KHC Loans & $12,500 Kentucky Down Payment Assistance (2026)

Quick answer: Kentucky Housing Corporation (KHC) offers 30-year fixed-rate home loans and down payment assistance for eligible Kentucky buyers. As of August 15, 2026, the regular KHC Down Payment Assistance Program can provide $1,000 to $12,500 for down payment and closing costs. It is a repayable 15-year second mortgage at a fixed 4.75% rate—not a grant. First-time and repeat buyers may qualify when the assistance is paired with an eligible KHC first mortgage.

KHC programs are available through approved lenders across Kentucky, including Louisville, Lexington, Bowling Green, Northern Kentucky and rural communities. The right option depends on your credit, income, debts, property and whether you qualify for FHA, VA, USDA/RHS or a KHC conventional loan.

Last reviewed: August 15, 2026 using current Kentucky Housing Corporation consumer pages and its June 13, 2026 program guide. Program terms and funding can change.

Want your numbers reviewed?
Call or text Joel Lobb at 502-905-3708, or start a free Kentucky mortgage pre-qualification. This is an initial review, not a commitment to lend.

On this page

1. 2026 KHC program snapshot
2. KHC loan options
3. $12,500 down payment assistance
4. Underwriting and eligibility requirements
5. Income and purchase-price limits
6. Eligible properties
7. Shared Appreciation Mortgage (SAM)
8. How to apply
9. Frequently asked questions

2026 KHC loan program snapshot

Current KHC homebuyer guidelines reviewed August 15, 2026

Guideline	Current KHC summary
Regular down payment assistance	$1,000 to $12,500, in $100 increments
DAP repayment	4.75% fixed rate, amortized over 15 years as a second mortgage
First-mortgage term	30-year fixed rate
Minimum KHC credit score	620 for FHA, VA and USDA/RHS; 660 for KHC conventional
Maximum debt-to-income ratio	Up to 50% with the required underwriting approval; a lower ratio may be required
Maximum purchase price	$566,354 for current Secondary Market and MRB programs
First-time buyer required?	No for Secondary Market financing or regular DAP; generally yes for MRB outside targeted areas
Occupancy	Owner-occupied primary residence in Kentucky

These are starting guidelines, not automatic approvals. Borrowers must also satisfy the rules for the underlying FHA, VA, USDA/RHS, Fannie Mae or Freddie Mac loan, plus any applicable mortgage-insurance and lender requirements.

What is a KHC loan?

A KHC loan is a mortgage offered through a KHC-approved lender and purchased or funded under a Kentucky Housing Corporation program. KHC is Kentucky’s state housing finance agency. It supports affordable homeownership, sets program overlays and provides access to down payment assistance.

KHC does not replace the underlying mortgage program. Instead, a buyer receives a KHC first mortgage built around one of these loan types:

KHC first-mortgage options

Loan type	Minimum KHC score	Minimum down payment	Good fit for
FHA	620	3.5%	Buyers who want flexible government-backed underwriting
VA	620	Often 0% for an eligible borrower	Qualified veterans, service members and eligible surviving spouses
USDA/RHS	620	Often 0% for an eligible borrower and property	Income-qualified buyers in USDA-eligible areas
KHC conventional	660	As little as 3%	Buyers who qualify for HFA Preferred, HFA Preferred Plus 80 or Freddie Mac HFA Advantage

VA and USDA may offer zero-down financing, but zero down does not always mean zero cash at closing. A buyer may still have closing costs, prepaid taxes and insurance, inspection costs or other expenses unless approved assistance, seller credits or lender credits cover them.

How the KHC $12,500 Down Payment Assistance Program works

KHC’s regular Down Payment Assistance Program—often called KHC DAP—may provide up to $12,500 toward a buyer’s down payment and eligible closing costs. The assistance must be used with a KHC first mortgage.

• Amount: $1,000 to $12,500 in $100 increments.
• Repayment: 4.75% fixed interest, amortized over 15 years.
• Structure: A second mortgage with a monthly payment.
• Eligible buyers: First-time and repeat homebuyers.
• Eligible homes: New and existing properties that meet the first-mortgage rules.
• Eligible first mortgages: KHC FHA, VA, RHS/USDA and qualifying KHC conventional programs.
• Income limits: The limit follows the selected KHC first-mortgage funding source.

KHC DAP is not a grant and is not forgivable. The second-mortgage payment is included when the lender calculates your debt-to-income ratio. Using the full $12,500 is not always the best choice; the lender should compare the cash saved at closing with the added monthly payment.

Assistance and first-mortgage funding are limited and can change. Check KHC’s current funding availability before relying on a program in a purchase offer.

KHC underwriting guidelines for 2026

Mortgage approval is based on the full file—not one number. A buyer can meet the minimum credit score and still be declined because of income documentation, debt, cash-to-close, property condition or the appraisal.

Credit score

KHC currently requires a minimum 620 score for FHA, VA and RHS/USDA loans and 660 for KHC conventional loans. The mortgage lender, automated underwriting system or mortgage-insurance company may require a higher score.

Debt-to-income ratio

KHC’s published maximum total debt ratio is 50%. Reaching 50% generally requires the appropriate automated underwriting approval and a fully documented file. It is a ceiling, not a guaranteed approval level. The DAP payment and all other required monthly obligations are included in the calculation.

Income documentation

Income must be stable, documentable and acceptable under the first-mortgage program. Depending on the income type, an underwriter may review pay stubs, W-2s, tax returns, benefit statements, employment verification and the likelihood that the income will continue. KHC uses different income calculations for qualifying and program compliance.

Assets and deposits

Buyers must document the money used for earnest money, inspections, closing costs, reserves and any required contribution. Gifts and other approved assistance may be allowed under the selected loan program. Avoid moving money or depositing undocumented cash during the mortgage process. KHC generally requires deposits over $500 to be sourced for compliance-income review.

Credit events and federal debt

Collections do not always have to be paid in full, but the first-mortgage rules control how collections, judgments, tax debt and disputed accounts are treated. Waiting periods after bankruptcy or foreclosure generally range from two to seven years depending on the event, loan program and any permitted exception.

Other KHC overlays

• A full appraisal is required for each KHC loan.
• Non-occupying co-borrowers and co-signers are not permitted under current KHC guidance.
• General KHC homebuyer education is not automatically required for every loan; follow the first-mortgage and automated underwriting findings. SAM has a separate mandatory course.
• Manual underwriting may be available for certain government-backed loans, but more restrictive agency and lender rules may apply.

KHC income limits and purchase-price limits

KHC has two main first-mortgage funding paths, and they do not calculate eligibility the same way.

Secondary Market funding

• Available to first-time and repeat homebuyers statewide.
• Uses the applicant’s qualifying income for the published program limit.
• Includes FHA, VA, RHS/USDA and conventional options.
• Current applicant-income limits generally range from $147,350 to $195,650 by county for the most common Secondary Market programs. Certain conventional products use separate 80% area-median-income limits.

Mortgage Revenue Bond (MRB) funding

• Generally requires a first-time homebuyer in a non-targeted area.
• Repeat buyers may be eligible when purchasing in a targeted area.
• Uses household-compliance income, including borrowers and non-borrowing occupants who take title.
• Current MRB first-mortgage options include FHA, VA and RHS/USDA.
• Federal recapture-tax rules may apply in limited circumstances after an early sale and income increase; discuss the rules with a tax professional.

The current maximum KHC purchase price is $566,354 for Secondary Market and MRB financing. Because income limits vary by county, household, funding source and conventional product, use KHC’s county income and purchase-price lookup or ask an approved lender to calculate the correct limit.

What properties are eligible for KHC financing?

The property must be in Kentucky and serve as the borrower’s principal residence. Depending on the selected first mortgage, eligible properties may include:

• New or existing one-unit homes, with or without an accessory dwelling unit (ADU);
• Approved condominiums;
• Eligible manufactured homes; and
• Owner-occupied duplexes, subject to funding-source and property-age rules.

The home must meet the appraisal and property standards for the underlying FHA, VA, USDA/RHS or conventional loan. A home inspection is still recommended because an appraisal is not a substitute for an independent inspection.

KHC Shared Appreciation Mortgage: a different assistance option

KHC launched its Shared Appreciation Mortgage (SAM) program in July 2026. SAM is separate from regular DAP.

• Provides a zero-interest, deferred-payment second mortgage of up to 25% of the home’s purchase price or appraised value, as determined under KHC rules.
• Currently limited to eligible first-time homebuyers purchasing qualifying new construction in Kentucky.
• Requires a SAM-specific homebuyer education course.
• Has no monthly SAM payment, but it is not free money.
• Requires repayment of the original SAM principal plus KHC’s agreed share of future appreciation when a repayment event occurs, such as a sale, payoff or most refinances.
• Cannot be combined with a regular KHC DAP second mortgage.

SAM can reduce the first-mortgage balance and may eliminate conventional private mortgage insurance, but the homeowner gives up part of the home’s future appreciation. Compare the long-term cost with regular DAP, seller credits and other loan options before choosing it.

How to apply for a KHC loan

1. Complete a pre-qualification. A lender reviews your income, credit, debts, savings and homebuying goals.
2. Compare funding options. Review Secondary Market versus MRB financing, the regular DAP payment and any SAM eligibility.
3. Verify county limits and funds. Income limits, purchase-price limits and funding availability must be current when the loan is reserved.
4. Receive a pre-approval before shopping. This helps identify a realistic purchase price and cash-to-close estimate.
5. Submit the property for underwriting. The lender verifies the contract, appraisal, title, insurance and final borrower documents.

Find out which KHC option fits your file

I can compare FHA, VA, USDA/RHS and KHC conventional financing with and without assistance using your actual income, debts and estimated purchase price.

Start your free pre-qualification
Call or text: 502-905-3708
Email: kentuckyloan@gmail.com

Frequently asked questions

Is KHC down payment assistance only for first-time buyers?

No. KHC’s regular DAP and Secondary Market first mortgages are available to eligible first-time and repeat buyers. MRB financing generally requires first-time-buyer status outside targeted areas.

Is the $12,500 KHC assistance a grant?

No. Regular KHC DAP is a repayable second mortgage. Current terms are 4.75% fixed interest amortized over 15 years.

What credit score is needed for a KHC loan?

KHC currently publishes a 620 minimum for FHA, VA and USDA/RHS and a 660 minimum for conventional. The full file must qualify, and a lender or mortgage-insurance company may require more.

Can KHC DAP cover all of my cash to close?

Sometimes, but not automatically. The result depends on the purchase price, loan type, closing costs, prepaid expenses, seller credits, earnest money and the amount of assistance approved.

Can I use KHC assistance with an FHA loan?

Yes. Eligible buyers can pair regular KHC DAP with a KHC FHA first mortgage. KHC currently requires a minimum 620 score for this option.

Does KHC allow a 50% debt-to-income ratio?

KHC publishes a maximum total ratio of 50% with the required underwriting approval. A lower ratio may be required based on the first-mortgage program, credit, reserves, property and overall risk.

Can I combine regular KHC DAP with SAM?

No. KHC’s current FAQ says a SAM second mortgage cannot be combined with a regular KHC DAP mortgage.

Where can I verify the official KHC rules?

Start with KHC’s loan-program overview, down payment assistance page, eligibility page and official tools and resources. KHC identifies AllRegs as its primary source for complete lending guidelines.

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About the author: Joel Lobb is a Kentucky mortgage loan officer with more than 20 years of experience helping homebuyers with FHA, VA, USDA/RHS, KHC and conventional financing. NMLS #57916. EVO Mortgage, Company NMLS #1738461. Louisville, Kentucky. Serving all 120 Kentucky counties.

Important disclosure: This page is educational and is not a commitment to lend or a guarantee of approval. All loans are subject to credit, income, asset, property and final underwriting approval. Program terms, interest rates, fees, income limits, purchase-price limits and funding availability can change without notice. Not all applicants will qualify. This website is not affiliated with or endorsed by Kentucky Housing Corporation, FHA, VA, USDA, HUD or any government agency. Equal Housing Lender. Verify licensing at NMLS Consumer Access.