price for Bradley County is $240,000.
In 2013, Bradley County had 46 THDA homeownership loans.
“Last summer we made some changes to create what we call our Great Choice Mortgage program. This is the biggest change we have made to the program in 15 years,” Perrey said.
THDA works with local lenders to set up theses loans. Perrey said lenders in the program ensure people will be able to make mortgage payments before approving the loan.
Credit history of applicants will also be reviewed.
“It’s not just that you have the means to repay it, it’s that you have a reputation of being willing to repay it,” Perrey said.
The current interest rate for a THDA mortgage is 3.99 percent.
Perrey said THDA gives lenders the guidelines and then they make the decision on who qualifies.
“We buy the loans from the lender. The lenders are making their money on the fees that we allow them to collect from them [homebuyers],” Perrey said.
Those who qualify for downpayment assistance are required to participate in an eight-hour homeowner education course.
THDA communications coordinator Josh Gibson said most offer these courses free of charge. The rest have a fee of $25. There are two approved by THDA mortgage counselors in Bradley County.
Perrey said the counseling is a way to help ensure success of the homebuyer. The course focuses on budgeting, improving credit score, importance of having savings for home repairs and what to expect during the home-buying experience. There are 13 THDA mortgage program lenders approved in Bradley County. While the course is not required for all homebuyers in the program, it is highly recommended.
THDA provides up to 4 percent of the downpayment for qualified homebuyers.
“We actually offer that out as a second mortgage at zero percent, and it gets paid over 10 years,” Perrey said.
While the Great Choice Mortgage Loan program mostly assists first-time homebuyers, many rural counties have programs for those who have been homeowners previously. In Bradley County, certain areas of southeast Cleveland qualify for the repeat homebuyer program.
Homeowners and first-time homebuyers can find out if they qualify for the program by talking to a banker, mortgage counselor or visiting the program’s website.
Perrey said an increase in first-time homebuyers helps the economy move in a positive direction.
Those interested in a mortgage for a house currently under construction or soon to be under construction may also qualify for the Great Choice Mortgage program, according to THDA director of Public Affairs Patricia Smith.
As part of improvements to the homeowner loan program, the time it takes to process the paperwork through THDA has been reduced. Smith said it usually takes about five days.
Potential homebuyers can find out if they qualify for the Great Choice Loan program at http://www.greatchoicetn.com/.