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Down Payment Assistance Quick Guide
Did you know that you don't need 20% down to buy a home in Louisville? Between FHA loans, KHC assistance, and Louisville Metro's DPA program, you could be closer to homeownership than you think. Here's everything you need to know.
What's Inside
1. Program Overview
Here's a quick comparison of the three main down payment assistance options available to Louisville homebuyers:
๐๏ธ Louisville Metro DPA
- 0% interest, partially forgivable loan
- Income limit: 80% AMI
- Must be primary residence
- 5-10 year affordability period
๐ KHC Regular DAP
- Repayable second mortgage
- Fixed 4.75% rate, 15-year term
- Must use KHC first mortgage
- Min credit score: 620 (FHA/VA/USDA) or 660 (Conventional)
๐ฆ FHA Loan
- Credit score 580+ = 3.5% down
- Credit score 500-579 = 10% down
- 2026 limit: $541,287 in KY
- Down payment can be gifted
๐ก Bottom Line: You don't need 20% down. Between these programs, many buyers can get into a home with $500-$5,000 out of pocket.
2. Louisville Metro Down Payment Assistance
The City of Louisville offers a powerful down payment assistance program for low- to moderate-income homebuyers purchasing a home in Jefferson County. [citation:1]
Key Program Details
- Maximum assistance: Up to $30,000 (20% of purchase price, capped at 20% LTV) [citation:1]
- Interest rate: 0% โ no interest accrues [citation:1]
- Loan structure: Partially forgivable second mortgage [citation:1]
- Affordability period: 5-10 years (depending on assistance amount) [citation:1]
- Forgiveness: 50% of the loan is forgiven after the affordability period; remaining balance due upon sale [citation:1]
- Not limited to first-time buyers: But you cannot currently own a home [citation:8]
Income Limits (80% AMI โ 2026)
| Household Size | Max Annual Income |
|---|---|
| 1 Person | $55,450 |
| 2 People | $63,400 |
| 3 People | $71,300 |
| 4 People | $79,200 |
| 5 People | $85,550 |
| 6 People | $91,900 |
| 7 People | $98,250 |
| 8 People | $104,550 |
Source: Louisville Metro Housing [citation:1]
Purchase Price Caps
- Existing homes (single-family): $260,000 [citation:1]
- New construction (single-family): $331,000 [citation:1]
Credit & Other Requirements
- No unpaid collections or charge-offs [citation:4]
- Bankruptcy must be discharged at least 1 year before applying [citation:12]
- Medical collections allowed up to $10,000 [citation:12]
- Minimum buyer contribution: $500 plus recording fee [citation:12]
- Must complete 6-hour HUD-approved homebuyer counseling [citation:1]
- If married, both spouses must apply as co-applicants [citation:12]
๐ Important: The program reopens for applications August 17, 2026. Applications will be accepted as long as funding is available โ so apply early! [citation:1]
3. KHC Down Payment Assistance
The Kentucky Housing Corporation (KHC) offers down payment assistance for eligible Kentucky buyers using a KHC first mortgage. [citation:10]
Key Program Details
- Maximum assistance: Up to $12,500 [citation:10]
- Interest rate: Fixed 4.75% [citation:10]
- Repayment term: 15 years [citation:10]
- Loan structure: Repayable second mortgage (not a grant) [citation:10]
- Must be used with: A KHC first mortgage [citation:10]
- Available with: KHC FHA, VA, RHS/USDA, and Conventional loans [citation:10]
Credit Score Requirements
- KHC FHA / VA / USDA: Minimum 620 credit score [citation:10]
- KHC Conventional: Minimum 660 credit score [citation:10]
โ ๏ธ Important: Don't confuse FHA agency rules with KHC rules. Standalone FHA may allow lower scores, but KHC requires 620 minimum for all government loan programs. [citation:10]
4. KHC Shared Appreciation Mortgage (SAM)
NEW for 2026: KHC launched Kentucky's first Shared Appreciation Mortgage program โ an innovative option for first-time buyers purchasing new construction homes. [citation:6]
How It Works
- Loan amount: Up to 25% of the home's purchase price or appraised value [citation:6]
- Interest rate: 0% โ no monthly payments [citation:6]
- No payments until the property is sold, refinanced, or the first mortgage is paid off [citation:6]
- Repayment: Original loan amount + KHC's proportionate share of any appreciation [citation:6]
- Eligibility: First-time homebuyers purchasing new construction homes [citation:6]
๐ Why it matters: The SAM program helps buyers get into a new home with no upfront cash for a down payment, while keeping monthly payments lower. It's especially valuable for buyers who can afford a mortgage but can't save for a down payment. [citation:6]
For more information, visit kyhousing.org/programs/sam
5. FHA Loans
FHA loans are insured by the Federal Housing Administration and offer flexible qualification requirements for buyers. [citation:5]
Key FHA Details for 2026
- Minimum down payment: 3.5% (with credit score 580+) [citation:5]
- Credit score 500-579: 10% down payment required [citation:5]
- 2026 FHA loan limit (KY): $541,287 for a single-family home (all 120 counties) [citation:5]
- Debt-to-income ratio: Preferred at or below 43% [citation:5]
- Down payment gifts: Allowed from eligible donors [citation:5]
- Property types: Single-family homes, FHA-approved condos, 2-4 unit properties (if you occupy one) [citation:5]
- Must occupy: Primary residence within 60 days of closing [citation:5]
๐ฐ FHA vs. Conventional: FHA is often easier to qualify for with lower credit scores and smaller down payments. However, FHA requires both upfront and annual mortgage insurance premiums. [citation:5]
6. Income Limits Comparison
Here's how the income limits compare between Louisville Metro DPA and KHC programs. [citation:1]
| Household Size | Louisville Metro DPA (80% AMI) |
|---|---|
| 1 Person | $55,450 |
| 2 People | $63,400 |
| 3 People | $71,300 |
| 4 People | $79,200 |
| 5 People | $85,550 |
| 6 People | $91,900 |
| 7 People | $98,250 |
| 8 People | $104,550 |
Source: Louisville Metro Housing โ 80% AMI limits for 2026 [citation:1]
KHC income limits vary by county and program. Check with your KHC-approved lender for specific limits.
7. How to Apply โ Step by Step
Follow these steps to apply for down payment assistance through Louisville Metro's DPA program: [citation:1]
- Complete homebuyer counseling โ Take a 6-hour minimum HUD-approved homebuyer education course. If applying with a co-applicant, both must complete the course. Married couples must apply as co-applicants. [citation:1]
- Get mortgage pre-approval โ Select a lender and realtor to help you through the process. This must be done before your application is approved. [citation:1]
- Apply to the Down Payment Assistance Program โ Submit your application through the Metro portal. Allow 45 days for Metro review and verification. [citation:1]
- Receive eligibility letter โ You'll get a letter stating your entrance or denial into the program. An eligibility letter does not guarantee funding will be available when you find a home. [citation:1]
- Shop for a home โ Work with your realtor to find an eligible home within the purchase price caps. [citation:1]
- Submit Home Purchase Packet โ Upon an accepted sales contract, submit your executed sales contract, primary loan documents, and required inspection results to Metro. [citation:1]
- Metro underwrites and approves โ Metro staff underwrites the loan and presents to the Case Review Board. You'll receive a conditional commitment letter stating your assistance amount. [citation:1]
- Pass inspection โ The property must pass a Louisville Metro Housing inspection and a private inspection. Homes in flood plains are not eligible. [citation:12]
- Close and fund โ Once all conditions are met, you close on your new home! [citation:1]
โฑ๏ธ Timing matters: Your contract should allow enough time for Metro processing. Incomplete files do not move forward, and late extensions can jeopardize your deal. [citation:4]
8. Common Questions & Who to Call
Frequently Asked Questions
Is Metro DPA a grant?
Many people call it a grant, but it's typically structured as a 0% interest second mortgage. A portion may be forgiven after the affordability period, and the remaining balance is usually repaid from net proceeds if you sell. [citation:4]
Can I combine Metro DPA with FHA, VA, or KHC?
Often yes, but the loan must be structured so first mortgage rules and Metro DPA rules align. This is a file-structure issue โ get it right from the start. [citation:4]
What are the most common reasons people get denied?
Income over the limit, unresolved collections/charge-offs, insufficient bank funds, incomplete documents, and contract timelines that don't allow Metro processing. [citation:4]
How long does the process take?
Plan for counseling + application + 45 days for Metro eligibility processing. After you go under contract, additional Metro processing is required. Your contract should allow enough time. [citation:1]
Do I need to be a first-time homebuyer?
No for Louisville Metro DPA โ but you cannot currently own a home. KHC SAM is limited to first-time buyers. [citation:8]
Who to Call
๐ BOTTOM LINE: You don't need 20% down. Between FHA, KHC, and Louisville Metro, help is available โ and I'm here to guide you through every step.
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