Kentucky’s Down Payment Assistance Just Increased to $12,500: Your 2025 Guide
LOUISVILLE, KY — In a major move to tackle housing affordability, the Kentucky Housing Corporation (KHC) has announced a significant, temporary increase to its flagship Down Payment Assistance (DPA) program.
For a limited time, eligible homebuyers can access up to $12,500 in assistance—a 25% increase from the standard $10,000. This boost is available for loan reservations made between August 21 and November 30, 2025.
Why the $12,500 KHC Boost is a Game-Changer
Saving for a down payment is the number one barrier to homeownership. This new increase helps Kentuckians:
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Cover more upfront costs – Down payment, closing costs, prepaids, even certain inspections.
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Make stronger offers – A bigger down payment makes you more competitive.
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Buy sooner – Get into a home months or years earlier instead of waiting to save.
How the $12,500 Kentucky Down Payment Assistance Program Works
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Loan Amount: Up to $12,500 (in $100 increments)
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Interest Rate: 4.75% fixed
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Term: 15 years, amortized
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Monthly Payment: About $97/month (for full amount)
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Prepayment: No penalty if you pay it off early
This is a second mortgage loan that sits behind your first mortgage.
What Can the Funds Be Used For?
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Down payment
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Closing costs
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Prepaids (taxes, insurance, mortgage insurance premiums)
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Some inspections (with documentation)
Who Qualifies for the $12,500 Program?
Borrower Requirements
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Credit Score: 620 minimum
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Primary Mortgage: Must use a KHC-approved first mortgage (FHA, VA, USDA, or Conventional)
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Citizenship: U.S. citizen, national, or qualified alien
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Education: First-time buyers may need homebuyer education
Income & Price Limits
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Income: Varies by county, program, and household size (generally ≤ 80% AMI)
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Purchase Price: Up to $544,232 (new or existing homes)
Which Loan Types Work With It?
The KHC assistance can be paired with:
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FHA Loans – 3.5% down
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VA Loans – 0% down for veterans/service members
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USDA Loans – 0% down in eligible rural areas
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Conventional Loans – As little as 3% down
Act Now: Why November 30, 2025 Matters
This is a limited-time increase. After November 30:
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The program reverts to $10,000 at 3.75% interest with a 10-year term.
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To qualify, your lender must reserve your loan by this date.
Frequently Asked Questions: Kentucky $12,500 Down Payment Assistance
Program Basics
Q: How much down payment assistance can I get in Kentucky? A: Up to $12,500 through Kentucky Housing Corporation's enhanced program (temporarily increased from $10,000). Loans must be reserved between August 21 and November 30, 2025, to qualify for the enhanced amount.
Q: What's the monthly payment on the $12,500 assistance? A: Approximately $97 per month with the enhanced program terms (4.75% interest rate over 15 years). This is a separate payment from your primary mortgage.
Q: Can I really buy a Kentucky home with $0 down? A: Yes! When you combine KHC's $12,500 assistance with:
- VA loans (0% down for veterans)
- USDA loans (0% down in rural areas)
- The assistance can cover down payment and closing costs for conventional/FHA loans
Q: Is this program available in all Kentucky counties? A: Yes, all 120 Kentucky counties are eligible for the KHC down payment assistance program.
Eligibility and Qualification
Q: What credit score do I need for Kentucky down payment assistance? A: Minimum 620 FICO score. Higher scores (640+) typically qualify for better interest rates on your primary mortgage.
Q: Do I have to be a first-time homebuyer? A: No. While first-time homebuyers are prioritized, repeat buyers may qualify in targeted areas throughout Kentucky.
Q: What are the income limits for Kentucky counties? A: Income limits vary by county. For example:
- Jefferson County (Louisville): $90,250 for 4-person household
- Fayette County (Lexington): $85,500 for 4-person household
- Rural counties typically have lower limits
Q: Can I use gift money with the KHC assistance? A: Yes, gift money from family members can be combined with KHC down payment assistance, subject to lender requirements.
Program Details and Usage
Q: What can I use the $12,500 assistance for? A: The assistance can be used for:
- Down payment
- Closing costs
- Prepaid expenses (insurance, taxes, interest)
- Property-related inspection costs (with proper documentation)
Q: Can I combine KHC assistance with other programs? A: Often yes. The KHC assistance can frequently be combined with:
- Employer homebuyer assistance programs
- Local city/county down payment programs
- Family gift funds
- Your own savings
Q: What types of homes are eligible? A: Eligible properties include:
- Single-family detached homes
- Condominiums (must meet KHC approval)
- Townhouses and attached units
- Manufactured homes (permanently affixed, taxed as real estate)
Application and Process
Q: How do I apply for Kentucky's down payment assistance? A: You must apply through a KHC-approved lender. The process involves:
- Find a KHC-approved lender
- Apply for primary mortgage and down payment assistance simultaneously
- Get pre-approved
- Shop for homes under $544,232
- Complete the loan process
Q: How long does the application process take? A: Typically 30-45 days from complete application to closing, though this can vary based on documentation completeness and market conditions.
Q: What happens if my loan isn't reserved by November 30, 2025? A: After November 30, 2025, the program will likely revert to standard terms of up to $10,000 at 3.75% interest over 10 years.
Loan Terms and Repayment
Q: Can I pay off the down payment assistance loan early? A: Yes, there are no prepayment penalties. You can pay off the $12,500 assistance loan early without additional fees.
Q: What happens if I sell my home? A: The down payment assistance loan must be paid off when you sell your home, similar to your primary mortgage.
Q: What happens if I refinance my primary mortgage? A: The KHC assistance loan typically remains in place when you refinance your primary mortgage, allowing you to keep the favorable assistance terms.
Q: Are there restrictions on how I use my home? A: Yes, the home must remain your primary residence. You cannot rent it out or use it as a second home while the assistance loan is outstanding.
Special Circumstances
Q: Can I use this program if I'm self-employed? A: Yes, self-employed borrowers can qualify but will need additional documentation including business tax returns, profit & loss statements, and business bank statements.
Q: What if I'm a veteran - can I use VA benefits with KHC assistance? A: Yes! This is one of the best combinations. VA loans require 0% down payment, and the KHC $12,500 can cover all closing costs, creating a true $0 out-of-pocket purchase.
Q: Are there any tax implications? A: The assistance is structured as a loan, not a grant, so there are typically no immediate tax implications. Consult a tax professional for personalized advice.
Q: What if I don't qualify for the full $12,500? A: The assistance amount can be adjusted based on your needs and loan structure. You might receive less if your down payment and closing cost needs are lower.
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