Kentucky first-time homebuyer programs offer down-payment assistance and tax credits

• Homebuyers can receive mortgages, down-payment assistance, and tax credits through the Kentucky Housing Corporation.
• Your income must not exceed certain thresholds to be eligible for most of these programs.
• You could also qualify for programs with the city of Louisville, the US Department of Housing and Urban Development, or your lender.
• See today’s mortgage and refinance rates in Kentucky on Insider.

Buying a home is an expensive endeavor. But if you live in Kentucky, you may be eligible for financial assistance through the government. Most first-time homebuyer programs are through the Kentucky Housing Corporation (KHC), although there are a few additional options.

Kentucky first-time homebuyer loan programs

KHC Conventional Preferred Program

A KHC 30-year fixed-rate mortgage is for both first-time and repeat homebuyers, and it comes with discounted mortgage insurance.

To qualify, you’ll need to have credit score of at least 660 and be able to make a 3% down payment. The price of the home must not exceed $346,644, and the applicant can’t earn more than 80% of the area median income. The maximum income limit ranges from $43,440 to $67,760 in 2022, depending on the county. Keep in mind that income limits for this program are for the applicant, not the entire household.

KHC Conventional Preferred Plus 80

The KHC Conventional Preferred Plus 80 Program is similar to the regular Conventional Preferred Program, with two key differences. First, you’ll pay a standard price on mortgage insurance. Second, the income limits for applicants are higher.

Kentucky down payment assistance programs

KHC Regular Down Payment Assistance Program

The Regular DPA Program can be combined with either of the aforementioned KHC mortgages. You’ll receive as much as $6,000 to put toward a down payment or closing costs. It comes in the form of a loan with a 5.5% interest rate, and you’ll pay it back over 10 years.

To be eligible, you must buy a home that costs $346,644 or less. The maximum income allowed depends on which county you live in and ranges from $113,925 to $149,450.

KHC Affordable Down Payment Assistance Program

Like Regular DPA, the Affordable DPA Program is for homes costing up to $346,644. You’ll get up to $6,000 and repay it over 10 years. 

However, the interest rate is much lower than with the Regular DPA Program — it’s just 1% instead of 5.5%. This program is also targeted toward borrowers with lower incomes. The income limits are the same as with the KHC Conventional Preferred loan, so you can combine this down payment assistance with your Conventional Preferred mortgage.

Louisville Down Payment Assistance

Louisville residents may qualify for a zero-interest down payment loan for up to 20% of your home price through the local government. The city will forgive 50% of your loan if you live in the house for five to 15 years. (The required length of stay will depend on how much you borrow.) You’ll pay off the remaining amount when you sell, refinance, or pay off the mortgage in full.

To qualify, your household income must be no more than 80% of the area median income. Income limits start at $43,050 for a single person and increase with more members in a household. An eligible existing single-family home can cost up to $200,000, and a new construction can cost up to $245,000.

You also must already be preapproved by a lender, have no debt collections (other than up to $10,000 in medical), and have at least $1,500 in savings. You’ll complete a homebuyer education course.

Other Kentucky first-time homebuyer programs

KHC Home Buyer Tax Credit

The Mortgage Credit Certificate (MCC) helps first-time homeowners save money on taxes. Each year, you’ll receive a credit of 25% of the interest paid on your mortgage that year, up to $2,000.

To be eligible, your home purchase price must be $311,997 or less. There are also household income limits that vary by county.

Assistance through your lender or local resources

You might qualify for a program through your mortgage lender, such as a down payment loan or a low-interest mortgage.

Darrin English, senior community development loan officer at Quontic Bank, has a tip for finding assistance if you aren’t eligible through the Kentucky Housing Corporation, the city of Louisville, or your lender.

“I would recommend that every individual buying a home for the first time, no matter your socioeconomic background, align yourself with a Housing and Urban Development-sponsored not-for-profit whose job it is to educate the public on buying a home for the first time,” English says.

Assistance through the not-for-profits associated with the federal housing agency can often be combined with programs offered by the state government. English suggests searching for a HUD-sponsored homebuying education counselor to learn about all of your options.

The best first-time homebuyer program for you will probably depend on your income and price of the home you want to buy.