2025 Guide: How to Buy Your First Home in Louisville, Kentucky with Zero Down Payment

Are you dreaming of buying your first home in Louisville, Kentucky but worried about the down payment? You are not alone — and the great news is, in 2025, you have several powerful options that can get you into a home with little or even zero money out of pocket.

Let's dive into your updated 2025 roadmap to first-time homeownership!

Step 1: Understand Your Financial Picture

Before you even start browsing listings, you need to know your numbers.

• Credit Score: Most zero-down and low-down programs require a minimum 580-640 credit score.

  • Example: If your credit score is 620, you may qualify for both USDA and VA loans.

• Income Verification: Stable employment history (2 years preferred).

  • Example: Working at the same company for two years with steady income is ideal.

• Debt-to-Income Ratio: Ideally below 45%, though flexibility exists with strong compensating factors.

  • Example: If you earn $4,000 monthly gross income, your total monthly debts (including your new mortgage) should stay under $1,800.

Tip: Pull a full tri-merge mortgage credit report through your lender — consumer sites like Credit Karma aren't accurate for home loan approvals.

Step 2: Get Pre-Approved by a Kentucky Mortgage Specialist

Pre-approval is essential. It tells you what you can afford and positions you as a serious buyer when you find "the one."

Partner with a lender experienced in:

• USDA Rural Loans

• VA Home Loans

• FHA + Kentucky Housing Corporation (KHC) Down Payment Assistance (DAP)

Pre-Approval Includes:

• Hard pull credit review

  • Example: Lender checks your true mortgage scores, not your app scores. 

  • Fico versions 2,4,5  are used for Mortgage Loan Scores from Experian, Equifax, Transunion

• Verified income review

  • Example: Reviewing pay stubs, W-2s, and/or tax returns.

• Issued Pre-Approval Letter to submit with offers

  • Example: "Pre-Approved for up to $250,000 FHA Loan with KHC DAP assistance."

Step 3: Explore Zero-Down and Low-Down Payment Options

Here are the top first-time buyer options for Louisville and all of Kentucky in 2025:

 USDA Rural Development Loans

• 100% financing (zero down)

• Targeted for suburban and rural areas

• Income limits apply (based on county)

• Typically need 640+ credit

Example: Buying a home in Shelbyville or Mount Washington using USDA financing.

VA Loans (Veterans, Active Military, Some Spouses)

• 100% financing

• No mortgage insurance (PMI)

• Flexible credit requirements (typically 620+)

• Must obtain Certificate of Eligibility (COE)

Example: An Army veteran purchasing a Louisville home with zero down and no monthly PMI.

 FHA Loan + Kentucky Housing DAP

• FHA requires 3.5% down normally — but DAP can cover this entirely.

• Credit score as low as 580 with flexible underwriting.

• Combine DAP for little to zero out of pocket.

Example: Buyer with 600 credit score using FHA financing and $10,000 DAP to cover down payment and closing costs.

 Welcome Home Grant (Limited Funds!)

• 20,000 grants (amount varies) changes every year. This year 20k

• Offered through Federal Home Loan Bank

• Must apply early — funds often run out quickly in Spring!

Example: A first-time buyer securing a $20,000 grant toward their Louisville home purchase in March.

Step 4: Secure Down Payment and Closing Cost Help

Even if you have zero down payment, you still need to address closing costs. Here’s how:

Kentucky Housing Corporation (KHC) DAP

• Up to $10,000 assistance (subject to change)

• 10-year loan term

• Low fixed interest rate

• Can cover down payment and/or closing costs

Example: Borrower uses KHC DAP to cover both the 3.5% FHA down payment and $2,000 of closing costs.

Seller Concessions

• Negotiate seller to pay a portion of your closing costs (common with VA, USDA, and FHA offers).

Example: Seller agrees to pay $5,000 of buyer’s closing costs, reducing buyer’s cash to close.

Step 5: Find Your Home and Close the Deal

Work with an experienced realtor who understands:

• USDA property eligibility

• VA minimum property requirements (MPRs)

• FHA appraisal standards

Your lender will order the appraisal, finalize underwriting, and set your closing date!

Example: After inspections and appraisal, your lender clears you to close, and you get the keys to your new home within 30-45 days of contract acceptance.

Ready to Buy Your First Home in Kentucky?

Don't let the fear of a down payment hold you back. There are real, proven options to help you succeed.

Let's get you pre-approved and on the path to homeownership today!

📞 Call/Text: (502) 905-3708
📧 Email: kentuckyloan@gmail.com
📚 Visit: www.mylouisvillekentuckymortgage.com

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Disclaimer: Program guidelines, income limits, grant amounts, and availability are subject to change without notice. All loans subject to underwriting and credit approval. NMLS #57916 | Equal Housing Lender.

 

How to Qualify For A Kentucky Mortgage Loan

Using a Pastor / Minister’s housing Clergy Income for A Mortgage Loan Approval

Using a Pastor / Minister’s housing allowance to qualify for a mortgage

Member of the Clergy Income for A Mortgage Loan Approval 

Where a borrower is a member of the clergy, all of the following will be required to document income: 1) Most recent year full tax return, 2) Most recent pay stubs, 3) W-2s, 4) Contract from the church to determine benefits.

The IRS looks at the housing allowance portion of a pastor’s income as an exclusion from income.  Therefore the housing allowance is not reported on the personal tax returns as taxable income.  Even though it is not reported on the tax returns, a pastor’s housing allowance can be used in qualifying for a mortgage loan to purchase or refinance a home. 

 As long as we can document the receipt of the housing income through a signed letter from the church/employer stating the actual breakdown of the pay and by providing copies of the checks received, we should be able to count the housing allowance as income.  Some employers will even put the housing allowance on the w2 as a nontaxable amount which makes it even easier. 

See guidelines below:

Housing or Parsonage Allowance A non-military housing or parsonage allowance may be considered qualifying income, if the income has been received for the most recent 12 months. The housing allowance may not be used to offset the monthly housing payment. All of the following income documentation is required:

 Written Verification of Employment, letter from employer, or paystubs reflecting the amount of the housing or parsonage allowance. 

 Terms under which the housing or parsonage allowance is paid.

 Proof of receipt of housing allowance for most recent 12 months. 

Housing or Parsonage allowance may be considered as qualifying income if there is documentation that the income has been received for the most recent 12 months and the allowance is likely to continue for the next three years. 

Member of the Clergy Income for A Mortgage Loan Approval 

Where a borrower is a member of the clergy, all of the following will be required to document income: 1) Most recent year full tax return, 2) Most recent pay stubs, 3) W-2s, 4) Contract from the church to determine benefits.

The IRS looks at the housing allowance portion of a pastor’s income as an exclusion from income.  Therefore the housing allowance is not reported on the personal tax returns as taxable income.  Even though it is not reported on the tax returns, a pastor’s housing allowance can be used in qualifying for a mortgage loan to purchase or refinance a home. 

 As long as we can document the receipt of the housing income through a signed letter from the church/employer stating the actual breakdown of the pay and by providing copies of the checks received, we should be able to count the housing allowance as income.  Some employers will even put the housing allowance on the w2 as a nontaxable amount which makes it even easier. 

See guidelines below:

Housing or Parsonage Allowance A non-military housing or parsonage allowance may be considered qualifying income, if the income has been received for the most recent 12 months. The housing allowance may not be used to offset the monthly housing payment. All of the following income documentation is required:

 Written Verification of Employment, letter from employer, or paystubs reflecting the amount of the housing or parsonage allowance. 

 Terms under which the housing or parsonage allowance is paid.

 Proof of receipt of housing allowance for most recent 12 months. 

Housing or Parsonage allowance may be considered as qualifying income if there is documentation that the income has been received for the most recent 12 months and the allowance is likely to continue for the next three years. 

1 -  Email - kentuckyloan@gmail.com 

2.   Call/Text - 502-905-3708

Joel Lobb
Mortgage Loan Officer - Expert on Kentucky Mortgage Loans

 Website: www.mylouisvillekentuckymortgage.com
 Address: 911 Barret Ave., Louisville, KY 40204

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Evo Mortgage
Company NMLS# 1738461
Personal NMLS# 57916

How to Get a Mortgage in Kentucky with Variable Income

 

How to Get a Mortgage in Kentucky with Variable Income (FHA, VA, USDA & Fannie Mae Guide)

Are you a commission-based, gig economy, or hourly wage worker wondering if your fluctuating income can get you approved for a mortgage in Kentucky? The answer is YES—with the right documentation and strategy. Here’s what you need to know to get approved with variable income for FHA, VA, USDA, and Fannie Mae loans in 2025.

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📌 What is Variable Income?

Variable income includes pay that changes monthly—like bonuses, overtime, tips, commissions, or self-employed earnings. Mortgage lenders require a history of income and proof that it's likely to continue.

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🏠 FHA Mortgage Guidelines

FHA loan Kentucky | FHA variable income | Kentucky mortgage approval

• 2 years of variable income history
• Income consistency required
• Documentation: W-2s, pay stubs, full tax returns

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🇺🇸 VA Loan Guidelines

VA loan Kentucky | veteran mortgage KY | variable income VA loan

• 1-2 years of consistent income
• Must pass residual income test
• Docs: Tax returns, LES, employer verification

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🌾 USDA Loan Guidelines

USDA loan Kentucky | rural mortgage KY | USDA income rules

• 12-24 months income history
• Stability must be documented
• Docs: 2 years of tax returns, YTD paystubs, VOE

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🏡 Fannie Mae (Conventional Loan) Guidelines

Conventional mortgage KY | Fannie Mae variable income

• Minimum 12 months history (24 preferred)
• Trending analysis required
• Docs: Pay stubs, tax returns, income verification

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📄 Tips for Getting Approved with Variable Income

• File taxes on time
• Keep consistent, accurate income records
• Avoid long income gaps
• Request an income stability letter from your employer

Bonus: Include side income if documented.

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👨‍💼 Advice from Kentucky Mortgage Expert – Joel Lobb

“As a Kentucky mortgage broker, I’ve helped hundreds of buyers get approved using commissions, bonuses, and gig work. The key is documentation and program selection.”

📞 (502) 905-3708
📧 kentuckyloan@gmail.com
🌐 www.mylouisvillekentuckymortgage.com
NMLS #57916 | Equal Housing Lender

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📊 Infographics & Visuals

• FHA Income Approval Chart
• VA Residual Income Chart
• USDA Income Verification Infographic
• Fannie Mae Trending Income Graphic

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🎯 Call to Action: Ready to Get Pre-Approved?

Let Joel Lobb and his team help you qualify using your variable income.

• ✔️ Free Pre-Approval
• ✔️ Same-Day Responses
• ✔️ Zero-Down Loan Options

Contact Joel Today:
www.mylouisvillekentuckymortgage.com
NMLS #57916 | www.nmlsconsumeraccess.org

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How to Buy a Home in Kentucky with No Money Down: A Step-by-Step Guide for First-Time Buyer

Dreaming of buying a home in Kentucky but worried about the down payment? You're not alone. Fortunately, several loan programs and grants are available that can help you purchase a home with zero money down. This guide walks you through the most effective ways to make that dream a reality in 2025.

✅ Zero Down Payment Options for Kentucky Buyers

🏡 USDA Loans

• No down payment required
• Must buy in eligible rural areas
• Income limits apply (115% of median income)
• Credit score typically 640+

🎖️ VA Loans

• 100% financing for veterans, service members, and eligible spouses
• No mortgage insurance
• Lenient credit requirements (often 620+)

🏠 FHA Loans + Down Payment Assistance (DAP)

• Minimum 3.5% down, often covered by assistance programs
• Minimum credit score: 580
• Accepted grants and gift funds to reduce upfront costs

🏦 Kentucky Housing Corporation (KHC) Assistance

💰 Down Payment Assistance Program (DAP)

• Up to $10,000 in assistance
• 10-year term at 3.75% interest
• Used with FHA, VA, USDA, and Conventional loans

🎉 Welcome Home Grant

• Available annually for qualified buyers
• Free grant money to cover closing and down payment costs

📝 Steps to Qualify for No Money Down Programs

1. Check Eligibility: Income, location, military status, credit score
2. Get Pre-Approved: Start with a trusted mortgage lender
3. Take a Homebuyer Education Course: Required for most grants
4. Apply for Assistance: Work with your lender to package loans + grants
5. Find a Home: Ensure the property qualifies for the loan program

📊 No Money Down Steps

❓ Frequently Asked Questions

Can I use multiple programs together?

Yes! You can layer KHC down payment assistance with FHA, VA, or USDA loans to cover costs.

What if I have bad credit?

FHA loans allow scores as low as 580 with 3.5% down. With a 620+ score, you can qualify for most no-money-down options.

Do I have to repay down payment assistance?

Some are forgivable if you stay in the home a certain number of years; others require repayment. Your lender will guide you.

📞 Call to Action

Ready to buy your Kentucky home with no money down? Contact Joel Lobb, Mortgage Loan Officer, for a free consultation and same-day pre-approval.

📧 kentuckyloan@gmail.com
📞 Call/Text: (502) 905-3708
🌐 www.mylouisvillekentuckymortgage.com

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NMLS #57916 | Equal Housing Lender | Subject to credit approval and program availability. Not a commitment to lend. Visit nmlsconsumeraccess.org for more information.

Mortgage Options in Kentucky for Buyers with 580 Credit Scores

Can You Buy a Home with a Credit Score of 580?

Buying a home with a credit score of 580 can feel daunting, but FHA loans and state-specific programs in Kentucky offer viable pathways to homeownership. This note covers eligibility criteria, credit improvement strategies, income and debt-to-income (DTI) ratios, down payment requirements, and available assistance, with a focus on practical steps and resources.

FHA Loan Eligibility and Credit Score Requirements

FHA loans, backed by the Federal Housing Administration, are designed to assist buyers with lower credit scores, making them a popular choice for first-time homebuyers or those with financial challenges. According to recent guidelines, the minimum credit score for FHA loans is 500, but the terms vary based on the score:

• Credit Score 500-579: Buyers can qualify with a 10% down payment. This higher down payment reflects the increased risk for lenders, but it remains accessible for those with limited credit history or past financial difficulties.
• Credit Score 580 and Above: Buyers can qualify with a down payment as low as 3.5%, significantly reducing the upfront cost and making homeownership more achievable.

FHA Loan Credit Score Requirements

• 500–579 Credit Score: Requires a 10% down payment
  (Example: $20,000 down on a $200,000 home)
• 580+ Credit Score: Eligible for just a 3.5% down payment
  (Only $7,000 down on the same $200,000 home)

Note: Lenders may impose stricter "overlays"—so shop around for FHA-approved lenders willing to go below 580.

 

Need Help Getting Approved for an FHA Loan in Kentucky?

As an experienced mortgage loan officer specializing in FHA loans for Kentucky first-time homebuyers, I’m here to guide you every step of the way.

Contact Me Today:

• 📧 Email: kentuckyloan@gmail.com
• 📞 Call/Text: 502-905-3708
• 🌐 Website: www.mylouisvillekentuckymortgage.com

Joel Lobb
Mortgage Loan Officer – Expert on Kentucky Mortgage Loans

Website: www.mylouisvillekentuckymortgage.com
Address: 911 Barret Ave., Louisville, KY 40204

---

Evo Mortgage
Company NMLS# 1738461
Personal NMLS# 57916

Equal Housing Lender

www.nmlsconsumeraccess.org

For assistance with Kentucky mortgage loans, reach out via email, call, or text Joel Lobb directly.

How to get approved for a Kentucky Mortgage Loan with Bad Credit

There are several mortgage loans programs for Kentucky Homebuyers that may have had experienced bad credit in the past. 

Below is a summary of programs that borrowers can use to get approved for a mortgage loan with bad credit..

 FHA loans in Kentucky, FHA will go down to a 500 minimum credit score with at least 10% down payment or 10% equity on a refinance. 

If your scores is over 580, then you could use a FHA loan in Kentucky to with just 3.5% down payment or refinance with that much equity. 

If it turns out that you have a 620 credit score or higher, you can look at doing an Conventional loan with just 3 to 5% down payment. Typically on conventional loans if your score is below 660, you would need 5% down payment.

If you happen to be a Veteran and qualify for a Kentucky VA loan,  you could possibly get approved for a VA loan with no minimum credit score. 

In reality, it is very difficult to get for a VA loan with a score below 560 to 580 range, with most VA lenders requiring a 620 credit score. 

If you are looking to purchase a home in a rural area, you can look at doing a Kentucky USDA loan because they have no minimum credit score but most lenders will want a 620 to 640 credit score. 

Kentucky FHA Loan are your best bet you have a lower fico score or credit score.

FHA loans are good for home buyers with lower credit scores and no much down, or with down payment assistance grants. FHA will allow for grants, gifts, for their 3.5% minimum investment and will go down to a 580 credit score. You can go down to a 500 credit score potentially with a 10% down payment. 

1 -  Email - kentuckyloan@gmail.com 

2.   Call/Text - 502-905-3708

Joel Lobb
Mortgage Loan Officer - Expert on Kentucky Mortgage Loans

 Website: www.mylouisvillekentuckymortgage.com
 Address: 911 Barret Ave., Louisville, KY 40204

---

Evo Mortgage
Company NMLS# 1738461
Personal NMLS# 57916

For assistance with Kentucky mortgage loans, reach out via email, call, or text Joel Lobb directly.

How to Get Approved for a Kentucky Mortgage Loan with Bad Credit.

Buying a home in Kentucky with bad credit can be done with the right mortgage loan officer to guide you through the process.

 There are various loan programs, including Kentucky FHA, VA, USDA, and conventional mortgages, have different criteria and offer opportunities for individuals with less-than-perfect credit to become homeowners. 

In this blog post, we'll explore the options available for Kentucky homebuyers with bad credit and provide tips on improving your credit scores to enhance your chances of loan approval to buy your first house in Kentucky

Understanding Your Credit Score or Fico Score 

Your credit score is a critical factor in determining your eligibility for a mortgage loan. It reflects your creditworthiness and helps lenders assess the risk of lending you money.

Credit scores range from 300 to 850, with higher scores indicating better credit health. Scores below 620 are generally considered "bad" credit, but don't be discouraged. There are still options available.

Loan Options for Kentucky Homebuyers with Bad Credit

Kentucky FHA Loans

Federal Housing Administration (FHA) loans are popular among Kentucky first-time homebuyers and those with bad credit. They offer more lenient credit requirements and lower down payment options.

• Credit Score Requirement: As low as 500 with a 10% down payment, or 580 with a 3.5% down payment.
• Benefits: Flexible credit requirements, low down payment, and competitive interest rates.
• Drawbacks: Mortgage insurance premiums (MIP) are required, which increase the overall cost of the loan. A lot of sellers view FHA buyers as weaker buyers vs Conventional loans and may hold that against you if you are making an offer with a FHA loan. 
• Bankruptcy: 2 years removed from Chapter 7 and 1 year in Chapter 13 pan with on time pay history and trustee approval is possible for FHA loans

Kentucky VA Loans

Veterans Affairs (VA) loans are available to veterans, active-duty service members, and eligible surviving spouses. These loans offer significant benefits, including no down payment and no private mortgage insurance (PMI).

• Credit Score Requirement: No official minimum, but most lenders prefer a score of at least 580 to 620.
• Benefits: No down payment, no PMI, competitive interest rates.
• Drawbacks: VA funding fee, which can be financed into the loan or waived for some eligible veterans. 
• Bankruptcy: 2 years removed from Chapter 7 and 1 year in Chapter 13 pan with on time pay history and trustee approval is possible for FHA loans

Kentucky USDA Loans

The United States Department of Agriculture (USDA) loans are designed for rural and suburban homebuyers with low to moderate incomes. These loans offer zero down payment options and low-interest rates.

• Credit Score Requirement: Generally, 640, but exceptions can be made for lower scores with compensating factors down to a 580 credit score. 
• Benefits: No down payment, low mortgage insurance, competitive interest rates.
• Drawbacks: Geographic and income restrictions apply and harder to qualify for vs FHA loans and VA loans when it comes to government backedmortgae loans. Much more restrictive on debt to income ratio and income limits for household see here 

Kentucky Conventional Mortgage Loans

Conventional loans are not backed by the government and typically require higher credit scores. However, there are programs available for those with lower scores.

• Credit Score Requirement: Generally, at least 620. Typically 720 or higher preferred--
• Benefits: Potentially lower overall costs compared to government-backed loans if you have a higher credit score and substantial down payment. No maximum purchase price or loan amount-Mortgage insurance not for life of loan and can recast your mortgage loan and remove mi unlike government backed loans via FHA, VA USDA ---Can be done anywhere and no income limits
• Drawbacks: Stricter credit requirements, higher down payments, and PMI required for down payments less than 20%. 

Joel Lobb
Mortgage Loan Officer

Individual NMLS ID #57916

Text/call:      502-905-3708

email:          kentuckyloan@gmail.com

https://www.mylouisvillekentuckymortgage.com/

Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant's eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over the life of a loan. Reduction in payments may reflect a longer loan term. Terms of any loan may be subject to payment of points and fees by the applicant Equal Opportunity Lender. NMLS#57916 http://www.nmlsconsumeraccess.org/