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Now that the housing market is finally calming down after the pandemic, buyers are facing a new challenge: Soaring mortgage rates.
In Kentucky, the average 30-year fixed mortgage rate is 6.92% — up from 2021's historic lows. This raises the average monthly mortgage payment to $1,044 (assuming a 20% down payment at the median home value).
But buying a home in Kentucky is still possible, even for first-time home buyers. Many markets are seeing frequent price drops and fewer offers, giving motivated buyers the upper hand in negotiating for the best price.
In this guide, you’ll learn how to buy a house in Kentucky with confidence no matter what the market brings. Learn why you can trust our advice.
Whether you're actively house hunting or just starting to browse homes on Zillow, it's never too early to find a great local realtor to guide you on your search. An experienced agent can help you navigate a tricky housing market, explore your financial options, and negotiate the best deal possible.
Best of all, hiring a real estate agent comes at no extra cost to you — since the seller typically pays both their listing agent and your buyer's agent.
Ready to find a great local realtor, but not sure where to start? The best (and easiest!) option is to try a free agent matching service like Semya-Moya. Answer a few simple questions about your home buying goals, and Clever will match you with hand-picked agents from Keller Williams, RE/MAX, and other top brokerages in your area. Find a top local agent and make your home buying dreams a reality today!
Step 1: Save for a down payment
🔑 Key takeaway:
Your down payment can be less than 20% of the purchase price — $39,531 for the typical home in Kentucky — but you'll have to purchase mortgage insurance and pay more interest over the life of your loan.
Your down payment is the first part of your home's purchase price that you pay at closing. Your mortgage lender will pay the remaining balance.
Typically, mortgage lenders in Kentucky want you to contribute 20% of the purchase price as a down payment. That would be $39,531 for a $197,657 home — the typical home value in Kentucky.
However, you have options to lower your down payment amount.
Government backed loans, like VA and FHA loans, allow you to contribute 0% and 3.5% of your home's purchase price respectively. Even conventional loans allow for down payments as low as 3-5% (though the minimum varies by lender).
But making a down payment of less than 20% comes with some risks.
First, because you're borrowing more money, you'll have a higher monthly payment and pay more in interest over the life of your loan.
Second, you may have to purchase mortgage insurance.
Conventional loans require private mortgage insurance (PMI) until your loan balance reaches 80% of the purchase price. FHA loans, on the other hand, require a mortgage insurance premium (MIP) for the life of your loans.
Mortgage insurance costs around 1% of your mortgage balance annually. However, rates vary based on your down payment and credit score. Typically, your mortgage insurance payment is added to your mortgage payment each month.
VA loans don't charge mortgage insurance. Instead, you'll pay a VA loan funding fee at closing, which can range from 1.4% to 3.6% of the purchase price.
Kentucky down payment assistance programs
The state offers numerous down payment assistance (DPA) programs to help first-time and low-income buyers afford a home. Here are just a few DPA resources in Kentucky that you may be eligible for:
KHC Regular DPA
The loan may provide up to $6,000 (in $100 increments) and is to be paid back over 10 years with a 5.5% interest rate. To qualify, a borrower's maximum home purchase price cannot exceed $346,644.
KHC Affordable DPA
KHC's second DPA program, the Affordable DPA program, offers a loan of up to $6,000 to eligible buyers with a KHC first mortgage. This loan is to be repaid over 10 years with a 1% interest rate.
Unlike the Regular DPA program, this loan is only eligible for those who meet certain income limits. You can check those limits here.
Louisville Metro Down Payment Assistance Program
Louisville’s Department of Housing and Community Development offers a DPA program for low-income homebuyers within the Louisville metro area. Financial assistance is available as a partially forgivable loan with 0% interest. The maximum amount given can't exceed 20% of the purchase price, but the specific amount provided is based on each borrower's needs.
This program is available to first-time and repeat homebuyers. To qualify, a borrower's household income must be at or below 80% of the area median income.
U.S. Department of Housing and Urban Development
HUD provides a list of alternative programs in Kentucky here.
Step 2: Find a great real estate agent in Kentucky
🔑 Key takeaway:
Interview multiple agents to find one who knows your target neighborhoods, has experience in your price range, and communicates well.
Your real estate agent will be your main ally during the home buying process. Besides finding and showing you properties, your agent will help you make offers, negotiate contracts, and navigate the closing process. Plus, they can recommend other service providers like title companies and inspectors to help you buy your home in Kentucky.
Don't rush into choosing an agent. Instead, take the time to research and interview multiple real estate agents who have experience in the neighborhoods you're interested in. You should pay attention to a realtor's:
- Years of experience
- Number of transactions in the last year (the more the better!)
- Experience in your price range
- Overall review score
- Individual reviews and complaints
Finding a great real estate agent shouldn't be complicated. Let Semya-Moya do the hard part and match you with experienced local realtors who are experts in your market.
Enter your zip code below to compare top agents from trusted brands like Keller Williams, Berkshire Hathaway, and Coldwell Banker, then choose the best fit for you. It's 100% free, and there's no obligation.
Step 3: Get preapproved for a mortgage
🔑 Key takeaway:
Once you're preapproved for a mortgage, it's imperative that your financial situation doesn't change. If your credit drops, it can derail the process and keep you from closing on your house.
Here are some easy ways to ensure your credit doesn't change after you receive your preapproval letter:
- Avoid opening new credit accounts
- Don't close any accounts that have been open for a long time
- Make all of your credit card payments on time
» LEARN MORE: What factors do mortgage lenders consider?
A mortgage preapproval letter is an offer to lend you up to a certain amount of money to purchase a home. It shows sellers that you are a serious buyer who is financially qualified to make an offer on a home.
Most sellers in Kentucky will require preapproval before showing you their home.
You don't have to decide on one lender right now. In fact, you should compare interest rates and preapproval amounts from several lenders to make sure you're getting the absolute best terms when you buy your Kentucky home.
Step 4: Choose the right location
🔑 Key takeaway:
Search for neighborhoods where:
- Home prices are within your price range
- Home values are on the rise
- The local amenities support your lifestyle
Currently, the typical home value in Kentucky is $197,657, but don't worry if that doesn't perfectly match your budget. Home prices vary dramatically from city to city and even from neighborhood to neighborhood!
Also, look at past home value trends. This will give you an idea of how much your home's value could go up over the next few years.
To give you an idea of how appreciation could impact what your house is worth in the future, consider these examples from three neighborhoods in Louisville:
Home value appreciation in Louisville
Step 5: Start house hunting in Kentucky
🔑 Key takeaway:
Listing prices continue to climb up in Kentucky, but the influx of inventory is keeping the market pretty neutral. This leaves buyers with a lot of options to choose from — which is where the experience of a skilled real estate agent will come in handy. They can help you find the listings that will check your boxes and may surprise you with a deal that fits well within your budget.
Searching for homes in Kentucky is the fun part of the home buying process! You'll get to look at a variety of homes and discover what you really want in a home.
Make a list of everything you want in a home and prioritize them. At the top of the list should be the items that are most important to you. This will help you separate your "must-haves" from your "nice-to-haves."
Your agent can help you understand if your wants are realistic for your budget and favorite neighborhoods or if you need to rethink what you're looking for.
Look at current housing inventory
The timing of your house hunt in Kentucky can have a big impact on your number of options. For example, in Kentucky, June has historically seen the most homes for sale. Searching in this season could give you more options and a greater likelihood of finding your dream home.
On the other hand, December gives you the fewest choices in Kentucky. Historically, there are 42.3% fewer homes for sale than during Kentucky's peak season.
Housing inventory in Kentucky by season
Step 6: Make an offer
🔑 Key takeaway:
Trends vary wildly across Kentucky — great listings in urban areas are being snatched quickly, while other properties in the market are sitting longer than usual — so work with your realtor to understand how to approach making an offer. Their knowledge of the local market will help dictate how strong an offer you should make while still keeping the price fair to you.
Once you find a Kentucky house you love, it's time to make an offer. Your real estate agent will help you write a compelling offer that gives you the best shot of convincing the homeowner to sell to you.
Currently, in Kentucky, homes stay on the market for 70 days before going under contract. However, every market goes through seasonal changes. During busier months, homes get snatched up more quickly than others.
Historically, Kentucky homes sell fastest in August, where the average property is only on the market for 59 days. If your home search falls around this time, you should be prepared to move quickly and potentially make offers on several homes before yours is accepted.
On the other hand, if you buy in February, you have a bit more time to search. Homes typically stay on the market 21 days longer than Kentucky's annual average.
Average time homes spend on market in Kentucky
» LEARN MORE: What should an offer include?
Step 7: Inspections and appraisals
Inspections and appraisals are an opportunity for you to better evaluate the home's condition and value before officially purchasing it. You may have an opportunity after this step to renegotiate the terms of your contract with the seller if something unexpected pops up.
🔑 Key takeaway:
- Inspections: A licensed professional checks the house for any unseen, unexpected, or potential issues.
- Appraisals: An appraiser hired by your lender examines the house to determine how much it's worth.
Home inspections in Kentucky
Having your Kentucky home inspected by a licensed inspector gives you peace of mind about the condition of the property before you commit thousands of dollars to purchase it.
Your inspector should check out the following parts of the property:
- Electrical system
- HVAC system
If the home has a septic system, you should also pay for a septic inspection to make sure it doesn't have any problems that wouldn't be covered in a typical home inspection.
Kentucky requires sellers to disclose any known issues to potential buyers, but a general home inspection may not reveal everything wrong with a property. As such, it’s best to go beyond the general inspection and have more specialized tests done before closing.
Here are a few highly recommended tests to complete before closing:
- Radon testing: While it's not required by law, the state of Kentucky strongly recommends testing homes for radon. Elevated levels of radon can cause health hazards, and radon can enter a home undetected. If a seller hasn't completed a radon test in the past year, you should consider doing one. The Kentucky Department for Public Health offers free radon testing kits, which you can order here.
- Termite and pest inspection: Termites and other pests spread quickly and can be difficult to spot. Even if a seller doesn't notice any on the property, it's best to get a professional inspection done to treat and prevent any potential infestations.
Appraisals determine the value of the property. If you're using a mortgage to buy your new home, your lender will order an appraisal to make sure the home is worth the money that it's loaning you.
Step 8: Close on your new home!
🔑 Key takeaway:
Before you close on your new home, you and your agent will do a final walkthrough of the property to ensure that it's still in the expected condition.
On closing day, you’ll meet at the title company to complete two final tasks before becoming a new Kentucky homeowner. First, you'll need to review and sign several legal documents to finalize the title transfer. Next, you'll have to pay your closing costs.
Take your time to read through each document before signing. It's recommended to go through the paperwork before the closing date to save time and ensure that you fully understand each page.
A few important legal documents will include:
- Your final loan application
- The deed
- The mortgage promissory note
Once the paperwork is finished, you'll pay your closing costs. The title company will collect the total amount you owe and then distribute the funds to the correct recipients.
Homebuyers can generally divide their closing costs into four categories:
- Lender fees: Fees paid to your lender for originating and underwriting your loan.
- Title and escrow charges: Fees paid to the title company for facilitating the closing process, conducting title searches, and providing title insurance.
- Prepaid costs: Ongoing homeownership costs, such as property taxes and homeowners insurance. Some lenders require new buyers to pay for these expenses up front.
- Other closing costs: Miscellaneous expenses that vary by homebuyer. Some common costs that fall into this category include home inspection fees, natural disaster certification fees, and real estate attorney fees.
Buyers in Kentucky typically pay 3–5% of the purchase price in closing costs. For a $197,700 home — the typical home value in Kentucky — that's between $5,931 and $9,885!
Ready to make your home-buying dreams a reality? The first step is to find a top local realtor who's an expert negotiator with proven experience in your market.
Enter your zip code below to compare the best agents from trusted brands like Keller Williams, Berkshire Hathaway, and Coldwell Banker, then choose the best fit for you. It's 100% free and there's no obligation.
Frequently asked questions
Do I need a real estate attorney in Kentucky?
In Kentucky it's required for a real estate attorney to be part of every home sale. While your agent can make recommendations, remember you get to make the final decision. Interview lawyers before hiring them to make sure they have the experience you need.
What are the steps to buy a house in Kentucky?
- Save for down payment
- Get pre-approved for a mortgage
- Choose your preferred Kentucky neighborhoods
- Partner with the right real estate agent in Kentucky
- Go house hunting
- Make a strong offer
- Inspections and appraisals
- Do a final walkthrough and close
Does Kentucky have a first time home buyer program?
No, but the Kentucky Housing Corporation offers several fixed-rate loans and the option to apply for down payment assistance. Eligible homebuyers can receive down payment assistance of up to $6,000 if they meet the income and home purchase price limits for their county.
Why trust us?
Semya-Moya is a free agent-matching service that has helped more than 82,000 people buy and sell homes. We partner with over 2,700 top-performing agents nationwide at national brokers including Keller Williams, RE/MAX, Century 21, and more. We also help buyers save money with cash back after closing — no strings attached.
We’ve earned buyers’ trust with a rating of 4.9 out of 5 starts on Trustpilot and over 1,800 customer reviews.
Our team of industry-leading researchers are committed to making homeownership more accessible by educating buyers through guides like this one. We've spent thousands of hours analyzing publicly available data, surveying consumers, and interviewing industry experts. Our research has been featured in The New York Times, Business Insider, Inman, Housing Wire, and many more.