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some text Ralph M. Perrey, Executive Director of the Tennessee Housing Development Agency spoke to the Chattanooga Times Free Press about various issues facing home buyers in Tennessee on March 16, 2018.

Despite rising home prices — or perhaps because of them — mortgage loans using down payment assistance from the Tennessee Housing Development Agency rose to a record high in 2018 and such loans are on pace to rise still higher this year.

THDA's Great Choice Home Loan program, which offers up to 5% of the cost of a home purchase to low- and moderate-income first-time homebuyers, grew to a record high of $601.2 million in 2018 and THDA Director Ralph Perrey said Thursday he hopes even more borrowers will use the program this year.

"We're really excited because last year was the best year we have ever had — topping our previous record set in 2007 — and we're doing even better this year," Perrey said. "In and around Chattanooga, we saw a 25% boost in our loans volume and we could even exceed that level this year."

The Great Choice Home Loans program provides up to 5 percent of the purchase price of a home for a first-time buyer to help pay for a down payment and the closing costs involved in a sale. In the Chattanooga area, such down payment assistance is available for first-time homebuyers, or those with military experience, for single persons making up $68,000 a year and a household of three or more persons earning up to $78,000 a year.

There is no interest accumulated on the down payment money from THDA, but the principal amount of the loan must be repaid to THDA when the home is sold or refinanced.

A minimum credit score of 640 is required and the debt to income ratio must be below 45% to qualify for the Great Choice program. All homebuyers receiving down-payment assistance must complete an eight-hour, pre-purchase counseling course.

"The single biggest impediment to buying the first home for a lot of people is that they have not saved enough for the down payment or, if they have, they need a few thousand dollars more for closing costs," Perrey said. "That's where we can help make a real difference."

THDA offers an even better down payment assistance program of up to $15,000 for qualified borrowers in low-income or distressed markets through its Hardest Hit Fund. Tennessee was allocated $85 million for the program, but only about $1.2 million remains available, Perrey said.

"It's worked very, very well to provide needed loans in some of our hardest hit areas of the state, but we expect that money will be gone by later this summer," he said.

Many millennial homebuyers are still struggling to pay college loans or household debts on cars, furniture and other expenses so rising home prices have squeezed some buyers out of the market. In 2018, the median home price of homes sold by Chattanooga Realtors rose 7.7% — or more than twice the average growth in income last year — to $191,200, according to the year-end report for Chattanooga in 2018 by the National Association of Realtors.

THDA estimates last year its Great Choice Home Loan program and the other eight lending and assistance programs the agency runs for the state of Tennessee helped pump $1.4 billion into the state's economy last year and generated more than 9,000 additional jobs by allowing more people to buy a home.

THDA uses more than 150 lenders across the state to market its programs. THDA took over servicing those loans last summer, which Perrey said has helped it save on expenses and stay in better contact to help borrowers.

Information about the Great Choice Home Loans is available at thda.org/homebuyers/great-choice-home-loans.

Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.

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