Kentucky First-Time Homebuyer Programs

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Updated on Monday, April 1, 2019

It can be overwhelming to consider everything that comes along with buying your first home. Along with the house hunting, there’s a lot of paperwork to wade through, and the upfront costs can be high. In short, it’s complicated.

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Help is available, however. If you’re a Kentucky resident, you have access to a range of assistance programs for prospective homebuyers through state- and county-wide programs.

In January 2019, we reviewed first-time homebuyer programs in the state of Kentucky. This includes reviewing the Kentucky Housing Corporation website and other sources. This guide will help you determine the assistance available in your area and the qualifications you must meet to receive it.

Kentucky first-time homebuyer programs

The Kentucky Housing Corporation offers several programs targeting first-time buyers, including down payment and closing cost assistance at various levels, loans with no mortgage insurance premiums and homebuyer tax credits.

KHC Conventional Preferred Risk Program

The Kentucky Housing Corporation offers a loan that comes with a lower monthly payment than an FHA loan because it doesn’t require the borrower to hold mortgage insurance. Mortgage insurance is usually required if you put down less than 20%. With an FHA loan, you have to pay an upfront insurance cost, plus monthly insurance premiums for the life of the loan.

If you get the KHC Conventional Preferred Risk loan, you may be able to pair it with a KHC down payment assistance program as well.

What is it?

  • A thirty-year fixed-rate mortgage
  • Three percent down payment
  • No upfront or monthly mortgage insurance requirement
  • No minimum borrower contribution
  • Can be paired with down payment assistance programs
  • No reserves required

Requirements

  • The borrower must not exceed income limits, which are dependent on county.
  • Minimum credit score of 660.
  • Minimum loan-to-value ratio (LTV) of 80.01%. LTV is the loan amount divided by the property value.
  • Homebuyer education required for first-time homebuyers.
  • Some fees are applicable.

How to apply

To get started, contact a KHC participating lender. They’ll work with you to determine whether you’re eligible and walk you through the application process. They can also tell you if you qualify for other types of assistance.

Homebuyer Tax Credit

All first-time buyers in Kentucky (as well as some repeat buyers in certain Kentucky counties) are eligible for a tax credit. A tax credit reduces the amount of tax you owe and is subject to a recapture tax if you sell the home within nine years at a profit.

What is it?

  • A tax credit equal to 25% of the mortgage interest annually, or $2,000 (whichever is less).
  • It reduces your federal income taxes every year you occupy the residence.
  • You can still claim the remaining 75% of the mortgage interest as a tax deduction.

Requirements

  • You must be a first-time homebuyer.
  • The home must not exceed the purchase price limit of $271,164.
  • Your household must not exceed income limits, which vary depending on the number of people and county of residence.

How to apply

The Kentucky Housing Corporation suggests you find a qualified lender to help you get the ball rolling and to see if you qualify.

Regular Down Payment Assistance Program (DAP)

What is it?

  • A down payment loan for up to $6,000, available in $100 increments.
  • The loan is repayable over 10 years at 5.5% interest.
  • No liquid asset review or reserve is requirement.

Requirements

  • The home must not exceed the purchase price limit of $301,294.
  • Available for all KHC first-mortgage loan borrowers.

How to apply

Start by contacting a KHC-qualified lender. They’ll see if you qualify and help you apply if you do. They can also tell you about other KHC DAP programs that might be right for you.

Affordable Down Payment Assistance

If you meet the income requirements set by your county, you could be eligible for this low-interest loan to help cover down payment and closing costs.

What is it?

  • A loan of up to $6,000 to pay for a down payment and closing costs.
  • The loan is repayable over 10 years at 1% interest.

Requirements

  • The home must not exceed the purchase price limit of $301,294.
  • You must not exceed income limits, which vary by county.

How to apply

Your first step is to check with a KHC-qualified lender. They’ll guide you through the application process.

Hardest Hit Fund Down Payment Assistance

As of November 2018, first-time homebuyers in Christian County, Kentucky, are eligible for the Hardest Hit Fund down payment assistance, a $10,000 loan that’s forgiven over five years.

What is it?

  • A $10,000 non-repayable second mortgage.
  • A 0% interest loan for first-time buyers.
  • The loan is forgiven after five years.

Requirements

  • You must live in Christian County to qualify.
  • No new construction; the residence must have been previously occupied.
  • You must be a first-time homebuyer.
  • You must meet the county’s income limits.
  • The home must not exceed the purchase price limits.

How it works

Check with a qualified lender to see if you qualify. They can help you with your application and also tell you if you’re eligible for other homebuyer programs.

National assistance

Many first-time homebuyers in Kentucky can also benefit from national programs, including FHA, USDA and VA loans. For more information on national first-time homebuyer programs, check out LendingTree’s guide to federal programs. (MagnifyMoney is owned by LendingTree.)

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