Kentucky New Construction Loans with 3.5% Down Payment Assistance
By Joel Lobb, Mortgage Broker – FHA, VA, USDA, KHC, Fannie Mae
NMLS #57916 | Company NMLS #1738461
3.5% Down Payment Assistance for Completed Construction Homes
If you are building or buying a completed new construction home in Kentucky, coming up with the cash for down payment and closing costs can slow everything down. This 3.5% down payment assistance (DPA) program pairs a competitive 5/1 ARM first mortgage with a repayable 3.5% DPA second to help buyers close with less money out of pocket.
The goal is simple: make Kentucky new construction loans more affordable for buyers while giving builders a clean way to move inventory without cutting price. For buyers who want to compare this to other Kentucky down payment assistance options through KHC, this program can be part of a larger strategy, not a one-size-fits-all answer.
How This Kentucky New Construction DPA Program Works
The structure is straightforward. Buyers receive:
- A 5/1 ARM first mortgage at a competitive rate.
- A 3.5% down payment assistance second lien that is repayable.
The assistance can be used toward several upfront costs that usually keep buyers on the sidelines. When we look at your file, we also compare this structure to Kentucky USDA zero-down home loans and KHC loan programs so you can see which option actually delivers the best fit.
What the 3.5% Down Payment Assistance Can Be Used For
- Down payment on a completed new construction home.
- Prepaid items such as taxes and insurance.
- Closing costs charged by the lender, title company, and other parties.
- Temporary or permanent interest rate buydowns to lower the monthly payment.
Used correctly, this Kentucky down payment assistance program can reduce the buyer’s cash to close and create a more comfortable payment from day one. If you are also researching your credit score needed for a Kentucky mortgage, it’s important to know that both the first mortgage and DPA second have minimum credit and underwriting guidelines.
Benefits for Kentucky Homebuyers
Buyers looking online for Kentucky new construction loans are usually focused on three things: monthly payment, cash to close, and long-term flexibility. This 3.5% DPA option helps in all three areas.
- Lower cash to close: Assistance can cover part of the down payment and closing costs.
- Payment relief: Funds can be structured toward rate buydowns to help manage the payment in the early years.
- Flexible structure: Buyers can combine this with other incentives, gifts, or seller credits where allowed.
- Local guidance: Work directly with a Louisville-based mortgage broker who understands KHC loan programs, USDA 100% financing in Kentucky, and credit score requirements.
Many buyers start by reading about minimum credit score guidelines for FHA, VA, USDA, and conventional loans and then want to know how those guidelines line up with this new construction DPA option. That’s part of the conversation we’ll have up front.
Benefits for Builders and Developers in Louisville and Across Kentucky
For builders, this program is a clean Louisville builder financing solution that helps buyers say “yes” without forcing deep price cuts or heavy concessions.
- No price reduction required: Use financing instead of discounting the list price.
- Move standing inventory: Turn qualified traffic into real contracts.
- Helps more buyers qualify: By assisting with upfront costs, more buyers can make the numbers work.
- Works with completed construction: Ideal for finished homes that are ready to close.
If you are a builder or listing agent with completed homes in Louisville, Lexington, Bowling Green, or other Kentucky markets, this down payment assistance option can become part of your standard financing toolkit alongside USDA, FHA, VA, and KHC down payment assistance.
Who Is a Good Fit for This Kentucky New Construction Program?
- Buyers purchasing a completed new construction home in Kentucky.
- Clients who have stable income but limited cash for down payment and closing costs.
- First-time buyers and repeat buyers who want to preserve savings.
- Builders with move-in ready homes who want a structured financing solution for their buyers.
Full underwriting guidelines will apply, including credit score, debt-to-income, income documentation, and property eligibility. Not all borrowers or properties will qualify. If you’re unsure whether your current profile fits, review the credit score and approval guide for Kentucky mortgages and then reach out for a tailored scenario.
How the 5/1 ARM Works with the 3.5% DPA
The first mortgage is a 5/1 ARM, which means the interest rate is fixed for the first five years and can adjust annually after that based on the terms of the note.
- Years 1–5: Fixed introductory rate, often lower than a comparable 30-year fixed rate.
- After year 5: Rate can adjust annually up or down within specified caps.
- DPA second: The 3.5% assistance is structured as a second lien that is repayable based on program terms.
For many buyers, this structure can be a smart option if they plan to refinance in the future, move, or expect income growth before the first adjustment period. We’ll compare this alongside fixed-rate products, USDA, KHC, and other Kentucky down payment assistance programs to make sure the ARM structure actually makes sense for your timeline.
Comparing This Program to Other Kentucky Down Payment Assistance Options
Kentucky homebuyers have several choices when it comes to down payment help, including KHC down payment assistance, USDA Rural Housing loans with zero down, FHA loans with gifts, and VA loans for eligible veterans.
The 3.5% new construction DPA option can be a strong fit when:
- The home is a completed new construction property in Kentucky.
- The buyer needs help with both down payment and closing costs.
- The property or buyer does not fit USDA or certain KHC income or location limits.
- The builder prefers financing solutions instead of permanent price reductions.
In many cases, the best approach is to review your file and then compare this program side-by-side with USDA zero-down financing, KHC down payment assistance, and the credit score thresholds discussed in the Kentucky mortgage credit score guide.
Steps to Get Started with a Kentucky New Construction DPA Loan
- Schedule a quick call or apply online. We review your credit, income, and goals.
- Run the numbers. I compare this 3.5% DPA option with KHC, USDA, FHA, VA, and conventional choices so you see the full picture.
- Lock in the strategy. We decide how to allocate the assistance between down payment, costs, and possible buydowns.
- Coordinate with your builder. I work directly with the builder or agent so everyone understands timelines and requirements.
- Close on your new home. You sign, move in, and start enjoying your Kentucky new construction home.
If you want to do some homework first, review the credit score and approval checklist and the overview of KHC loan programs for Kentucky homebuyers.
About Joel Lobb, Louisville Mortgage Broker
I have helped Kentucky homebuyers since 2001 with FHA, VA, USDA, KHC, and conventional mortgage programs. My focus is on providing clear, honest guidance so you understand your options and choose the loan that fits your budget and long-term plan.
Whether you are a first-time buyer, a move-up buyer, or a builder looking for reliable Louisville builder financing support, I am available to walk you through every step. That includes reviewing USDA Rural Housing loans, KHC down payment assistance, and other structures side-by-side with this new construction DPA option.
Call or Text: 502-905-3708
Email: kentuckyloan@gmail.com
Website: www.mylouisvillekentuckymortgage.com
Request a Personalized New Construction Quote
Every buyer and property are different. The best way to see if this Kentucky new construction DPA program is right for you is to run a custom quote based on your credit, income, and the specific home you are building or buying.
We’ll look at this program, compare it to USDA zero-down loans in Kentucky, and to KHC down payment assistance, and make sure your credit profile lines up with the guidance in the credit score resource page.
Next Step: Call or text 502-905-3708, or use the contact form on my website to get started.
Important Disclosures
This is not a commitment to lend or an offer to extend credit. All loans are subject to credit approval, underwriting guidelines, and program availability. Interest rates, program terms, and eligibility guidelines may change without notice. Not all borrowers will qualify for all programs described. The 5/1 ARM and 3.5% down payment assistance program described on this page is for completed new construction homes only and may not be available in all areas of Kentucky.
Please contact Joel Lobb for the most current information and to receive a customized quote based on your specific situation.
Equal Housing Lender
NMLS #57916 | Company NMLS #1738461
