Downpayment Assistance Program

What is Downpayment Assistance Program?

Downpayment Assistance Program is a forgivable loan for homebuyers in Knoxville, Tennessee.

• Knoxville HND HUD HOME-funded forgivable second mortgage for FTHBs purchasing within Knoxville city limits. Up to $20,000 at 0% interest, deferred, forgiven over 10 years. 80% AMI ceiling.
• City of Knoxville Housing and Neighborhood Development (HND) Downpayment Assistance Program is a HUD HOME-funded forgivable second mortgage for first-time homebuyers purchasing a primary residence within Knoxville city limits. Eligible buyers receive up to $20,000 toward down payment and closing costs. The loan is 0% interest, deferred (no monthly payments), and forgivable over a 10-year HUD HOME affordability period (1/10 per year of owner-occupancy.
• longer term reflecting larger subsidy per 24 CFR 92.254). Pre-purchase homebuyer education required.
• Funding comes from Federal, HOME, and City.

Do you have to pay it back?

Downpayment Assistance Program is forgiven after 10 years, so a buyer who stays that long does not repay it.

• Repayment is triggered by Forgiven over 10-year HUD HOME affordability period (1/10 per year). Unforgiven balance due on sale/refi/transfer/non-occupancy before period end, limited to net proceeds.
• The assistance is recorded in 2nd Lien position.
• Forgiveness and repayment terms are set by the program and can change — confirm them on the official program page before applying.

Who qualifies?

Downpayment Assistance Program is open to first-time homebuyers and buyers who will live in the home as their primary residence.

What are the income limits?

Downpayment Assistance Program limits household income to 80% of the area median income, which varies by county and household size.

• Household income at or below 80% AMI per HUD HOME for Knoxville MSA. 2025 limits: $48,400 (1p) to $91,250 (8p).
• The limit applies to total household income, not only the borrower’s.
• The program lists a maximum household size of 8.
• Area median income figures are published by HUD and updated annually, so check the current table for the county before relying on a number.

What kind of home can it be used for?

Downpayment Assistance Program caps the purchase price at $300,000.

• Eligible property types include Single-family detached, condominium, townhouse, PUD, 2-unit (1 unit owner-occupied), manufactured home on permanent foundation.
• New construction is eligible.
• Manufactured homes are eligible.

Is there eligibility for specific groups?

Downpayment Assistance Program names veterans, active-duty service members, reservists and National Guard members, and surviving spouses among the groups it serves.

• Being named here means the program mentions the group, not that membership alone qualifies an applicant — the rest of the eligibility rules still apply.

Where does it apply?

Downpayment Assistance Program serves buyers purchasing in Knoxville, Tennessee.

How do you apply?

Applications for Downpayment Assistance Program go through the administering agency, which publishes the current terms and the application steps on its own site.

1. 1

   Take a homebuyer education course

   Required by the program, through HUD-approved housing counseling agency required. Local providers include Knoxville Area Urban League, East Tennessee Realtors Association partner counseling. Online via eHome America accepted. Certificate required at closing..

2. 2

   Contact the administering agency to reserve funds

   Funds are reserved through Apply through Knoxville HND; subject to annual HOME / CDBG allocation., and are subject to availability.

3. 3

   Work with a lender who handles the program

   Hey Prescott is not a lender and does not accept applications; this page describes the program so a buyer can take it to a lender or housing counselor.