KHC down payment assistance | FHA, VA or Rural Housing Kentucky

Kentucky Housing Corporation (KHC) Down Payment Assistance – $12,500 Down payment Assistance Program

Buy a Home with NO MONEY DOWN

If you’re a Kentucky first-time homebuyer, the Kentucky Housing Corporation (KHC) down payment assistance program may help you purchase a home with $0 out of pocket. KHC provides up to $12,500\ Down payment assistance funds to cover your down payment and closing costs when you combine it with an approved mortgage program.

How KHC Down Payment Assistance Works:

The $12,500 KHC Assistance can be used to cover your entire down payment, closing costs, and prepaid items. This means you can qualify for FHA, VA, USDA, or conventional loans with no money down, making homeownership accessible to more Kentucky families.

Example:

• Home purchase price: $150,000
• FHA down payment (3.5%): $5,250
• Closing costs & prepaids: $4,500
• Total needed: $9,750
• KHC covers all $9,750 from your $12,500 DAP —you bring $0 to closing

Compatible Loan Programs:

KHC down payment assistance can be combined with:

• FHA Loans: Use KHC to cover the 3.5% down payment and all closing costs with FHA’s flexible credit standards
• VA Loans: Veterans and eligible surviving spouses can use KHC to cover closing costs (VA requires no down payment, but KHC helps with upfront costs)
• USDA Rural Housing Loans: Qualified buyers in eligible rural areas can combine USDA’s zero-down program with KHC assistance
• Conventional Loans: Some KHC programs work with conventional mortgages for borrowers who qualify

KHC Eligibility Requirements:

To qualify for KHC down payment assistance, you must meet the following criteria:

• First-Time Homebuyer Status: You haven’t owned a home in the past 3 years (exceptions may apply for displaced homemakers, single parents, and others)
• Kentucky Residency: You must be purchasing a primary residence in Kentucky
• Income Limits: Your household income must fall within KHC income limits (limits vary by county and household size; most Kentucky counties allow households up to 80% of area median income)
• Credit & Debt Requirements: Minimum credit score typically 620 for FHA/VA combinations; debt-to-income ratios must meet loan program standards
• Property Requirements: The home must be your primary residence, meet appraisal standards, and be in an eligible area
• Homebuyer Education: Many KHC programs require completion of an approved homebuyer education course (can be done online)

Income Limits by Household Size (2026 Kentucky examples—limits vary by county):

Contact us for your specific county limits, as they vary. Generally, KHC serves households earning up to 80% of area median income for your county.

What KHC Funds Can Cover:

✓ Down payment (even if it’s 0% with VA or USDA)
✓ Closing costs (loan origination, appraisal, title insurance, recording fees)
✓ Prepaid items (property taxes, homeowners insurance, HOA fees)
✓ Homebuyer education course fees

What KHC Funds CANNOT Cover:

✗ Realtor commissions
✗ Home inspection or home warranty
✗ Seller concessions or credits already included in the sale contract

The Application Process:

1. Pre-Qualification: We review your income, credit, and goals to confirm KHC eligibility
2. Find a Home: You locate and make an offer on an eligible Kentucky property
3. Loan Application: Apply for your mortgage (FHA, VA, USDA, or conventional) through our office
4. KHC Application: We submit your KHC application with your mortgage application
5. Approval & Closing: Once approved, KHC funds are disbursed directly at closing to cover your down payment and costs
6. Keys to Your Home: You close on your home with $0 out of pocket

Common Questions about KHC Assistance:

Is KHC a loan I have to repay? 15 years at 4.75%

Can I use KHC if I have past credit problems? Yes. KHC works well with FHA loans, which are more forgiving of past credit challenges. If you have a bankruptcy or foreclosure, we can discuss your situation and timeline.

What if I can’t find a home for $12,500? KHC can help with homes of any price. The $12,500 is the maximum assistance available, but you only use what you need. If your down payment and closing costs total $9,000, KHC covers $9,000.

Can I use KHC to refinance? KHC down payment assistance is designed for home purchases only. However, FHA streamline refinances and other refinance options may be available to help lower your payment.

How long does the KHC process take? KHC applications are typically processed within 10-15 business days. We can submit your KHC application at the same time as your mortgage application to keep the timeline moving.

Do I have to live in Kentucky to use KHC? Yes. You must be purchasing a primary residence in Kentucky. Investment properties and second homes do not qualify.

What if I’m self-employed or have variable income? KHC and our loan programs can work with self-employed borrowers. You’ll need to provide two years of tax returns and a year-to-date P&L statement. FHA is often more flexible with self-employed income than conventional programs.

Can I use KHC if I’m buying with a co-borrower? Yes. Both you and your co-borrower must meet first-time homebuyer requirements, and your combined household income must be within KHC limits. This is a great option for couples buying together.

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Comparing Your Options: FHA + KHC vs. VA vs. USDA

Choosing the right mortgage program depends on your unique situation. Here’s how Kentucky’s most popular homebuyer programs compare:

Feature	FHA + KHC	VA Loan	USDA Rural Housing
Down Payment	0% (3.5% FHA covered by KHC $12,500)	0% (No down payment required)	0% (No down payment required)
KHC DAP Assistance	KHC: Up to $12,500 DAP Loan	VA Funding Fee: ~2.3% (can be waived for disabled vets)	No down payment assistance, but 100% financing available
Who Qualifies	First-time homebuyers in Kentucky, within KHC income limits	Veterans, active duty, National Guard, Reserves, surviving spouses with valid COE	Qualified rural property buyers in USDA-eligible areas
Credit Score Minimum	620 KHC FICO	No minimum score required by VA; lenders typically 620+	No minimum score required by USDA; lenders typically 620+
Debt-to-Income Ratio	Up to 50% with compensating factors	Up to 41% (VA allows higher with compensating factors)	Up to 45% typical; can go higher with compensating factors
Mortgage Insurance	Yes—UFMIP 1.75% + annual MIP (life of loan with <10% down)	No mortgage insurance required	No mortgage insurance required
*Monthly Payment (example)	Higher (includes UFMIP + MIP on $150,000 home)	Lower (no mortgage insurance)	Lower (no mortgage insurance)
Closing Costs	Covered by KHC DAP	Paid by seller (borrower pays VA funding fee) or rolled into loan	Typically seller-paid; borrower may have minimal costs
Property Type	Primary residence, single-family to 4-unit (occupant in one)	Primary residence, single-family to 4-unit	Primary residence in USDA-eligible rural/suburban areas
Property Restrictions	Must be within Kentucky; appraisal required	None (nationwide); appraisal required	Must be in USDA-eligible area; appraisal required
Refinance Options	FHA streamline, rate-and-term, cash-out	VA streamline (IRRRL), cash-out, rate-and-term	USDA streamline (similar to VA)
Seller Concessions	Up to 6% allowed	Up to 4% allowed	Up to 6% allowed
Assumption Rights	FHA loan can be assumed by qualified buyers	VA loan can be assumed by qualified buyers (preserves entitlement)	USDA loan can be assumed by qualified buyers
Best For	First-time buyers with limited savings, moderate credit	Veterans & eligible family members (lowest overall cost)	Rural property buyers with stable income in eligible areas

Which Program is Right for You?

Choose FHA + KHC if:

• You’re a first-time homebuyer with limited savings
• You have past credit challenges (bankruptcy, late payments)
• You want to buy anywhere in Kentucky
• You need help with closing costs and down payment
• You want the fastest path to homeownership

Choose VA if:

• You’re a Veteran, active duty, or eligible surviving spouse
• You want to avoid mortgage insurance entirely
• You want the lowest long-term cost
• You don’t have a VA disability rating (though some programs help with funding fees)
• You want the most generous seller concessions and terms

Choose USDA if:

• You’re buying in a USDA-eligible rural or suburban Kentucky area
• You want 100% financing with no mortgage insurance
• You have decent credit (typically 620+) and stable income
• You want to avoid putting any money down
• You want competitive interest rates without insurance premiums

Want to Compare Your Options?

Every situation is unique. We recommend a personalized review of your income, credit, assets, and goals to see which program gets you the best rate and lowest payment. Contact us for a free consultation—we’ll show you exactly how much you could save with each option.

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Getting Started: Documents You’ll Need

What documents do I need to prepare for my Kentucky mortgage loan application?

Every situation is different, so you may be required to provide less or more documentation than listed below. Sometimes a document you provide will prompt us to ask for something additional—this is a normal part of the process and doesn’t mean anything is wrong.

Your Property

• Copy of signed sales contract including all riders and addendums
• Verification of the deposit when you made your offer
• Names, addresses, and telephone numbers of your realtor, builder, insurance agent, and attorney (if involved)

Your Income

• Copies of your pay stubs for the most recent 30-day period and year-to-date
• Copies of your W-2 forms for the past two years
• Names and addresses of all employers for the last two years
• Letter explaining any gaps in employment in the past 2 years
• Green card or visa (copy of front and back, if applicable)

If you are self-employed or receive commission, bonus, interest/dividends, or rental income:

• Full tax returns for the last two years including attached schedules and statements (include extension copy if filed)
• Year-to-date Profit and Loss statement
• K-1’s for all partnerships and S-Corporations for the last two years
• Completed and signed Federal Partnership (1065) and/or Corporate Income Tax Returns (1120) including all schedules, statements, and addenda for the last two years (required only if your ownership position is 25% or greater)

If you will use Alimony or Child Support to qualify:

• Divorce decree or court order stating the amount
• Proof of receipt of funds for the last year

If you receive Social Security income, Disability, or VA benefits:

• Award letter from that organization

Source of Funds and Down Payment

• Sale of your existing home – Settlement/Closing Statement (you won’t have this until you close on your current home)
• Savings, checking, or money market funds – bank statements for the last 2 months
• Stocks and bonds – most recent statement
• Gifts – If part of your cash to close, provide a Gift Letter (we can provide this for you)

Debt or Obligations

• Prepare a list of all names, addresses, account numbers, balances, and monthly payments for all current debts with copies of the last three monthly statements
• Include all names, addresses, account numbers, balances, and monthly payments for mortgage holders and/or landlords for the last two years
• If you are paying alimony or child support, include marital settlement or court order stating the terms of the obligation

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Understanding Credit & Approval

How is my credit judged by lenders?

Credit scoring is a system lenders use to determine whether to extend credit and under what terms. Your credit report includes information about your bill-paying history, number and type of accounts, late payments, collection actions, outstanding debt, and account age. Using statistical analysis, lenders compare your information to consumers with similar profiles.

The most widely used credit scores are FICO scores, developed by Fair Isaac Company, Inc. Your score will fall between 350 (high risk) and 850 (low risk).

It’s critical to ensure your credit report is accurate before applying. You’re entitled to one free credit report every 12 months from each of the three major agencies:

• Equifax: (800) 685-1111
• Experian: (888) 397-3742
• TransUnion: (800) 916-8800
• Free reports: http://www.annualcreditreport.com

(Agencies may charge up to $9.00 for reports obtained directly)

What can I do to improve my credit score?

Credit scoring models are complex and vary among creditors and credit types. Improvement depends on how factors relate to each other. However, most models evaluate:

Payment History – This is typically the most significant factor. Late payments, collections, or bankruptcy will negatively affect your score.

Outstanding Debt – Many models compare the amount you owe to your credit limits. High balances relative to your limits will lower your score.

Credit History Length – Generally, a longer track record helps, though insufficient history can be offset by timely payments and low balances.

Recent Credit Applications – Multiple recent inquiries for new credit can negatively affect your score. (Note: pre-screened offers don’t count against you)

Types and Number of Accounts – Having varied, established credit is good, but too many credit card accounts or finance company loans may hurt your score.

To improve your score:

• Pay all bills on time
• Pay down outstanding balances
• Avoid taking on new debt
• Give yourself time—significant improvement takes several months

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The Mortgage Process

What is an appraisal?

An appraisal is an estimate of a property’s fair market value. Lenders generally require this document before loan approval to ensure the mortgage loan amount doesn’t exceed the property’s value. An appraiser is a state-licensed professional trained to render expert opinions on property values, location, amenities, and physical condition.

What is PMI (Private Mortgage Insurance)?

On conventional mortgages, when your down payment is less than 20% of the purchase price, lenders typically require Private Mortgage Insurance (PMI) to protect them if you default. You may need to pay up to one year’s worth of PMI premiums at closing, which can cost several hundred dollars.

Ways to avoid PMI:

• Make a 20% down payment, or
• Ask about alternative loan programs (many Kentucky first-time homebuyer programs help avoid PMI)

What does it mean to lock the interest rate?

Mortgage rates can change daily. If rates rise sharply during your application process, your mortgage payment could increase unexpectedly. Once you “lock-in” your loan’s interest rate, that rate is guaranteed for a specified time period (typically 30–60 days), and that becomes your rate for the entire loan term (assuming a fixed-rate mortgage).

What are points?

A point equals 1% of your loan amount. For example, one point on a $100,000 loan is $1,000. Points are costs paid to a lender to obtain mortgage financing under specified terms. Discount points are fees you pay upfront to lower your interest rate.

Should I pay points to lower my interest rate?

Yes, if you plan to stay in the property for at least a few years. Paying discount points lowers your monthly payment and can increase the loan amount you can afford to borrow. However, if you plan to stay for only one or two years, your monthly savings may not offset the upfront cost of the points.

What is an APR?

The Annual Percentage Rate (APR) reflects the total cost of obtaining a mortgage as a yearly rate. It’s usually higher than the note rate (advertised rate) because it includes all fees and costs. Because APR calculations vary based on different lender fees, a lower APR generally indicates a better deal—but not always.

The best way to compare options: Ask us for a cost analysis so you can compare different loan options side-by-side.

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Refinancing Your Mortgage

When should I refinance?

It’s generally a good time to refinance when mortgage rates are 2% lower than your current loan rate. You may also want to consider refinancing if the difference is 1% or less—any reduction can trim your monthly payment.

Example: On a $100,000 loan at 8.5%, your payment (excluding taxes and insurance) would be about $770. If you refinanced at 7.5%, your payment would be $700—saving you $70 per month.

Your actual savings depend on your income, budget, loan amount, and how rates change. We can help you calculate your specific options and determine if refinancing makes sense for you.

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Closing on Your Home

What happens at closing?

The property is officially transferred from the seller to you at “Funding.” You’ll typically sign final documents at a title company or attorney’s office. However, the actual ownership transfer happens either later that same day or the next business day—that’s when you’ll normally receive the keys to your home.

If you can’t attend closing in person (for example, if you’re out-of-state), we can arrange for mobile notaries to help you sign documents and notarize your signature, so closing can happen virtually.

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Ready to Get Started?

With over 20 years of experience and more than 1,300 Kentucky families helped to homeownership, we’re ready to guide you through every step of the mortgage process.

Why Work With Us?

✓ Local Expertise – We know Kentucky’s housing market and all available loan programs
✓ Fast Approvals – Free mortgage applications with same-day approvals
✓ Customized Solutions – We find the right loan program for your unique needs
✓ Personalized Service – We treat every client like family
✓ Down Payment Assistance – KHC programs still available for Kentucky first-time homebuyers

Contact Us Today

📞 Call or Text: 502-905-3708
📧 Email: kentuckyloan@gmail.com
🌐 Website: http://www.mylouisvillekentuckymortgage.com

Licensing Information:
Individual NMLS ID: 57916 | Company NMLS ID: 1738461
Kentucky Mortgage Loan Only | Equal Housing Lender
http://www.nmlsconsumeraccess.org

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This website is an independent platform created to educate and assist homebuyers with expert advice and accessible tools. It is not endorsed by the FHA, VA, USDA, or any government agency.