With a cost of living much lower than the national average — and housing costs below that benchmark, as well — Kentucky can be an affordable place to call home. Best-known for the Kentucky Derby, it boasts a solid economy, thanks to industries like shipping and transportation, automotive manufacturing, health care and of course, bourbon distilling.

Whether you’re looking for a home in the (relatively) big burgs of Louisville or Lexington, bucolic and historic Berea or Bardstown, or the state capital Frankfort, the Kentucky Housing Corporation might be able to help. The organization is dedicated to promoting affordable housing for both first-time and repeat homebuyers across The Bluegrass State.

Kentucky first-time homebuyer loan programs

KHC Conventional Preferred

The Kentucky Housing Corporation’s (KHC) Conventional Preferred program offers a 30-year mortgagee with a fixed interest rate. You can be a first-time homebuyer, but that isn’t required to take advantage of this program. There’s no minimum borrower contribution or reserves needed to be eligible, but you’ll need to pay for mortgage insurance, which comes at a reduced rate to make your monthly mortgage payment more affordable. Depending on the lender you work with, you might also be required to take a pre-closing education course.

• 3 percent down payment (down payment assistance available)
• 660 minimum credit score
• Maximum 40 percent to 50 percent debt-to-income (DTI) ratio, depending on loan type
• Must meet KHC income limits at or below 80 percent of the area median income (AMI), which vary according to county and range from $35,360 (Carter County) up to $67,760 (Boone, Bracken, Campbell, Gallatin, Grant, Kenton and Pendleton counties); income cap only applies to applicant, not household

Property requirements:

• Must be a single-family home, townhome, condominium or manufactured home (according to agency guidelines and must be on a permanent foundation); two-unit homes (duplexes) aren’t eligible
• Must be in Kentucky
• Must be a primary residence
• Must meet KHC purchase price limit of $349,525

KHC Conventional Preferred Plus 80

The Conventional Preferred Plus 80 program through KHC also offers a 30-year mortgage with a fixed interest rate, but standard mortgage insurance coverage is required. As with the Conventional Preferred program, you can be a first-time or repeat buyer to be eligible.

The down payment, credit score and DTI ratio requirements for the Conventional Preferred Plus 80 program are the same as the ones for the Conventional Preferred program, and the maximum purchase price is also $340,525. However, the county income limits are different and range from $131,600 to $173,425. These only apply to the applicant, not the entire household.

FHA, VA and USDA loans

Homebuyers can also obtain an FHA, VA or USDA loan with the help of KHC. These types of loans either require a low down payment or none at all, which can be ideal for first-time homebuyers especially. VA loans are only available to military members and veterans, and USDA loans are available for properties in specific rural areas. FHA loans are widely available. If obtaining one of these loans through KHC, the required minimum credit score is 620.

Kentucky down payment assistance

KHC Regular Down Payment Assistance Program (DAP)

KHC offers down payment help to borrowers through the Regular Down Payment Assistance Program (DAP), a loan of up to $10,000. The loan is repayable over 10 years at an interest rate of 3.75 percent.

The program is open to all KHC first mortgage borrowers using the same application. You can be a first-time homebuyer, but that’s not a requirement. The purchase price of your home can’t exceed $349,525, but there’s no limit on the cash reserves you can have, and your liquid assets won’t be considered when determining your eligibility.