How to get approved for a mortgage in Kentucky as a first-time homebuyer

How to Buy a Home in Kentucky with Zero Down Payment: Your 2025 First-Time Buyer Guide

Dreaming of owning a home in Kentucky but worried about saving for a down payment? Good news! Several loan programs and assistance options can help qualified first-time buyers purchase a home with little or even zero money down out-of-pocket. This guide outlines the steps and programs to explore for your 2025 home purchase.

Step 1: Check Your Credit & Financial Health
Knowing your credit score and financial picture is the foundation. Many programs have minimum credit requirements.

Step 2: Get Pre-Approved with a Knowledgeable Lender
This is crucial! A lender specializing in Kentucky first-time buyer programs can:

• Determine your borrowing power.

• Help you understand which zero-down options you might qualify for (VA, USDA).

• Explain how Down Payment Assistance (DAP) works with loans like FHA or Conventional.

• Provide an essential pre-approval letter needed to make offers.

Step 3: Explore Kentucky’s Zero & Low Down Payment Options

Here are the primary ways to achieve little to zero money down:

• 🏡 USDA Rural Development Loans:

  • The Goal: 100% financing (zero down payment required).

  • Who Qualifies: Buyers purchasing in USDA-eligible rural or suburban areas (check eligibility online!) who meet income limits (typically based on county median income).

  • Keep in Mind: Generally requires a credit score around 640+, though lender specifics vary. Property must meet USDA standards.

• 🎖️ VA Loans (For Eligible Veterans & Service Members):

  • The Goal: Often 100% financing (zero down payment required).

  • Who Qualifies: Eligible Veterans, active-duty service members, and surviving spouses. Requires a Certificate of Eligibility (COE).

  • Benefits: No private mortgage insurance (PMI). Flexible credit requirements (often 620+ minimum, varies by lender).

• 🏠 FHA Loans + Down Payment Assistance (DAP):

  • How it Works: FHA loans require a minimum 3.5% down payment. HOWEVER, this can often be fully covered by Down Payment Assistance programs, resulting in zero out-of-pocket down payment for the buyer.

  • FHA Basics: Minimum credit scores often start around 580 (can vary). More flexible underwriting than conventional loans.

  • The Key: Combining it with assistance like KHC DAP (see below).

Step 4: Secure Down Payment & Closing Cost Assistance

Even with zero-down loans (VA/USDA), you’ll have closing costs. Assistance programs help cover these and the required down payment for loans like FHA.

• 🏦 Kentucky Housing Corporation (KHC) Assistance:

  • 💰 Down Payment Assistance Program (DAP): Offers assistance (historically up to $10,000, verify current amount) structured as a separate loan, often with a favorable fixed interest rate (check KHC for current rates) and a 10-year term. Can be used with FHA, VA, USDA, and Conventional loans to cover down payment and closing costs.

  • Other KHC programs may exist – consult KHC or your lender.

• 🎉 Potential Grant Opportunities (e.g., Welcome Home Grant):

  • What it is: Programs like the FHLB’s Welcome Home Grant offer free money (doesn’t need repayment) for down payment/closing costs to qualified buyers via participating lenders.

  • Important Caveats: Funding is limited, allocated annually (often in Spring), and runs out extremely quickly. Availability is not guaranteed. Check with lenders early in the year about participation.

Step 5: Find Your Home & Close!
Work with a realtor familiar with these programs and eligible properties (especially for USDA). Your lender will guide you through the final loan process, appraisal, and closing.

Ready to Take the First Step?

Achieving zero down payment homeownership in Kentucky is possible! The key is understanding the options and working with the right professionals.

Contact a Kentucky mortgage specialist today to get pre-approved and discuss the best path for your 2025 home purchase!

Disclaimer: Loan program requirements, assistance amounts, interest rates, and availability (especially for grants) are subject to change. All information should be verified directly with KHC, relevant agencies (VA, USDA), and your qualified mortgage lender prior to application. Credit score minimums and underwriting guidelines may vary by lender.