The Kentucky real estate market is hot. We’re talking blazing, double-digit-price-increase, year-over-year kind of hot. The median sales price in Kentucky for single-family homes is up $20K – from $179,000 to $199,000. One more amazing stat: pending home sales transactions were up nearly 50% as of April 2021. (Source: KYRealtors.com.)
Don’t Be Afraid
Low inventory and a fast-paced economic Kentucky recovery is part of the story. Low mortgage rates continue to drive the buying frenzy. Being a first-time homebuyer is scary for many – even in a buyer’s market. But don’t let this seller’s market frighten you away. There are two things you can do to strengthen your position. First, find a great Realtor who knows the area you’re looking to buy in. Second, take advantage of first-time homebuyer programs in Kentucky.
First-Time Homebuyer Programs
There are a few options for first-time homebuyers. They include programs targeted to Kentucky buyers and federal programs through the Federal Housing Authority (FHA), the Veterans Administration (VA), and the United States Department of Agriculture (USDA).
Kentucky Housing Corporation (KHC)
There are first-time homebuyer programs that are specific to those buying property in Kentucky. Here are a few programs available through the Kentucky Housing Corporation (KHC):
KHC Conventional Preferred
The KHC Conventional Preferred program does require a 3% down payment. However, assistance is available to help you come up with the cash. Other requirements to be eligible for the 30-year, fixed-rate mortgage are a minimum credit score of 660 and an income level 80% or below the area’s median income (based on county data). Obviously, the property must be located in Kentucky. You must live in it (not buy it as an investment property). That’s why duplexes are not eligible. It must be a single-family home on a permanent foundation with a sales price not to exceed $327,334.
KHC Conventional Preferred Plus 80
The KHC Conventional Preferred Plus 80 program also offers a 30-year, fixed-rate mortgage. However, the income limit is higher, between $114,450 and $150,025. All the other guidelines are the same as the KHC Conventional Preferred program.
KHC Regular Down Payment Assistance Program (DAP)
This is a loan in addition to the mortgage. You can borrow up to $6,000 repayable over 10 years.
Federal First-time Homebuyer Programs
There are three federal agencies that offer first-time homebuyer assistance:
FHA
An FHA loan requires a 3.5% down payment. However, assistance with the down payment may be available to you. You will need a minimum credit score of 620.
VA
Veterans and active military members may be eligible for a VA loan. You must serve a minimum amount of time, depending on your status and whether you are serving in wartime or peacetime. The spouse of a service member who has died in the line of duty may also be eligible for a VA loan. You must still meet income and credit requirements.
USDA
If you are buying a property in a rural area, you may qualify for a USDA mortgage. You must have a credit score of at least 620. Only specific rural area properties are eligible. In some cases, no down payment is required.
Mortgage Insurance
All of these programs require you to pay private mortgage insurance (PMI) in addition to principal, interest, taxes and insurance (PITI). The purpose of PMI is to protect the lender in case you default on the loan. Buyers making a low (or no) down payment are considered a higher risk. However, PMI must be removed when you are halfway through your loan. For example, 15 years into a 30-year mortgage. Or when the mortgage balance is 78% of the original purchase price. Talk to your lender to understand the complete terms of PMI.
More First-time Homebuyer Help
There are even more programs available. The U.S. Department of Housing and Urban Development (HUD) offers the Good Neighbor Next Door program for firefighters, emergency medical technicians (EMTs), law enforcement and teachers. An experienced Realtor can connect you with a great mortgage broker to help you navigate the array of first-time homebuyer programs – and see if you qualify.
The Key to Buying in a Seller’s Market
The most important tool a first-time homebuyer can have in their toolbox is patience. It takes time to find the right home at the right price – for you. Be mentally prepared to make multiple offers. The competition is stiff right now. But low-mortgage rates and the chance to own your own home in the great state of Kentucky make it worth it.
It’s Personal
Buying your home is a critical life decision for most people. I believe in the unique, personal nature of real estate. I will carefully guide you through the process of buying your home – or any other real estate investment. Feel free to contact me anytime, whether it is to get started on helping you realize your goals and dreams, or just to ask a question. I would welcome the opportunity to make a difference for you. Please email me at pthessen1@gmail.com or call 270-745-9900.
-by Perry Thessen
