First-Time Home Buyer Programs in Kentucky 2026
Kentucky Housing Corporation (KHC) runs Kentucky’s first-time buyer programs: 30-year fixed first mortgages, including Mortgage Revenue Bond (MRB) loans, a Down Payment Assistance loan of up to $12,500 repaid over 15 years, and, for new construction only, a Shared Appreciation Mortgage of up to 25% of the price.
KHC is the state housing finance agency, created by the General Assembly in 1972. It works as the investor behind loans made by a statewide network of KHC-approved lenders and services those loans itself, so every application below starts with one of those lenders. The figures on this page were read on KHC’s site on September 24, 2026.
Secondary Market or MRB: the two kinds of KHC first mortgage
Every KHC loan has a 30-year fixed rate, and the purchase price can be no more than $566,354, a cap in effect since May 18, 2026. If the contract price is higher, the home cannot be financed through KHC, and your own cash cannot cover the difference. What separates the two tracks is who may use them and how income is counted.
| Track | Who can use it | Loan types | Whose income counts |
|---|---|---|---|
| Secondary Market | First-time and repeat buyers | Conventional (HFA Preferred, HFA Preferred Plus 80, Freddie HFA Advantage), FHA, VA, RHS | Applicants only |
| Mortgage Revenue Bond | First-time buyers, or anyone buying in a targeted area | FHA, VA, RHS | The whole household: borrowers plus anyone else taking title |
The MRB loans are paid for with municipal bonds, and KHC says that is how it can offer “below-market rates to lower-incomed households.” KHC’s conventional loans need at least 3% down and a 660 score. FHA needs 3.5% down. VA and RHS loans may need no down payment. RHS is only for homes in areas the federal government classes as rural.
Who counts as a first-time buyer for a Kentucky bond loan
KHC’s rule is short: outside a targeted area you must be a first-time buyer to get an MRB loan, and inside one “a borrower … may be a first-time or a repeat homebuyer.” The look-back period comes from the federal bond statute these loans are issued under. Under 26 U.S.C. § 143(d), the money has to go to buyers who “had no present ownership interest in their principal residences at any time during the 3-year period ending on the date their mortgage is executed.”
- Outside a targeted area, the test applies to every borrower and to anyone else taking title.
- Owning a timeshare does not disqualify you.
- On an MRB loan you may not own any other property when you close. If you own a manufactured home that was never converted to real estate, you have to sell it before closing.
KHC’s targeted-area list names whole counties, among them Harlan, Perry and Pike. It also names individual census tracts inside other counties, including Jefferson, Fayette and Kenton. Your lender checks the address against that list.
Kentucky income limits, set county by county
KHC publishes two income grids, both effective September 1, 2026. On the eligibility page, the Secondary Market limits run from $152,775 to $192,325. Counties the grid does not list use $152,775; six counties, Boone, Bracken, Campbell, Gallatin, Kenton and Pendleton, are at $192,325; Jefferson County is $173,250.
The MRB grid has two columns: households of 1-2 people and households of 3 or more. In Jefferson County the limits are $101,534 and $116,765. A fifth or sixth household member does not raise the limit. Targeted census tracts get their own rows on page 2 of the PDF; the listed Jefferson tracts are $118,800 and $138,600. KHC’s lender FAQ counts all income you are expected to receive in the next 12 months, and for MRB loans it also adds 1% of the checking and savings balances left after closing.
There is a trade-off. If you sell an MRB-financed home within the first nine years, at a gain, and your income has risen above the adjusted limit, federal recapture tax may apply. All three conditions have to be met.
KHC Down Payment Assistance is a second loan
KHC’s DPA “provides up to $12,500 toward your down payment and closing costs,” in $100 increments with a $1,000 minimum. It is a second mortgage at a fixed rate, repaid monthly over 15 years, and you have to qualify with that extra payment included. KHC’s FAQ says the amount “has been temporarily increased to $12,500.” None of it is forgiven.
- It is open to first-time and repeat buyers, but only if your first mortgage is from KHC. The income limit is the one for whichever track your first mortgage uses.
- The money goes to the down payment and closing costs, not to paying off debt.
- You can pay it off early with no penalty. If you later refinance your first mortgage outside KHC, the DPA has to be paid off.
- No homebuyer course is required for it. The loan’s disclosures show a $50 document preparation fee and an $80 recording fee.
City down payment money can be layered on top if the city agrees to take third lien position behind KHC. How KHC’s loan compares with other down payment money in Kentucky is on our Kentucky down payment assistance page.
The Shared Appreciation Mortgage for newly built homes
KHC launched SAM on July 27, 2026. It “offers up to 25% of your home’s purchase price or appraised value to help cover your down payment and closing costs.” It is a zero-interest second mortgage with nothing due each month. When you sell, refinance or pay off the first mortgage, you repay the original amount plus the same percentage of the home’s gain in value. For example, a 20% SAM means 20% of the appreciation. If the home loses value, you owe only the original amount. KHC is explicit: “The SAM is not subject to forgiveness.”
- SAM is only for first-time buyers purchasing a newly built home, including a new manufactured home. KHC started it with a $10 million allocation.
- You cannot combine it with KHC’s DPA loan. KHC says: “We do not have a veteran exemption available.”
- You must take a homebuyer course through eHome America, which costs $35, and there is a $500 SAM fee.
- You need a lender that is approved for SAM specifically.
KHC’s credit, debt and occupancy rules
The minimum credit score is 620 for FHA, VA and RHS loans and 660 for conventional loans, and each borrower has to meet it. KHC’s partner guide puts the maximum debt ratio at 50%. KHC does not add its own homebuyer education requirement. Beyond SAM, you follow the rules of the loan type, and on conventional loans the automated underwriting findings decide whether you need a course.
The home must stay your primary residence for the life of the loan. If it stops being your home, the KHC first mortgage and any KHC second have to be paid off. KHC does not allow co-borrowers or co-signers who will not live in the home. It finances owner-occupied duplexes but not 3-4 unit buildings. For an MRB loan, the duplex must be at least five years old or in a targeted area.
Questions Kentucky buyers ask about KHC
I owned a house ten years ago. Can I still use KHC?
Yes. Secondary Market loans and the DPA loan are open to repeat buyers. For an MRB loan, a home you sold more than three years before closing does not count against you, and if you are buying in a targeted area, prior ownership does not matter at all.
Does the $12,500 have to be paid back?
Yes. It is a second mortgage repaid over 15 years, and you can pay it off early without a penalty.
My partner will live with me but will not be on the loan. Does their income count?
For an MRB loan, only if they take title. Household income includes non-borrowing occupants taking title. For a Secondary Market loan, KHC counts only the applicants’ income.
Can I use SAM to buy an existing house?
No. SAM is for new construction only. KHC says a version for existing homes is “under consideration for a potential Phase 2” and has no set timeline.
Where do I start?
With a KHC-approved lender. The lender checks your income against the county grid and your address against the targeted-area list, and the DPA or SAM loan documents come out of the same KHC system as the first mortgage.
More on buying in Kentucky: Kentucky closing costs, the Kentucky hub, FHA requirements, the VA loan guide, FHA vs. conventional, pre-approval, the affordability calculator, the payment calculator and the down payment calculator. Programs next door: Tennessee, Ohio, Virginia.