Houses are expensive! And with affordability at record lows, buying a home is a major financial decision. While we can’t change affordability, this guide provides everything you need to know about buying a home in Kentucky, from state-specific homebuying programs to essential steps to consider along the way.
And if you use Bidly as your buyer’s agent you’ll avoid the historically high closing costs, with our average buyer saving $8,500!
Step 1: Set a Budget
Step 2: Get Pre-Approved for a Mortgage
Step 3: Identify Must-Haves, Nice-to-Haves and No-Needs
Step 4: Find an Agent You Trust
Step 5: Hunt for Houses
Step 6: Make An Offer
Step 7: Offer Accepted & Closing
Step 1: Set a Budget
It might sound obvious, but you have to decide how much you can responsibly afford. And in some cases, renting may be better than buying. Download the free rent vs buy calculator here (video walkthrough).
Generally, experts recommend spending less than 35% of your monthly income on mortgage payments.
One Kentucky homebuying program to help as you budget are Mortgage Revenue Bonds (MRB) for first-time and eligible repeat buyers. MRB lets you buy a home with a 30 year fixed interest rate with a down payment of only 3.5% if the home is under $510,939, and your credit score is 620 or better. To evaluate other programs, visit Kentucky Housing Corporation (KHC).
Other important considerations:
Debts
Existing debt may take a priority over purchasing a home. If you have significant credit debt, that typically comes with a high interest rate. Consider paying that off before saving for a down payment.
Savings & assets
Whether it’s job loss or unexpected car problems, having savings to pay for 6 months of expenses if you were to get laid off is generally wise.
Job stability
A steady income is crucial for managing your monthly mortgage payments. When evaluating your budget, consider whether any potential career changes, job instability or raises might be on the horizon.
Anticipate future expenses
Consider any upcoming life changes, such as a new car or expanding your family, and how these future expenses might impact your ability to afford your mortgage.
Ultimately, use your best judgement and decide what makes sense for your situation.
Step 2: Get Pre-Approved for a Mortgage
If you’re not buying your home in cash, which can incentivize the seller to reduce the cost, you’ll need to borrow some money.
Credit score and history
Start by checking your credit score and history with your bank or a free online service. Higher credit scores typically mean lower interest rates, which could save you hundreds of thousands of dollars over time. If your score is below 600, it may be wise to wait, six months or longer, to improve your score. You can also find lenders who specialize in working with lower credit scores here.
Financial statements
Gather essential financial documents, like your recent pay stubs, bank statements, and tax returns.
Contact a lender
You can apply at your local bank or get pre-approved from an online mortgage lender. Just as you would get multiple quotes for car repair, it’s best to shop around with multiple lenders for the best interest rate.
Step 3: Map Out a List of Must-Haves, Nice-to-Haves, and No-Needs
Map out a list of your must-haves, nice-to-haves, and no-needs, using our customizable house hunting PDF here.
This may sound simple, but it’s incredibly important. Teen daughters? Multiple bathrooms might be mandatory. Young boys? Check the yard size. Love to entertain? An open floor plan and nice kitchen may be essential. Avid gamer? Fiber internet could be a must.
From school zones to the number of bathrooms, this will help you refine your search and guide your buying decisions.
Step 4: Find an Agent You Trust
A real estate agent should guide you through the search, negotiate on your behalf, and handle paperwork, simplifying a complex process. When you close on your home they’ll be paid 3% of your home’s value for their efforts.
On a $300,000 home that’s $9,000.
At Bidly, we help you close on a home for a flat $1,000 rate, far lower than the typical 3% buyer’s agent commission. Schedule a free consultation to identify your best next step no matter where you are in the home buying process.
Step 5: Hunt for Houses
Your realtor can help identify homes that align with your must-haves, nice-to-haves, and no-needs – along with the Multiple Listing Service (MLS) which is a home listing site exclusively accessible realtors. In addition to suggestions from your realtor, you’ll probably be looking on other sites like Zillow & Realtor.com. Set up alerts or saved searches to receive notifications when homes that meet your criteria appear on the market.
When you find a home you’re interested in, first request a Seller’s Dislosure Document, where the seller discloses key details like appliance age, roof condition, and any history of basement flooding. Then, after reviewing, schedule a time to view the house in person!
Disclosure statements can vary in detail, so be sure to ask specific follow-up questions to the seller about major systems not addressed. This can help you uncover potential issues and future costs.
Step 6: Make An Offer
Market Value
Before making an offer, check neighborhood prices on Zillow and review the property’s past sale prices using the MLS or county records. Houses on the market for long periods of time may indicate overpricing or hidden issues, providing room for negotiation.
Contingencies
Contingencies are important conditions in your offer that protect your interests during the homebuying process. Key contingencies, like a home inspection and appraisal, ensure the property is in good condition and that it’s worth the price you’re offering.
Inspection
Although sellers in Kentucky must disclose major structural issues they know of, an independent inspection is a smart move. It can reveal hidden problems, giving you leverage to negotiate for repairs or adjust the price if needed.
Appraisal
Required by lenders, an appraisal ensures the property’s value aligns with your offer, protecting your investment.
Financing
Guarantees that if you are unable to borrow the money for the house you aren’t still obligated to buy it.
Plan for Closing Costs
Closing costs can be high and unexpected, covering taxes, lender, and attorney fees, etc. so budget accordingly.
Closing costs in Kentucky generally are 1%-3% of the home’s purchase price.
Clarify Inclusions
List items like appliances or fixtures in your offer to avoid post-sale surprises.
Step 7: Offer Accepted & Closing
Once your offer is accepted—congratulations!—the closing process will typically take 30-45 days.
Offer Accepted (Day 1)
Earnest Money Deposit (Day 2-3)
Home Inspection (Day 3-10)
Appraisal (Day 10-20)
Mortgage Underwriting (Day 20-30)*
Final Walkthrough (Day 30-35)
Closing (Day 35-45)
*Your lender will send you a Closing Disclosure at least three days before closing. This document outlines your loan terms and the total amount you’ll need at closing. Be sure to review it carefully, as these terms will impact you for years to come.
On closing day, remember to bring a government-issued ID, your Closing Disclosure, and proof of funds. During the meeting, you’ll sign several documents, including:
- Settlement Statement – Outlines all transaction costs.
- Mortgage Note – Your commitment to repay the loan.
- Deed of Trust – Secures the mortgage.
Once everything has been signed, and the funds have been transferred, you’ll officially own your new home!
And now on to renovations and repairs! (Enter Home Depot theme music…)
For guidance on your next steps in the home-buying process, schedule a free consultation with us.
Photo by roam in color on Unsplash.
