Kentucky First-Time Home Buyer Grants 2026: KHC, Louisville & Lexington Programs
KHC DPA: up to $10,000 at 1% · Louisville: $20K forgivable · Lexington GRASP: $25,000 · MCC: $2,000/yr tax credit
Kentucky median home price: $215,000 · 620+ credit · Most affordable first-time buyer market in the US
🏡 Why Kentucky Is One of America's Best States for First-Time Buyers
$215,000
Statewide Median Price
2nd most affordable in US
$25,000
Max DPA Available
Lexington GRASP program
$2,000/yr
MCC Tax Credit
Every year you own
Kentucky DPA Programs Compared (2026)
| Program | Amount | Repayment | Income Limit | Area |
|---|---|---|---|---|
| KHC Regular DPA | Up to $10,000 | 3.75%, 10 years | County limits | Statewide |
| KHC Affordable DPA | Up to $10,000 | 1%, 10 years | ≤80% AMI | Statewide |
| KHC Welcome Home | $5,000 grant | None! (Grant) | County limits | Targeted counties |
| Louisville Metro DPA | Up to $20,000 | Forgivable (5yr) | ≤80% AMI | Jefferson County |
| Lexington GRASP | Up to $25,000 | Deferred (0%) | ≤80% AMI | Lexington city |
| KY MCC Tax Credit | $2,000/yr credit | N/A (tax credit) | KHC limits | Statewide |
Kentucky Mortgage Credit Certificate (MCC): Save $2,000/Year on Taxes
The Kentucky MCC gives first-time buyers a 25% federal income tax credit on their annual mortgage interest — every single year they live in the home. This is not a deduction (which just reduces taxable income) — it's a dollar-for-dollar tax credit that directly reduces your tax bill.
📊 MCC Real Example: $250K Kentucky Home at 6.15%
- • Year 1 mortgage interest paid: ~$15,100
- • MCC credit (25%): $2,000 (capped at $2,000/year)
- • Over 10 years: $20,000 in tax savings
- • Remaining 75% of interest still fully deductible if you itemize
MCC stacks with KHC DPA programs. Apply through a KHC-approved lender at closing.
KHC Income & Purchase Price Limits by County (2026)
| County / City | Income (1–2 HH) | Income (3+ HH) | Max Purchase Price |
|---|---|---|---|
| Jefferson Co. (Louisville) | $105,000 | $120,750 | $367,700 |
| Fayette Co. (Lexington) | $98,400 | $113,160 | $367,700 |
| Boone/Kenton (NKY) | $102,000 | $117,300 | $367,700 |
| Warren Co. (Bowling Green) | $88,800 | $102,120 | $367,700 |
| Daviess Co. (Owensboro) | $82,400 | $94,760 | $367,700 |
| McCracken Co. (Paducah) | $80,000 | $92,000 | $367,700 |
| Targeted Areas (all KY) | Above limits OK | Above limits OK | $449,300 |
| Rural KY Counties | $75,000–$85,000 | $86,000–$97,750 | $367,700 |
Kentucky First-Time Buyer FAQs
What first-time home buyer grants are available in Kentucky in 2026?
Kentucky first-time home buyer grants and programs in 2026: (1) KHC Regular Down Payment Assistance Program — up to $10,000 at 3.75% interest, 10-year term (not a grant — a second mortgage). (2) KHC Affordable Down Payment Assistance — up to $10,000 at 1% interest, 10 years, for buyers earning ≤80% AMI. (3) KHC Welcome Home Program — $5,000 grant (no repayment) for targeted counties and neighborhoods. (4) Louisville Metro DPA — up to $20,000 forgivable for Louisville/Jefferson County buyers. (5) Lexington GRASP Program — up to $25,000 for Lexington city limits (income ≤80% AMI). (6) Kentucky Homebuyer Tax Credit (MCC) — 25% of mortgage interest as federal tax credit annually (up to $2,000/year). All require 620+ credit and homebuyer education.
How does the Kentucky Housing Corporation (KHC) program work?
KHC (Kentucky Housing Corporation) is the state's housing finance agency. In 2026, KHC offers: First mortgage: 30-year fixed at below-market rate (typically 0.25%–0.50% below conventional). Down payment assistance: $10,000 second mortgage at 1%–3.75% interest, 10-year repayment term (NOT forgivable — you must repay it). Loan types: FHA, VA, USDA, conventional. Requirements: first-time buyer (no ownership in 3 years), 620+ credit, income ≤$105,000–$115,000 depending on county, purchase price ≤$367,700 (non-targeted) or $449,300 (targeted areas). Apply through a KHC-approved lender, not directly through KHC.
What is the income limit for Kentucky first-time home buyer programs?
Kentucky KHC income limits for 2026 (1–2 person / 3+ person households): Jefferson County (Louisville): $105,000 / $120,750. Fayette County (Lexington): $98,400 / $113,160. Boone/Kenton/Campbell (NKY/Cincinnati): $102,000 / $117,300. Warren County (Bowling Green): $88,800 / $102,120. McCracken County (Paducah): $80,000 / $92,000. Most rural KY counties: $75,000–$85,000 / $86,000–$97,750. MCC (Mortgage Credit Certificate) has slightly different limits — check kyhousing.org for your county's exact figures.
What is the purchase price limit for KHC loans in Kentucky?
KHC 2026 purchase price limits: Non-targeted areas (most of KY): $367,700. Targeted areas (economically distressed counties — buyers don't need to be first-time buyers here): $449,300. Louisville MSA and Lexington MSA: $367,700. New construction: same limits. Kentucky's affordable median home price ($215,000 statewide, $285,000 Louisville) means the $367,700 limit covers virtually all first-time buyer purchases in the state — unlike California or New York where limits are frequently exceeded.
Is Kentucky a good state for first-time home buyers?
Kentucky is one of the most affordable states for first-time buyers in 2026: Statewide median home price: ~$215,000 (among lowest in the US). No major housing market overheating like FL, TX, or CA. Strong DPA programs (up to $25,000 in Lexington). MCC tax credit worth $2,000/year. Low property taxes (0.83% average statewide). Affordable cities: Louisville ($285K median), Lexington ($310K), Bowling Green ($240K), Owensboro ($195K), Covington/NKY ($265K). Cons: Some rural areas have limited inventory. Economic diversity is lower than coastal states. For a first-time buyer, $215K median + $10K–$25K DPA means many KY buyers can purchase with $5,000–$8,000 out of pocket.
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Meet Sarah
Senior Mortgage Advisor & VA Loan Specialist
Sarah Mitchell brings over 12 years of mortgage industry expertise, specializing in VA loans and first-time homebuyer programs. As a certified NMLS professional, she has helped thousands of veterans and military families achieve homeownership through specialized loan programs. Her deep understanding of VA benefits and down payment assistance programs makes her a trusted advisor for service members transitioning to civilian life.
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Helped 2,500+ veterans secure home loans