Kentucky First-Time Home Buyer Programs of 2021

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Doing something important for the first time is often scary, especially if you’ve dreamed about it for years. Buying a first home is no exception.

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But help is out there to make the process easier. The Kentucky Housing Corp., or KHC, offers programs to help repeat and first-time home buyers get a mortgage.

National loan programs with lower down payment or credit score requirements can also open up a path to homeownership. Check out the possibilities below to find an option that fits your needs.

National first-time home buyer programs

Many lenders participate in national programs that can help first-time buyers get a home loan. You may qualify for one of these mortgages even if you have less-than-perfect credit or little cash for a down payment.

Conventional mortgage

Best for:

Low down payments, limited mortgage insurance premiums

What you need to know:

A conventional mortgage is a home loan that isn’t guaranteed or insured by the federal government. Conventional mortgages that conform to the requirements set forth by Fannie Mae and Freddie Mac allow down payments as low as 3% for first-time buyers or lower-income home buyers. Unlike FHA loans, conventional loans allow borrowers to eventually cancel their mortgage insurance or avoid mortgage insurance altogether if they put at least 20% down.

VA loans

Best for:

Military, low down payments

What you need to know:

The U.S. Department of Veterans Affairs helps service members, veterans and surviving spouses buy homes. VA loans are especially generous, providing competitive interest rates, often requiring no down payment or mortgage insurance. Although there is no official minimum credit score, most VA-approved lenders require scores of at least 640.

FHA loans

Best for:

Low credit score, low down payments

What you need to know:

This is the go-to program for many first-time home buyers with lower credit scores. The Federal Housing Administration allows down payments as low as 3.5% for those with credit scores of 580 or higher. The FHA will insure loans for borrowers with scores as low as 500 but requires a 10% down payment for a score that low. Mortgage insurance is required for the life of an FHA loan and cannot be canceled.

USDA loans

Best for:

Low down payments, rural

What you need to know:

A USDA home loan is a zero-down-payment mortgage for eligible rural and suburban home buyers. USDA loans are issued by the U.S. Department of Agriculture through the USDA Rural Development Guaranteed Housing Loan Program. There are income limitations, which vary by region. Applicants with credit scores of 640 or higher receive streamlined processing. Those with scores below that must meet more stringent underwriting standards.

Kentucky Housing highlights and eligibility requirements

The Kentucky Housing Corp. offers conventional, FHA, VA and USDA mortgages to home buyers through a network of approved lenders.It also offers FHA, VA and USDA refinance loans. The corporation’s financial assistance and tax credit programs can be combined with any of these loans to make buying a home more affordable.

Highlights

  • 30-year fixed-rate mortgages available.

  • Down payment and closing cost assistance available.

  • Federal income tax credit available to reduce annual mortgage interest.

Eligibility

  • Can be a first-time or repeat home buyer for most programs.

  • Must have a minimum credit score of 620.

  • Must meet county income limits and statewide purchase price limits.

  • Must work with a lender approved by the Kentucky Housing Corp.

  • Allows for properties that include single-family homes, condos and manufactured homes.

Kentucky Housing first-time home buyer loan programs

Conventional Preferred Program

Best for:

Low down payment

What you need to know:

This loan program for lower-income borrowers requires a minimum 3% down payment, but it does not require the borrower to contribute a minimum amount toward the purchase or keep a certain amount of money in reserve. Monthly mortgage insurance is required. Other KHC down payment assistance programs can be used with this loan.

Conventional Preferred Plus 80 Program

Best for:

Low down payment

What you need to know:

Like other conventional loans, this program requires a minimum 3% down payment. Monthly mortgage insurance is required. The program has no minimum borrower contribution and does not require the borrower to have a certain cash reserve. KHC down payment assistance programs can be combined with this loan.

Home Buyer Tax Credit

Best for:

Tax credits

What you need to know:

After you buy a home, a portion of every mortgage payment goes toward interest on the loan. The Kentucky Home Buyer Tax Credit reimburses eligible borrowers up to 25% of the annual mortgage interest you pay during a calendar year, with a maximum credit of $2,000 per year.

Regular Down Payment Assistance Program

Best for:

Down payment assistance, closing cost assistance

What you need to know:

This program is available to any recipient of a Kentucky Housing Corp. conventional, FHA, USDA or VA first mortgage. Assistance is provided in the form of a loan of up to $6,000 at a 5.5% interest rate. The buyer repays the loan over 10 years.

Affordable Down Payment Assistance Program

Best for:

Down payment assistance, closing cost assistance

What you need to know:

Borrowers who meet certain income limits can get up to $6,000 in down payment and closing cost assistance. Funds are provided in the form of a 10-year loan with a 1% interest rate. This program can be used with any Kentucky Housing Corp. conventional, FHA, USDA or VA first mortgage.

Summary: 2021 KHC first-time home buyer programs

  • Conventional Preferred Program for low income borrowers with a down payment of just 3%.

  • Conventional Preferred Plus 80 Program for a down payment of just 3%.

  • Home Buyer Tax Credit for reimbursement of a portion of the annual mortgage interest payments.

  • Regular Down Payment Assistance Program for a down payment loan of up to $6,000.

  • Affordable Down Payment Assistance Program for a down payment loan of up to $6,000 for low-income borrowers.

Knowing about national and Kentucky state loan programs to help buy a home is a good start; now it’s time to dig into the details. For specifics, visit the Kentucky Housing Corp. website. There you’ll find information about all the loan programs, including eligibility requirements, how to enroll in home buyer counseling and a list of approved lenders in your county.

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