First-Time Homebuyer Programs in Kentucky

The down payment on a new home is often the biggest hurdle for first-time homebuyers. In Kentucky, where the average home value is $207,759, a down payment of $41,552 is needed to avoid private mortgage insurance.

Fortunately, first-time homebuyer programs in Kentucky can help you achieve homeownership. There are also mortgages that allow first-time homebuyers to put less down on a home, but these usually have income requirements and require mortgage insurance. MoneyGeek explores several state-specific and government-backed first-time homebuyer programs for people from different financial backgrounds.

Kentucky First-Time Homebuyer Programs

Kentucky provides grants and loans to assist first-time homebuyers with down payment and closing costs. We have compiled the first-time homebuyer programs offered by Kentucky Housing Corporation (KHC) to help you find the best option for your particular needs and situation.

Mortgage Revenue Bonds (MRB)

The Mortgage Revenue Bonds (MRB) program by the Kentucky Housing Corporation (KHC) provides affordable, fixed-rate 30-year mortgages to first-time homebuyers in Kentucky. It is also available to repeat homebuyers who are purchasing in targeted areas. MRB loans offer competitive interest rates and are only available for a principal residence. Borrowers can use MRB loans with FHA, VA or RHS mortgages, with minimum down payments depending on the loan type. Borrowers may also qualify for down payment assistance through KHC’s Down Payment Assistance Program (DAP).

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ELIGIBILITY REQUIREMENTS

To qualify for the Mortgage Revenue Bonds program in Kentucky, you must meet eligibility requirements.

  • Must be a first-time homebuyer or repeat buyer in targeted areas
  • Must use an FHA, VA or RHS loan product
  • Have a minimum credit score of 620
  • Meet purchase price limit of $510,939
  • Meet KHC's MRB income limits

​​​​​Secondary Market Funding Source

The Secondary Market Funding Source program provides fixed-rate 30-year mortgages for first-time and repeat homebuyers statewide. It offers competitive rates for FHA, VA, RHS and conventional loans. Borrowers using this program can also qualify for down payment assistance through KHC’s Down Payment Assistance Program (DAP). The program ensures flexibility by providing options for buyers with different loan products, and no reserves or minimum borrower contributions are required.

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ELIGIBILITY REQUIREMENTS

To qualify for the Secondary Market Funding Source program in Kentucky, you must meet specific eligibility requirements.

  • Meet purchase price limit of $510,939
  • Have a minimum credit score of 620 for FHA, VA or RHS loan and 660 for conventional
  • Must meet KHC income limits

Regular Down Payment Assistance Program (DAP)

Kentucky Housing Corporation's (KHC) Regular Down Payment Assistance Program (DAP) is designed to help homebuyers manage upfront costs by offering a loan of up to $10,000 for down payments and closing costs. This assistance is repayable over a 10-year term at a 3.75% interest rate. It is available to recipients of KHC first mortgages. The loan is issued in $100 increments, and there are no asset or reserve limits, making it accessible to a wide range of buyers.

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ELIGIBILITY REQUIREMENTS

To qualify for the Regular Down Payment Assistance Program (DAP) in Kentucky, you must meet specific eligibility requirements.

  • Use a KHC first mortgage loan
  • Maximum purchase price limit is $510,939
  • Meet KHC income limits

Kentucky First-Time Homebuyer Programs by City

Aside from statewide first-time homebuyer programs in Kentucky, city-specific programs are available to help you pursue homeownership in a city of your choosing. Check out the table below for some of the cities in Kentucky that provide first-time homebuyer programs for potential residents.

City
First-Time Homebuyer Program

Louisville

Louisville's Down Payment Assistance Program provides down payment and closing cost assistance of up to 20% of the purchase price to low-to-moderate-income homebuyers. The assistance comes in the form of a partially forgivable loan with 0% interest, which can be used to purchase an existing or newly constructed home. You must occupy the purchased home as your primary residence for a period of five to 15 years, depending upon the amount of assistance received. After that specified period ends, 50% of the loan will be forgiven, while the remaining balance will not be due until the sale of that home.

Zero-Down-Payment Loan Programs in Kentucky

In Kentucky, there are zero-down-payment loan programs available that allow you to purchase a home without putting any money down. USDA and VA loans are two government-backed options that offer this benefit.

USDA Loans

USDA loans are designed to assist low-to-moderate-income homebuyers in rural areas. These loans are issued by the U.S. Department of Agriculture through its Rural Development Guaranteed Housing Loan program. These loans offer a path to homeownership with benefits like low interest rates and no down payment, making them an attractive option for those who qualify.

USDA loans provide financing for homes in designated rural areas. They come with favorable terms, including no down payment and competitive interest rates. These loans are available to those who meet specific eligibility criteria, such as location and income limits. The program aims to make homeownership more accessible for individuals and families in rural communities.

To qualify for USDA loans, your property must be 2,000 square feet or below and located in a USDA-eligible rural area with a population of less than 35,000. You must meet certain income limits, which vary by location. For instance, in Bell County, Kentucky, the income limit for a four-person, low-income household is $52,500, while in Harrison County, Kentucky, it is $62,100.

VA Loans

VA loans, issued by the U.S. Department of Veterans Affairs, are designed to help veterans, active-duty service members and certain members of the National Guard and Reserves purchase homes. These loans offer a range of benefits that make homeownership more accessible for those who have served.

VA loans offer several advantages, including no down payment requirement and no private mortgage insurance (PMI) needed, which can significantly lower your monthly payments. VA loans often have lower interest rates than conventional loans. As of November 2024, the APR for a 15-year fixed-rate VA loan in Kentucky is 6.21%, while the APR for a 30-year fixed-rate VA loan is 6.34%.

To qualify for VA loans, you must meet specific eligibility requirements based on your length of service, duty status and character of service. You may need to meet certain income limits depending on where you live. A valid Certificate of Eligibility (COE) is also required to access these benefits.

Low-Down-Payment Loan Programs in Kentucky

First-time homebuyers in Kentucky can take advantage of low-down-payment loan programs that allow them to finance their home with a down payment of 3.5% or less. These programs include conventional, FHA and FHA 203(k) loans.

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    Conventional Loans

    Conventional loans are a popular choice for homebuyers, offering flexibility and various options. There are two main types: conforming loans, which adhere to Freddie Mac or Fannie Mae guidelines, and non-conforming loans, which exceed those limits. Depending on the lender, you can secure a mortgage with as little as a 3% down payment. However, if your down payment is 20% or less, you'll need to pay private mortgage insurance. To qualify, you'll need a minimum credit score of 620 and a debt-to-income ratio of 43% or lower.

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    FHA Loans

    FHA loans are designed to make homeownership accessible, following Federal Housing Administration policies. In Kentucky, the mortgage limit for single-family properties is $766,550, and for two-family properties, it's $981,500. To qualify, you'll need a minimum credit score of 500 and a 3.5% down payment. Remember, private mortgage insurance is required if your down payment is less than 20%.

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    FHA 203(k)

    FHA 203(k) loans offer a unique opportunity to combine the cost of renovations into your mortgage. There are two types: the Standard 203(k) and the Limited 203(k). With a 3.5% down payment, this loan is accessible to many, requiring a credit score between 500 and 580 and a front-end debt-to-income ratio of 31% or less. It's not limited to first-time homebuyers, but you can't have two FHA loans at the same time.

FHA vs. Conventional Loan: Which Is Right for You?

FHA loans and conventional loans are often compared as they are the two most common types of mortgages. FHA loans require a minimum down payment of 3.5%, while conventional loans can require as low as 3% for first-time homebuyers. Conventional loans typically have stricter credit score and debt-to-income ratio requirements than FHA loans.

As of November 2024, the current APR for a 15-year fixed-rate conforming loan in Kentucky is 5.93%, while the APR for a 15-year fixed-rate FHA loan is 8.11%. FHA loans can have higher APRs because there tend to be more fees and extra costs associated with borrowing money on government-backed loans.

You can use our FHA vs. conventional loan calculator below to help you compare FHA and conventional mortgage programs and determine the best option for you.

FHA vs. Conventional Loan Calculator

Compare FHA and conventional mortgage programs to better understand your loan opportunities in Kentucky.

Basic Details

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Calculation Results
Financial AnalysisFHAConventionalDifference
Monthly Payment (First Year)FHA$0Conventional$0Difference$0
Upfront Costs FHA$0Conventional$0Difference$0
Total 30-Year CostFHA$0Conventional$0Difference$0
Total 5-Year CostFHA$0Conventional$0Difference$0
Monthly Mortgage Insurance (First Year)FHA$0Conventional$0Difference$0
Down PaymentFHA$0Conventional$0Difference$0
Calculator results are rounded to the nearest whole dollar.
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RECOMMENDED CREDIT SCORES FOR FIRST-TIME HOMEBUYERS

Qualifying for first-time homebuyer programs often involves meeting minimum credit score requirements, which can vary depending on the loan program. Conventional loans typically require a credit score of 620, while government-backed loans like FHA loans may only need a minimum credit score of 500. These requirements are designed to assess the borrower's financial reliability and ability to repay the loan.

According to Experian, the average credit score in Kentucky in the third quarter of 2023 was 705. With a credit score above the minimum requirements for these programs, potential homebuyers in Kentucky are well-positioned to qualify for both conventional and FHA loans.

FAQ: First-Time Homebuyer Programs in Kentucky

We have addressed frequently asked questions about first-time homebuyer programs in Kentucky to assist you in selecting the best option and moving closer to homeownership.

Does Kentucky have first-time homebuyer programs?

What qualifies me as a first-time homebuyer in Kentucky?

Can you buy a house in Kentucky with no down payment?

Who can help me with my down payment on a house in Kentucky?

Additional Resources for First-Time Homebuyers in Kentucky

Explore additional MoneyGeek resources for first-time homebuyers in Kentucky to help you with the homebuying process.

About Zachary Romeo, CBCA


Zachary Romeo, CBCA headshot

Zachary Romeo is a certified Commercial Banking and Credit Analyst (CBCA), and the Head of Loans and Banking at MoneyGeek. Previously, he led production teams for some of the largest online informational resources in higher education, with over 13 years of experience in editorial production.

Romeo has a bachelor's degree in biological engineering from Cornell University. He geeks out on minimizing personal debt and helping others do the same through people-first content.


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