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 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.

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).

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.

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.

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.

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 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, 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.

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.

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.

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.

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