Buyer financing
Do I need 20% down to buy a house?
No — and believing you do is the most expensive misunderstanding in home buying. It keeps people renting for years longer than they need to. Both Kentucky and Indiana run programs that help with the down payment and the closing costs, and more people qualify for them than think they do.
How much do I actually need to put down?
Far less than 20 percent. FHA loans start at 3.5% down, some conventional programs start at 3%, and VA loans are zero down if you are eligible. On top of whatever your loan requires, both Kentucky and Indiana run assistance programs that help with the rest.
What down payment assistance does Kentucky offer?
Kentucky Housing Corporation lends up to $12,500 toward your down payment and your closing costs. The minimum is $1,000 and it is issued in $100 increments, so you can take only what you need. It requires a KHC first mortgage, which means not every lender can offer it.
What Kentucky's assistance costs each month
| If you borrow | You pay | Over 15 years you repay |
|---|---|---|
| $5,000 | $38.89 a month | $7,000 |
| $10,000 | $77.78 a month | $14,001 |
| $12,500 | $97.23 a month | $17,501 |
Calculated from Kentucky Housing's stated rate of 4.75% over a 15-year term. Illustration, not a loan offer.
Who qualifies for Kentucky's down payment assistance?
Far more people than expect to. Kentucky Housing runs two kinds of loan, and the income limit depends on which one your lender puts you in. On the standard route the limit starts at $147,350 and repeat buyers qualify, not only first-time buyers.
| Loan type | Household income limit | First-time buyer? |
|---|---|---|
| Standard KHC loans — the most common route | $147,350 as a statewide starting point, rising to $195,650 in the highest-cost counties | No — repeat buyers qualify |
| Bond-funded loans — lower interest rate, tighter rules | $85,080 to $134,160 for a one or two person household, varying by county and household size | Yes, unless the home is in a designated target area |
There is a third income tier, roughly $57,520 to $87,200 by county, but it attaches to one specific conventional product rather than to assistance in general. Your lender will tell you if it applies to you. The purchase price limit is $566,354 on both.
Credit is the real gate, not income: 620 for FHA, VA and USDA loans, and 660 for the conventional options. If you are sitting at 590 or 600 today, you are usually a few months of focused work away — not years, and not never.
What down payment assistance does Indiana offer?
The Indiana Housing and Community Development Authority runs the state's programs, and two of them include down payment assistance. First Step lends 5% of the purchase price and is for first-time buyers, with exceptions for designated target areas and for verified military status. Next Home lends a smaller percentage and is open to first-time and repeat buyers alike.
What Indiana's 5% is worth
| Purchase price | First Step assistance at 5% |
|---|---|
| $200,000 | $10,000 |
| $300,000 | $15,000 |
| $400,000 | $20,000 |
Indiana sets its credit score minimum, its debt-to-income limit, and its county income and price limits with its participating lenders rather than publishing them. That is four answers that come from a phone call rather than a website — including mine.
Do I have to pay down payment assistance back?
Yes, in both states. Kentucky's is a second mortgage at 4.75% over fifteen years. Indiana calls its programs non-forgivable, which means the same thing: borrowed money with a payment attached, not a gift. You should know that before you apply, not after. It is still usually worth it — money that stays in your account after closing is what covers the water heater that fails in month three.
What is the first step?
A conversation with a lender approved by the program in the state you are buying in, because assistance requires one of their first mortgages and not every lender can offer it. Ask them to confirm the current income limit for your county and where your credit actually stands. Then start looking at houses — knowing your real number first is what keeps you from falling for something you cannot finance.
Buying on either side of the river?
I am licensed in Kentucky and in Indiana, so this is one conversation rather than two agents and two answers. Call or text 859.684.9995 — there is nothing to sign to have it.
Sources: Kentucky Housing Corporation (kyhousing.org) and Indiana Housing and Community Development Authority (in.gov/ihcda), September 2026. Program terms, income limits and purchase price limits change — an approved lender in the relevant state confirms current figures for your situation. Dollar and payment figures on this page are illustrations, not loan offers. Alexandria Grayson is a licensed REALTOR, not a lender or mortgage broker, and does not originate loans.