Kentucky First-Time Home Buyer Programs 2026 | Complete Guide
Kentucky First-Time Home Buyer Programs 2026
Your Complete Guide to Homeownership & Down Payment Assistance
New Update: Kentucky Housing Corporation (KHC) increased their purchase price limit to $544,232 (effective June 23, 2025). Whether you’re in Louisville, Lexington, or rural Kentucky, we help you find up to $10,000 in down payment assistance.
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What’s Available for Home Buyers in 2026?
Kentucky offers some of the most comprehensive first-time home buyer assistance programs in the nation. From zero-down payment options to substantial down payment assistance, first-time buyers in Kentucky have multiple pathways to homeownership.
Key Highlights:
- Kentucky Housing Corporation (KHC): Up to $12,500 in down payment assistance.
- USDA Rural Development: 0% down for eligible areas (rural & suburban).
- FHA Loans: 3.5% down with credit scores as low as 580 (10% down for 500-579).
- VA Loans: 0% down for eligible veterans and active military.
- Conventional Loans: As little as 3% down for qualified borrowers.
The best part? Many of these programs can be combined to maximize your buying power.
Side-by-Side Comparison
| Program | Min. Credit Score | Down Payment | Income/Price Limits | Best For |
|---|---|---|---|---|
| FHA Loan | 580 (3.5% down) 500-579 (10% down) |
3.5% minimum | Limit: $544,225 (most KY counties) | Lower credit, flexible qualification |
| USDA Rural | 640+ (preferred) Manual u/w possible |
0% down | Income cap: 115% AMI (typically $119k-$158k) |
Rural buyers, zero down |
| VA Loan | No official min (620+ preferred) |
0% down | No income limits Must meet residual income |
Veterans, Active Military |
| KHC Assistance | 620-660 (varies by loan type) |
0% (with assistance) | Price Limit: $544,232 Income limits vary by county |
Need cash for down payment |
| Conventional | 620+ (720+ for best rates) |
3% minimum | Limit: $806,500 Max DTI 45-50% |
Good credit, cancel PMI later |
FHA Loans for First-Time Buyers
FHA loans are the most popular choice for Kentucky first-time home buyers. The Federal Housing Administration backs these loans, making them less risky for lenders and more accessible for borrowers.
- Low Down Payment: Just 3.5% with a 580+ credit score.
- Flexible Credit: Scores as low as 500 accepted (requires 10% down).
- Seller Concessions: Sellers can contribute up to 6% toward closing costs.
- Assumable: Future buyers can take over your interest rate.
2025/2026 Loan Limits: Most Kentucky counties are capped at $524,225.
USDA Rural Development Loans
Perfect for rural and suburban communities, USDA loans offer 100% financing (no down payment) for eligible properties.
- Zero Down Payment: 100% financing.
- Lower PMI: Cheaper mortgage insurance than FHA.
- Eligibility: “Rural” covers many suburban areas near Louisville, Lexington, Bowling Green, and more.
Requirements: Household income cannot exceed 115% of the area median income. Credit score of 640+ is preferred for automated approval, though manual underwriting is possible for lower scores with strict debt-to-income ratios (29/41).
VA Loans for Military
Kentucky’s strong military presence makes this a top choice. VA loans are arguably the best mortgage product available.
- No Down Payment.
- No Monthly Mortgage Insurance (PMI).
- Competitive Rates: Often lower than conventional.
Note: While there is no monthly PMI, there is an upfront VA Funding Fee (waived for veterans with service-connected disabilities).
KHC Down Payment Assistance
The Kentucky Housing Corporation (KHC) helps qualified buyers overcome the cash barrier to entry.
Program Highlights
- Up to $12,500 in down payment assistance.
- Purchase Price Limit: Increased to $544,232 (effective June 23, 2025).
- Forgivable Options: Some assistance loans are forgiven after 5-10 years.
- Combinable: Use with FHA, VA, USDA, or Conventional loans.
Income Limits (Example):
Jefferson County (Louisville): Up to $99,700 (1-2 person household)
Fayette County (Lexington): Up to $92,400 (1-2 person household)
How to Qualify
Generally, a “first-time buyer” is defined as someone who hasn’t owned a primary residence in the past 3 years.
- Credit Score: 620 minimum for most government loans; 660+ often needed for specific assistance programs.
- Employment: Stable 2-year work history (same line of work preferred).
- Debt-to-Income (DTI): Typically 50% or lower.
- Primary Residence: You must live in the home (no investors).
Required Documents Checklist
- Pay stubs (last 30 days)
- W-2s (last 2 years)
- Tax Returns (last 2 years)
- Bank Statements (last 2 months)
- Photo ID & Social Security Card
Step-by-Step Home Buying Guide
1. Check Finances
Pull your free credit report. Review your budget to see what monthly payment fits your lifestyle, not just what the bank says you qualify for.
2. Get Pre-Qualified
Contact a Kentucky-licensed loan officer. Pre-qualification takes less than 24 hours and requires no hard credit check initially.
3. Choose Program
Based on your credit profile and location, select FHA, USDA, VA, or Conventional, and decide if you need KHC assistance.
4. Find a Realtor
Work with a buyer’s agent who knows the local market and understands the specific requirements of FHA/USDA appraisals.
5. Apply & Close
Submit full documentation. Underwriting typically takes 30-45 days (allow extra time for USDA or KHC processing).
Frequently Asked Questions
What credit score do I need?
FHA allows down to 580 (3.5% down). KHC assistance programs generally require 620-660. USDA prefers 640+ but allows manual underwriting.
Is the down payment assistance free money?
It depends. KHC offers forgivable loans (essentially grants if you stay 5-10 years) and repayable loans (low interest, paid back over time). Your loan officer can check which you qualify for.
How long does closing take?
Average closing is 30 days. USDA loans may take 35-45 days due to Rural Development review. KHC files also require a few extra days for compliance review.
Can I buy a home if I have student loans?
Yes. FHA and conventional loans have specific calculations for student loan debt (even if deferred). We help calculate your DTI correctly to see if you qualify.
Monthly Payment Calculator
*Estimate only. Does not include PMI/MIP or HOA fees.
Ready to Start Your Journey?
Get your free pre-qualification in 24 hours. No hard credit check required to start.
Joel Lobb – Senior Loan Officer
EVO Mortgage • NMLS #1738461 • Personal NMLS #57916
Licensed in Kentucky
Kentucky First-Time Home Buyer Programs | USDA, FHA, VA & KHC Loans 