Kentucky first-time homebuyer grants and down payment assistance (2026)

What KHC’s $12,500 DAP costs you each month

DAP is a second mortgage of $1,000 to $12,500, set in $100 steps, that pays down payment and closing costs ⁠¹⁠². KHC’s FAQ says the amount has been “temporarily” raised to $12,500. The loan carries a fixed 4.75% rate, amortized over 15 years ⁠³. KHC’s own comparison flyer shows a $97.23 monthly payment on a $12,500 DAP, and your lender must count it when qualifying you ⁠¹⁰⁠².

Rules from KHC’s June 13, 2026 program guide ⁠²:

• Who: first-time and repeat buyers, for new or existing homes.
• Which loans: only a KHC first mortgage (FHA, RHS, VA, HFA Preferred, HFA Preferred Plus 80 or Freddie Mac HFA Advantage).
• Income and price: the limit for your first-mortgage type, and a price of $566,354 or less.
• Fees: a $50 document preparation fee and an $80 recording fee.
• Repairs: DAP money cannot pay for required repairs. The buyer or seller pays them.

You can pay DAP off early with no penalty. It cannot be assumed by a later buyer ⁠³. If you refinance with a lender other than KHC, you must repay the DAP in full. KHC subordinates it only when the new first mortgage also goes through KHC ⁠³. Cash back at closing is limited to money you put in, such as earnest money or an inspection fee. Any extra goes first to reduce the DAP balance ⁠³.

Choosing between KHC’s MRB and Secondary Market loans

Every DAP sits behind one of two kinds of KHC first mortgage. Both are 30-year fixed loans with the same $566,354 price cap ⁠⁶:

• Mortgage Revenue Bond (MRB) loans. These are FHA, VA and RHS loans funded by tax-exempt bonds and priced below market. Outside targeted areas you must be a first-time buyer, and so must anyone else taking title. You may not own any other home at closing. Income counts the whole household, including non-borrowers on the title ⁠²⁠³. KHC treats timeshare owners as first-time buyers ⁠³. Sell within nine years at a gain with income above the adjusted limit, and you may owe federal recapture tax ⁠³. KHC lenders see remaining bond funds on KHC’s lender dashboard ⁠³.
• Secondary Market loans. These are FHA, VA, RHS and conventional loans for first-time and repeat buyers. Only the applicants’ income counts, and the limits are higher ⁠²⁠³.

On KHC’s flyer, built on a $250,000 purchase, an FHA MRB loan was priced at 5.75% and a conventional HFA loan at 6.625% ⁠¹⁰. Rates change daily, and KHC does not publish them to buyers, so ask your loan officer for the current rate.

Kentucky’s MRB rules are looser than some states’. KHC does not require three years of tax returns to prove first-time status. Lenders check credit reports, fraud reports and public records instead ⁠³. Liquid savings left after closing do count: 1% of the balance is added to your “compliance income” ⁠³.

2026 KHC income limits by county

KHC posts three limit charts. The MRB chart has two columns (1-2 people and 3 or more), and the limit does not rise for households above three ⁠³⁠⁴. Effective Sept. 1, 2026, non-targeted counties range from $87,300 to $109,900 for 1-2 people and $100,660 to $126,385 for 3 or more ⁠⁴. All of the 41 targeted counties use $104,760 and $122,220. Most are in eastern and south-central Kentucky, including Pike, Perry, Harlan, Floyd, Laurel and Whitley, and any buyer there may use an MRB loan ⁠⁴. Targeted census tracts in 28 other counties have their own figures. The highest, in parts of Boone, Campbell and Kenton, is $131,880 and $153,860 ⁠⁴.

The Secondary Market limit applies to applicant income. It is $152,775 in counties not listed and as high as $192,325 in Northern Kentucky ⁠⁵. HFA Preferred conventional loans at KHC’s 80% of area median income tier use a lower chart, from $57,520 to $87,200 (effective June 13, 2026) ⁠².

Scroll the table sideways to see every column.

MRB and Secondary Market limits are effective Sept. 1, 2026 ⁠⁴⁠⁵; the 80% AMI chart is effective June 13, 2026 ⁠². Each KHC chart lists the $566,354 purchase price limit, effective May 18, 2026. To find your tract, use KHC’s targeted counties and census tracts list or ask a KHC lender ⁠⁶.

Credit scores, the 50% ratio and manual underwriting

KHC requires a 620 minimum credit score on FHA, VA and RHS loans and 660 on conventional loans. Every borrower must meet it; a co-borrower with no score is not allowed ⁠²⁠³. With an automated underwriting approval, KHC allows a 50% debt-to-income ratio on all of its loans, counting the DAP payment ⁠². KHC does not allow non-occupying co-borrowers or co-signers ⁠³. Bankruptcies and foreclosures must be discharged two to seven years before closing, depending on the loan type. Most collections do not have to be paid in full ⁠².

KHC manually underwrites government loans only. For FHA, its matrix sets a 620 floor and caps ratios at 31/43 with no compensating factors. Ratios can reach 37/47 with one factor, such as three months of reserves, and 40/50 with two ⁠³⁠¹².

SAM: up to 25% on a new home, paid back with appreciation

The Shared Appreciation Mortgage is a 0% second mortgage with no monthly payment. It covers up to 25% of the price or appraised value of a newly built home, including new manufactured homes ⁠⁹⁠³. It is for first-time buyers only, there is no veteran exemption, and it cannot be combined with DAP ⁠³. KHC started the program with a $10 million allocation. A version for existing homes is under consideration, with no timeline ⁠³.

There is no forgiveness. When you sell, refinance, pay off the first mortgage or hit another repayment trigger, you repay the SAM amount plus the same percentage of the home’s gain in value ⁠³. KHC’s example: a $75,000 SAM (25%) on a $300,000 home sold for $350,000 five years later costs $87,500, that is, the $75,000 plus 25% of the $50,000 gain ⁠¹⁰. Before KHC takes its share, you recover your own down payment, standard selling costs and the principal you paid. If the value falls, you repay only the original amount ⁠³. There is a $500 SAM fee ⁠³. Before closing you must take a SAM homebuyer course from eHome America, which costs $35, and you must use a SAM-approved lender ⁠⁹.

Homebuyer education: when Kentucky actually requires it

KHC has no education requirement of its own. The DAP rule sheet says “Not Required,” and conventional loans follow the automated underwriting findings ⁠²⁠³. KHC recommends a homebuying video series, still listed as “coming soon,” and points buyers to Fannie Mae HomeView, Freddie Mac CreditSmart, eHome America and HUD-approved counselors ⁠¹¹. Education becomes mandatory in two cases: the $35 SAM course ⁠⁹, and Louisville Metro’s 6 hours of counseling from a HUD-certified agency for every applicant ⁠¹³.

Louisville Metro and Lexington: the local money

Louisville Metro Down Payment Assistance Program. This is a partially forgivable 0% second mortgage for households at or below 80% of area median income buying anywhere in Louisville/Jefferson County. You do not need to be a first-time buyer, but you cannot have owned a home in the 12 months before applying ⁠¹³. The FY27 handbook (August 2026) sets these terms ⁠¹³:

• Amount: up to 20% of the price, capped at $30,000, based on need.
• Income limit: $79,200 for a family of four (effective July 1, 2026).
• Price caps: $260,000 for an existing single-family home and $331,000 for a new one.
• Ratios: front-end 25% to 30%; back-end 43% excluding student loans, or 50% including them.
• Forgiveness: half is forgiven after 5 years (under $25,000) or 10 years ($25,000 to $40,000). The rest is due when you sell, without interest.
• Other rules: at least $2,000 in the bank, a lender pre-approval, and city and private home inspections.

Metro processes complete applications first come, first served. It keeps no waiting list, and eligibility decisions take about 45 days ⁠¹³. It accepts applications only during windows posted on its program page, which blocked our automated check on Oct. 20, 2026. Call (502) 574-1974 to confirm whether a window is open ⁠¹³.

Lexington. The Lexington-Fayette Urban County Government funds non-repayable mortgage subsidies and 0% to 2% loans for first-time buyers who already live in Lexington. You apply through REACH Inc. ((859) 455-8057) or Lexington Habitat for Humanity, not through the city. The city does not publish amounts or current funding ⁠¹⁴.

Getting a KHC loan with DAP, step by step

1. Check your county’s limits

   Compare your income with the MRB and Secondary Market charts. Use the MRB chart’s household column for first-time buyers ⁠⁴⁠⁵.

2. Pick a KHC-approved lender

   Use KHC’s Lender Directory, or the SAM-approved filter for a new home ⁠¹⁠⁹.

3. Get prequalified

   The loan officer runs KHC’s income calculator, counting all income expected in the next 12 months, such as overtime, child support and a coming raise ⁠³.

4. Take education if your program needs it

   SAM buyers complete the eHome America course. Louisville applicants finish 6 hours of HUD-certified counseling before applying to Metro ⁠⁹⁠¹³.

5. Gather documents

   You will need pay stubs and W-2s, at least one month of statements for every bank account, and a year-to-date profit-and-loss statement if self-employed. MRB files also need a Mortgagor Certification and a Seller Certification ⁠³.

6. Make an offer within $566,354

   A contract price above the limit is ineligible, even if you pay the difference ⁠³.

7. Lender reserves funds

   KHC reservations last 45 days. Extensions cost 0.125% for 7 days or 0.25% for 15 days ⁠³.

8. Close and keep your papers

   Keep the DAP or SAM note and the MRB recapture notice for a future sale or refinance ⁠³.

If one lender turns you down, another KHC lender may still approve you, since KHC follows agency rules on most credit questions ⁠³. Louisville applicants who think they were wrongly denied can request an appeal form from the program coordinator ⁠¹³. Compare other states on the first-time homebuyer grants page.