What to know about buying a house in Kentucky
If you’re a Kentucky first-time home buyer, you have a leg up. Home prices here are generally more affordable than in the rest of the nation. Of course, saving for a down payment and closing costs can still be difficult. But the good news is that Kentucky can offer help ranging from special mortgages to tax credits and down payment assistance. Here’s what you should know.Verify your home buying eligibility in Kentucky. Start here
In this article (Skip to ...)
- KY home buyer overview
- Home loan options
- KY home buyer programs
- First-time buyer grants
- Buying in Kentucky’s cities
- KY mortgage rates
Kentucky home buyer overview
The median listing price for a home in Kentucky was $247,000 in November 2023. That was an increase of 5% year-over-year, according to Redfin.Verify your home buying eligibility in Kentucky. Start here
Those figures may look scary to a first-time home buyer. But they’re actually lower than the national average. The nationwide median home price was $387,600 during the same month.
Kentucky home buyer stats
|Average Home Sale Price in KY1
|Minimum Down Payment in KY (3%)
|20% Down Payment in KY
|Average Credit Score in KY2
|Maximum KY Home Buyer Loan3
|Up to $10,000 as a 10-yr second mortgage
Down payment amounts are based on the state's most recently available average home sale price. “Minimum” down payment assumes 3% down on a conventional mortgage with a minimum credit score of 620.
If you're eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the U.S. Department of Agriculture), you may not need any down payment at all.
First-time home buyer loans in Kentucky
If you’re a first-time home buyer in Kentucky with a 20% down payment, you can get a conventional loan with a low interest rate. And you never have to pay for private mortgage insurance (PMI).Find the best first-time home buyer loan for you. Start here
Of course, few first-time buyers have saved enough for 20% down. But the good news is that you don’t need that much. Not by a long shot.
Borrowers can often get into a new home with as little as 3% or even 0% down using one of these low-down-payment mortgage programs:
- Conventional 97: Backed by Freddie Mac or Fannie Mae. 3% down payment and 620 minimum credit score. You can usually stop paying mortgage insurance after a few years
- FHA loan: Backed by the Federal Housing Administration. 3.5% down and a 580 minimum credit score. You’re on the hook for mortgage insurance premiums (MIP) until you refinance to a different type of mortgage, move, or pay off your loan
- VA loan: Only for veterans and service members. Zero down payment is required. Minimum credit score varies by lender but often 620. No ongoing mortgage insurance after closing. These are arguably the best mortgages available, so check your eligibility if you have a military service history
- USDA loan: For those on low-to-moderate incomes buying in designated rural areas. Zero down payment required. Credit score requirements vary by lender but often 640. Low mortgage insurance rates
- Kentucky Housing Corp. loans: Special mortgages, sometimes with down payment assistance. Also mortgage credit certificates that can reduce your annual, federal tax bill
Note that government loan programs (including FHA, VA, and USDA home loans) require you to buy a primary residence. That means you can’t use these loans for a vacation home or investment property.
In addition, most programs let you use gifted money or down payment assistance (DPA) to cover your down payment and closing costs. Depending on your mortgage loan, you could potentially get into a new house with minimal cash out of pocket.
If you’re unsure which program to choose for your first mortgage, your lender or real estate agent can help you find the right match based on your finances and home buying goals.
Kentucky first-time home buyer programs
The Kentucky Housing Corporation (KHC)4 offers several mortgage programs that may come with down payment assistance. These are based on standard loan programs, though KHC sets its own minimum requirements.Verify your home buying eligibility in Kentucky. Start here
At the time of writing, there was a purchase price limit of $481,176 across all KHC loans. But check when you apply to see if that’s changed.
These programs also come with income limits5, and stricter income caps apply if you want the best deal (including down payment assistance) on a conforming loan.
KHC Conventional Preferred
The KHC Conventional Preferred loan program offers both first-timers and other eligible home buyers a 30-year fixed-rate mortgage with a 3% down payment. Although this is a conventional loan, borrowers enjoy reduced rates for mortgage insurance. Further, it can be paired with any of the KHC down payment and closing cost assistance programs.
- $481,176 purchase price limit
- 3% minimum down payment
- 660 minimum credit score
- Annual income must not exceed 80% of the area median income limits
- Completion of a home buyer education course
KHC Conventional Preferred Plus 80
The KHC Conventional Preferred Plus 80 loan program is nearly identical to the Conventional Preferred, but with one important difference. Borrowers do not have access to lower mortgage insurance rates. In addition, the income limits are higher to accommodate first-time buyers who earn more income. So if you qualify for this loan’s counterpart, you’ll likely enjoy a better deal.
- $481,176 purchase price limit
- 3% minimum down payment
- 660 minimum credit score
- Annual income limits range depending on your county
- Completion of a home buyer education course
FHA, VA, and USDA loans
Kentucky first-time home buyers can also qualify for government-backed loans through KHC.
- FHA loans: 3.5% down, minimum credit score of 620
- VA loans: Zero down payment, 620 credit score. Only for veterans, service members, and closely related groups
- USDA loans: Zero down payment, 620 credit score. Only for housing in designated rural locations
KHC Home Buyer Tax Credit
Certain buyers may be eligible for mortgage credit certificates through the KHC. It says: “The tax credit provides a dollar for dollar reduction of your federal income taxes, every year you occupy the home. The Tax Credit is equal up to 20 percent of the annual mortgage interest paid in a calendar year.”6 And yes, it’s available even if you take the standard federal tax deduction.
You can also get housing counseling and education through the KHC.
Kentucky first-time home buyer grants
Unlike the housing agencies in many other states, the Kentucky Housing Corporation doesn’t provide grants or forgivable loans for those entering its down payment assistance program. Instead, assistance comes in the form of a repayable second mortgage.Let us help find the right mortgage for you
KHC Regular Down Payment Assistance Program (DAP)
KHC offers down payment and closing assistance in the form of a 10-year second mortgage that is repayable with a 3.75% interest rate. Eligible borrowers have access to loan amounts of up to $10,000.
KHC Affordable DAP
The KHC Affordable DAP is designed with lower-income buyers in mind. Eligible borrowers can obtain a repayable 10-year second mortgage of up to $7,500 with a low 1% interest rate. Funds can be applied to both down payment and closing costs.
Note that interest rates are subject to change and may be different by the time you read this.
Buying a home in Kentucky’s major cities
Home prices are rising more quickly in Kentucky’s three biggest cities than elsewhere in the state. In the case of Lexington, they shot up by 4.7% over the 12 months ending in November 2023.Verify your home buying eligibility in Kentucky. Start here
As far as home prices are concerned, Louisville is the most affordable city, followed by Bowling Green. But Lexington is significantly more costly than either. And yet only Louisville has its own down payment assistance program. The others suggest you contact third parties for help.
Louisville first-time home buyers
The median listing price for homes in Louisville was $248,000 in November 2023. That was up 8.8% year-over-year, according to Realtor.com.
At those home prices, making a down payment in Louisville, Kentucky, might cost:
- $7,440 for 3% down payment
- $49,600 for 20% down payment
The Louisville Metro Down Payment Assistance Program is better than KHC’s offering. So think about taking it, if you’re eligible. If approved, you can borrow the amount you need but must contribute $500.
Its loans have a 0% rate and half the amount you borrow will be forgiven after an agreed period. That time varies depending on how big your loan is. But you won’t have to repay the rest until you sell the home or refinance.
This program is open only to those on lower incomes: $47,450 for a one-person household, rising in stages to $78,600 for a six-person household. (Again, those limits may be subject to change.)
Lexington first-time home buyers
The median listing price for homes in Lexington was $365,500 in November 2023. That was trending up 4.7% year-over-year, according to Realtor.com.
At those home prices, making a down payment in Lexington, Kentucky might cost:
- $10,965 for 3% down payment
- $73,100 for 20% down payment
The Lexington-Fayette Urban County Government says it “provides non repayable mortgage subsidies and 0-2% loans to lower-to-moderate-income first-time home buyers.” However, it doesn’t deal directly with the public. Instead, you have to go through a third party, such as Reach Inc. and Lexington Habitat for Humanity. There are others so click the link in the previous paragraph for more contacts.Let us help find the right mortgage for your first home in Lexington. Start here
Bowling Green first-time home buyers
The median listing price for homes in Bowling Green was $331,200 in November 2023. That was up 1.9% year-over-year, according to Realtor.com.
At those home prices, making a down payment in Bowling Green, Kentucky might cost:
- $9,936 for 3% down payment
- $66,240 for 20% down payment
The City of Bowling Green says, “Through a Housing Choice Voucher Homeownership Program, you may be able to own your own home and use your monthly Section 8 assistance to help pay your mortgage.” But you can’t deal with the city directly. And you should approach HANDS, Inc. (270-796-4176) or Live the Dream (270-467-7120) for information about programs.
Where to find home buying help in Kentucky
All the organizations we’ve listed above should provide advice freely to any first-time home buyer in Kentucky. In addition to our selection, the U.S. Department of Housing and Urban Development (HUD) provides a list of statewide and city- and county-specific programs across Kentucky. The list is as follows:Verify your home buying eligibility in Kentucky. Start here
- HUD Community Development Block Grants (CDBG) — Kentucky contacts: HUD provides grant money to communities and those funds may be used to assist home buyers
- HUD HOME Program — Kentucky contacts: HUD provides grant money to communities designated as participating jurisdictions for assisting home buyers, rental assistance, and other housing initiatives
- Community Ventures Corporation Kentucky Home Financing
- The Kentucky Housing Corporation offers:
- Habitat for Humanity: Through volunteer labor and donations of money and materials, Habitat builds and rehabilitates simple, decent houses with the help of the homeowner (partner) families
- Federal Home Loan Bank of Cincinnati: Serves Kentucky residents by offering various home buying assistance programs, including Welcome Home grants. For more information, you may call 1 (888) 345-2246
- Kentucky Area Development Districts (ADDs): Contact your local ADD to find out more about local home buying assistance programs
- Kentucky Association for Community Action: Helps to fund housing programs for low-income residents
- Federal Appalachian Housing Enterprise (FAHE): Provides housing assistance in rural, low-income, Appalachian communities
- Housing Partnership, Inc.: Provides affordable housing services for residents of Jefferson County
- Secondary financing/down payment assistance programs are listed by state
- USDA Rural Development: Home buying loan programs that reduce the cost of homeownership for low and moderate-income families
What are today’s mortgage rates in Kentucky?
You can check current mortgage interest rates in Kentucky here. Experiment with a mortgage calculator to see how down payment, interest rates, homeowners insurance, and property taxes affect your monthly mortgage payment.
When you’re ready to start the home buying process, get personalized rate quotes from at least three mortgage lenders. Don’t just look at advertised rates online. Apply for preapproval and compare the interest rates and fees you’re offered. That’s the only way to know you’re getting the best deal possible on your new home loan.Time to make a move? Let us find the right mortgage for you
1Source: Redfin.com Kentucky Housing Market Report
2Source: Experian.com study of 2021 and 2020 data
3Based on a review of the state's available DPA grants at the time this was written
4Kentucky Housing Corporation (KHC)