Down Payment Assistance Kentucky: Do You Pay It Back? (2026 KHC Costs)
Last updated: July 2026 · Joel Lobb, Mortgage Loan Officer, NMLS #57916 — 20+ years in Kentucky mortgages, 1,300+ families closed.
Most articles about Kentucky down payment assistance stop at "you can get $12,500." This one covers the part buyers actually need before signing: what it costs you every month, what it does to your buying power, and when you should take less than the maximum — or skip it entirely.
Do you have to pay back down payment assistance in Kentucky?
Yes. This is the single most common misunderstanding I correct, and buyers are usually hearing it from me for the first time. KHC assistance is a second mortgage recorded as a lien against your home. You make a separate monthly payment on it for 15 years.
| The real terms | 2026 |
|---|---|
| Is it a grant? | No — a repayable second mortgage |
| Maximum | Up to $12,500, in $100 increments |
| Term | 15 years, fully amortizing |
| Rate | Approximately 4.75% (KHC sets it; subject to change) |
| Payment on the full amount | About $97 per month |
| Total repaid over 15 years | Roughly $17,500 on a $12,500 advance |
| Counts against your debt ratio? | Yes |
| Due in full if you | Sell or refinance the first mortgage |
| Purchase price limit | Around $566,354 statewide (subject to change) |
| Eligible uses | Down payment, closing costs, prepaids — not repairs |
KHC sets these terms and can revise them without notice. Call or text 502-905-3708 for today's exact figures.
What does KHC down payment assistance actually cost per month?
Here is what the payment looks like at each level, on a 15-year term at approximately 4.75%:
| Amount borrowed | Estimated monthly payment |
|---|---|
| $12,500 | About $97 |
| $10,000 | About $78 |
| $7,500 | About $58 |
| $5,000 | About $39 |
| $2,500 | About $19 |
On the full $12,500 you will repay roughly $17,500 over the life of the second mortgage. That is the honest number, and it is the one most lenders skip.
How the second payment shrinks your buying power
The $97 does not just leave your account each month — it also sits inside your debt-to-income ratio while you are being underwritten. That means taking the maximum assistance can lower the purchase price you qualify for.
The tradeoff nobody explains: a buyer who takes $12,500 to cover closing costs may qualify for meaningfully less house than the same buyer who takes $6,000 and negotiates the rest from the seller. More assistance is not automatically better. It is a lever, and it moves in both directions.
When you should take less than the maximum
- You only need part of it. Assistance comes in $100 increments. If $6,800 closes your gap, take $6,800 — not $12,500.
- Your debt ratio is tight. Trimming the second mortgage payment can be what gets you an approval at the price you actually want.
- The seller is motivated. Every dollar of seller-paid closing costs is a dollar you never repay.
When you should skip assistance entirely
- You are using a VA or USDA loan and have closing costs covered. There is no down payment to fund, so borrowing to create one makes no sense.
- You have the cash. Paying 4.75% on money you already have in savings is a losing trade in most cases.
- You qualify for a local city program. Louisville Metro and Lexington-Fayette run forgivable or grant assistance. Free money beats borrowed money — always check those first.
When it is absolutely the right call
None of the above means avoid it. For a large share of the Kentucky families I work with, this program is the difference between buying now and renting for another three years while prices and rents keep climbing. About $97 a month to stop waiting is frequently the better financial decision — it just needs to be a decision, not an assumption.
For the full program mechanics — credit score minimums, debt ratios, purchase price limits and which loan types pair with assistance — see my complete guide to KHC down payment assistance. For whether your household income qualifies, see the 2026 KHC income limits by county.
Frequently asked questions
Do you have to pay back down payment assistance in Kentucky?
Yes. Kentucky Housing Corporation down payment assistance is a repayable second mortgage, not a grant. It is recorded as a lien on your home and repaid over 15 years in a separate monthly payment alongside your first mortgage.
How much does KHC down payment assistance cost per month?
About $97 per month on the full $12,500, based on a 15-year term at approximately 4.75%. Smaller amounts cost proportionally less — roughly $58 per month on $7,500.
When does KHC down payment assistance have to be paid off in full?
The remaining balance comes due when you sell the home, refinance your first mortgage, or otherwise pay off the property. It is not forgiven and it does not shrink over time beyond normal amortization.
Does down payment assistance reduce how much house you can afford?
Yes. The second mortgage payment is counted in your debt-to-income ratio, so taking the full $12,500 modestly lowers the purchase price you qualify for. Taking less assistance can raise your maximum price.
Should you always take the maximum down payment assistance?
No. Borrow only what actually closes your gap. Every dollar is repaid with interest, and unnecessary assistance both costs you money and reduces your buying power.
Is there any Kentucky down payment help you do not repay?
Seller-paid closing costs are the most reliable option that is never repaid — on an FHA loan a seller may contribute up to 6% of the purchase price. True grant programs exist but are funding-round dependent and frequently exhausted.
Can KHC down payment assistance be used for repairs?
No. Funds are limited to your down payment, eligible closing costs, and prepaid items. Renovations require a different product such as an FHA 203(k) loan.
Is down payment assistance still worth it if you have to repay it?
Often yes. For a buyer who would otherwise spend three more years saving while rents and prices rise, about $97 a month to buy now is frequently the better financial outcome. The point is to decide deliberately, not assume it is free.
Not sure how much assistance you actually need?
That is the question worth answering before you write an offer. Free application, no obligation, same-day approvals. I will run your numbers with and without assistance so you can see the difference in both your payment and your maximum price.
Call or text: 502-905-3708
Email: kentuckyloan@gmail.com
About the author
Joel Lobb specializes in Kentucky first-time homebuyer financing — FHA, VA, USDA and Rural Housing, KHC, and Fannie Mae loans. More than 20 years in the mortgage industry and over 1,300 Kentucky families helped into a home or into a lower payment.
Joel Lobb — Mortgage Loan Officer
EVO Mortgage
911 Barret Ave, Louisville, KY 40204
Call/Text: 502-905-3708
Email: kentuckyloan@gmail.com
NMLS #57916 · Company NMLS #1738461
Licensed in Kentucky only. Verify at nmlsconsumeraccess.org
This article is educational and is not a commitment to lend. Payment figures are estimates for illustration; your actual rate, payment and terms are disclosed on your Loan Estimate. Rates, program terms, income limits, purchase price limits and funding availability are set by Kentucky Housing Corporation and are subject to change without notice. All loans subject to credit approval, income verification and property eligibility. Not endorsed by or affiliated with FHA, VA, USDA, HUD, Kentucky Housing Corporation or any government agency. Equal Housing Lender.
