Preparing to buy a house? Call us for a complimentary mortgage consultation.
Compare mortgage rates in Kentucky.
Key Points
• Kentucky’s mortgage rates follow the national average very closely, although the state’s overall cost of living is about 15 points below average.
• Mortgage interest rates are influenced by economic factors such as inflation and the Federal Reserve’s monetary policy but also by personal financial factors such as credit score.
• Higher mortgage rates result in higher monthly payments, making it more challenging to afford a home, while lower rates lead to lower payments and increased affordability.
• Kentucky offers various mortgage types, including fixed-rate mortgages, adjustable-rate mortgages (ARMs), FHA loans, VA loans, USDA loans, and jumbo loans.
• Homebuyers in Kentucky can access resources such as first-time homebuyer programs, down payment assistance, tools and calculators, and refinancing options.
Introduction to Mortgage Interest Rates
Kentucky’s real estate market offers a plethora of opportunities for prospective homebuyers. However, navigating the complexities of mortgage rates can be a daunting task. This comprehensive guide aims to simplify the process by providing an in-depth analysis of mortgage rates in Kentucky, encompassing historical trends, influential factors, and strategies for securing competitive rates. Understanding these factors is crucial for homebuyers seeking to make informed decisions.
Where Mortgage Rates Come From
The Federal Reserve, often referred to as the Fed, plays a pivotal role in shaping mortgage rates. While mortgage rates are not directly tied to Fed rates, they tend to follow similar economic trends. The Fed sets short-term interest rates, which serve as benchmarks for other interest rates, including those for home loans. In essence, when the Fed’s interest rate is high, there is a strong likelihood that mortgage rates will follow suit.
How Interest Rates Affect Home Affordability
Contrary to common perception, mortgage rates have a profound impact on home affordability. Even seemingly minor fluctuations in interest rates can significantly influence affordability, particularly for those who are living on a tight budget. An increase of one percentage point in the interest rate on a $360,000 mortgage can add more than $200 to the monthly payment and more than $80,000 to the total interest paid over the life of the loan.
Prospective homebuyers must carefully assess their financial situation and determine the maximum mortgage payment they can comfortably afford before embarking on the homebuying journey.
Recommended: Average Monthly Expenses for One Person
Should Homebuyers Wait for Interest Rates to Drop?
A common dilemma faced by homebuyers is whether to buy or hold off. Yes, interest rates can fluctuate over time, but it is essential to consider the broader financial implications of waiting. For example, if home prices are rising, any savings in rate may be outweighed. Attempting to time the market and waiting for the “perfect” moment can result in missing out on favorable opportunities.
Secondly, homeowners have the option to undertake a mortgage refinance in the future if interest rates decrease or if something in their financial profile becomes more favorable (their credit score increases noticeably, for example). Refinancing may allow homeowners to secure a lower interest rate, potentially reducing their monthly payments and overall borrowing costs.
Kentucky Mortgage Rate Trends
Examining historical mortgage rate trends can provide valuable insights. Mortgage rates in Kentucky have tended to hover right around the national average. (The Federal Housing Finance Agency stopped compiling state averages after 2018.) Here are some historic numbers:
| Year | Kentucky Rate | U.S. Rate |
|---|---|---|
| 2000 | 8.29 | 8.14 |
| 2001 | 7.00 | 7.03 |
| 2002 | 6.49 | 6.62 |
| 2003 | 5.68 | 5.83 |
| 2004 | 5.71 | 5.95 |
| 2005 | 5.94 | 6.00 |
| 2006 | 6.62 | 6.60 |
| 2007 | 6.48 | 6.44 |
| 2008 | 6.12 | 6.09 |
| 2009 | 5.09 | 5.06 |
| 2010 | 4.84 | 4.84 |
| 2011 | 4.53 | 4.66 |
| 2012 | 3.67 | 3.74 |
| 2013 | 3.86 | 3.92 |
| 2014 | 4.18 | 4.24 |
| 2015 | 3.85 | 3.91 |
| 2016 | 3.77 | 3.72 |
| 2017 | 4.00 | 4.03 |
| 2018 | 4.65 | 4.57 |
Historical U.S. Mortgage Rates
To gain a broader perspective, it is beneficial to take a look at historical U.S. mortgage rates over several decades. This historical perspective offers reassurance that current rates are not exceptionally high. While there have been ups and downs over time, rates now are not as high as they were in the 1980s and 1990s.
Factors Affecting Mortgage Rates in Kentucky
A multitude of factors influence mortgage rates in Kentucky and across the nation. Some of these factors are rooted in economic conditions, while others are directly influenced by the homebuyer’s financial profile.
Economic Factors
Economic factors play a significant role in shaping mortgage rates. These factors include:
• The Fed: As noted above, the Federal Reserve’s decisions regarding the federal funds rate have a direct impact on mortgage rates. When the Fed raises the federal funds rate, mortgage rates tend to follow suit, and vice versa.
• Inflation: Inflation can erode the value of money, prompting lenders to increase interest rates to maintain profit margins. This relationship between inflation and mortgage rates highlights the importance of monitoring economic indicators when planning for a mortgage.
• Unemployment: As unemployment rises, the Fed often lowers its rate — so unemployment has an indirect effect on rates. (Low unemployment also often leads to increased demand for housing, which may drive up home prices.)
Consumer Factors
In addition to economic factors, several consumer-specific factors influence mortgage rates. These factors include:
• Credit score: A strong credit score demonstrates a history of responsible borrowing and financial management, making borrowers more attractive to lenders and typically qualifying them for lower mortgage interest rates.
• Down payment: The size of the down payment can impact what mortgage interest rate a borrower is offered. A larger down payment means the borrower will have more equity in the home and the lender will have less risk. Borrowers who make a larger down payment may qualify for a lower mortgage interest rate.
• Income and assets: A larger down payment reduces the loan amount required, lowering the lender’s risk. As a result, borrowers who can make a substantial down payment often secure lower mortgage interest rates.
• Type of mortgage loan: The type of mortgage loan selected can also impact the interest rate. Adjustable-rate mortgages (ARMs) often start with lower initial rates compared to fixed-rate mortgages.
Types of Mortgages Available in Kentucky
Kentucky offers a diverse range of mortgage types to cater to the needs of different homebuyers, including both conventional and government-backed loans.
Fixed-Rate Mortgage
Fixed-rate mortgages provide peace of mind with an interest rate that remains constant for the entire loan term. This stability allows homeowners to easily budget their monthly payments and plan for the future. Fixed-rate mortgages are available in terms of 10, 15, 20, or 30 years, providing borrowers with options to tailor the loan to their financial circumstances.
Adjustable-Rate Mortgage (ARM)
ARMs offer an initial period of lower interest rates, followed by periodic adjustments based on market conditions. This feature can be beneficial for borrowers who plan to sell the property before the fixed-rate period ends. However, it’s important to carefully consider the potential for future interest rate increases and ensure that the monthly payments remain affordable even under less favorable market conditions.
FHA Loans
FHA loans, insured by the Federal Housing Administration, are designed to make homeownership more accessible to borrowers with limited financial resources or less-than-perfect credit.
FHA loans typically require a smaller down payment compared to conventional loans, making them an attractive option for first-time homebuyers or those with limited savings.
VA Loans
VA loans are exclusively available to eligible veterans, active-duty military members, Reserve and National Guard members, and surviving spouses. These loans offer competitive interest rates, but one of the primary benefits of VA loans is that they do not require a down payment. If you think your service record might entitle you to a VA loan, the next step is to apply for a Certificate of Eligibility (COE).
USDA Loans
USDA loans, backed by the U.S. Department of Agriculture, are specifically designed for borrowers whose income falls below a designated threshold and who are seeking to purchase a home in a rural area. These loans offer favorable terms and flexible eligibility requirements, including the option for many borrowers to skip the down payment.
Jumbo Loans
Jumbo loans are specialized mortgages designed for borrowers seeking to finance properties that exceed the conforming loan limits set by the Federal Housing Finance Administration. These loans typically require a larger down payment and may have stricter eligibility requirements. In Kentucky, a mortgage larger than $766,550 will need to be a jumbo loan.
Popular Places to Get a Mortgage in Kentucky
Securing a mortgage often depends on choosing a location where home prices are affordable. Factors such as cost of living, job opportunities, and housing inventory play a significant role in determining the overall attractiveness of a location for homebuyers.
When you compare Kentucky’s costs to the cost of living in the U.S. as a whole, the Bluegrass State is 15 points lower than the national average, which should make it a relatively affordable place to purchase a home. Here are some towns that stand out as attractive options for homebuyers, as well as some of the pricier spots to undertake a home search.
Least Expensive Locations
Some of the most affordable places to get a mortgage in Kentucky include:
• Henderson: This is one of the more affordable towns in an already highly affordable state. It’s also a suburb of a good-sized city: Evansville, Indiana.
• Bowling Green: This city has one of the lower cost-of-living ratings in Kentucky. The average home value here is $274,555, according to Zillow.
• Elizabethtown: This affordable town of about 32,000 people, known as E’town, has an average home value slightly lower than Bowling Green.
• Richmond: The home of Eastern Kentucky University has a cost of living on the lower side and an average home value of $270,679.
• Somerset: With an average home value of $184,716, Somerset is certainly one of the most affordable spots to put down roots.
Most Expensive Locations
The most expensive places to get a mortgage in Kentucky, due to their higher cost of living and higher home prices, tend to be larger cities.
• Lexington: Though the average home value here is $302,558 and rising, this is still below the national average value.
• Georgetown: This quaint town near Lexington has a similar average home value to the larger city: $307,320.
• Fort Thomas: The average Fort Thomas, KY home value is $334,155, a higher price that reflects the town’s proximity to Cincinnati, Ohio.
• Louisville: The state’s largest city has competitive home values but its cost of living is among the highest in the state.
Recommended: The Best Affordable Places in the U.S.
Tips for Securing a Competitive Mortgage Rate in Kentucky
Obtaining a competitive mortgage rate can significantly reduce the overall cost of homeownership. Here are some tips to help you secure the best possible rate in Kentucky:
Compare Interest Rates and Fees
Take the time to compare interest rates from multiple lenders — but don’t forget to also look at fees. This comparison shopping can help you identify the most competitive offers and avoid unnecessary costs.
Get Preapproved
Going through the mortgage preapproval process and obtaining a letter stating you are preapproved for a mortgage strengthens your position as a buyer and allows you to move quickly when you find the right property. Preapproval also provides a clearer understanding of your borrowing power and budget. If you’re worried about interest rates rising, you can pay a fee to the lender to lock in your rate for a defined period of time while you solidify your home choices.
Kentucky Mortgage Resources
Kentucky offers various resources and programs to assist homebuyers, particularly first-time buyers and those with limited financial resources. These resources include:
First-Time Homebuyer Programs
Kentucky offers several programs specifically designed to help if you’re buying your first home. These programs may provide financial assistance, education, and counseling to help those who qualify as a first-time homebuyer overcome the challenges of homeownership. The Kentucky Housing Corporation offers a below-market, 30-year fixed interest rate to first-time or repeat homebuyers through its Mortgage Revenue Bond (MRB) program. This program has both income and home price limits, and must be used on a principal residence.
Down Payment Assistance
Down payment assistance programs can help homebuyers overcome the hurdle of saving for a down payment. In Kentucky, assistance is available in the form of a 10-year loan of up to $10,000 repayable in $100 increments for qualified borrowers.
Tools & Calculators
Various online tools and calculators are available to help homebuyers estimate their monthly mortgage payments, compare loan options, and determine their affordability.
Run the numbers on your home loan.
-
Mortgage calculator
Punch in your home loan amount and a new interest rate, and we’ll estimate your payoff date.
-
Down payment calculator
Enter a few details about your home loan and we’ll provide your monthly mortgage payment.
-
Home affordability calculator
Provide us with a few details and see how much you can afford to spend on a home purchase.
Using the free calculators is for informational purposes only, does not constitute an offer to receive a loan, and will not solicit a loan offer. Any payments shown depend on the accuracy of the information provided.
Refinancing Options in Kentucky
Homeowners in Kentucky may explore refinancing options to secure a lower interest rate or improve their loan terms. Refinancing can potentially reduce monthly payments, shorten the loan term, or access cash-out options. In addition to refinancing offered through banks and other conventional lenders, there are government programs available:
• The FHA Streamline Refinance program offers a simplified and streamlined process for FHA-insured homeowners to refinance their mortgages without the need for a new appraisal or full credit check.
• The Interest-Rate Reduction Refinance Loan (IRRRL) is specifically designed for VA loan holders and allows them to refinance their mortgages to obtain a lower interest rate without the need for a new appraisal or full credit check.
Closing Costs, Taxes, and Fees in Kentucky
When purchasing a home in Kentucky, buyers can expect to pay certain closing costs, taxes, and fees. These costs may include fees for the lender, title company, appraisal, and other services related to the home purchase. The value of the property and its location can impact the amount of closing costs incurred by the buyer.
The Takeaway
Kentucky’s mortgage landscape offers a range of options for homebuyers and the state as a whole is a relatively affordable place to undertake a home search. By staying informed about current mortgage rates, exploring assistance programs, and carefully considering refinancing options, individuals can make strategic decisions that align with their financial goals and enjoy successful homeownership in the land of thoroughbreds and bourbon.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.FAQ
Will mortgage rates drop in Kentucky?
Predicting future mortgage rate movements is challenging due to the influence of various economic factors. Homebuyers can keep an eye on economic indicators such as the Federal Reserve’s rate to try to get a sense of where the numbers are headed.
Will mortgage rates ever go back to normal?
The definition of “normal” mortgage rates varies over time. Historical data shows that mortgage rates have fluctuated over the years, influenced by economic conditions and market dynamics. What feels normal in one decade might feel unnaturally high (or low) in another.
Will Kentucky home prices ever drop?
Real estate market trends are influenced by a combination of economic factors, including housing demand, and new home construction. Predicting future home price movements is complex and uncertain. Your best bet is to ask a local real estate agent who is watching the area market closely to give you an informal forecast.
Is it a good time to buy a house in Kentucky?
When you consider that even in Kentucky’s more costly home markets, the average home value is noticeably below the national average, you might decide that now is a good time to buy in Kentucky. But determining the right time to buy a house involves considering personal financial readiness and long-term financial goals as well. Homebuyers should assess their job stability, income, savings, and housing needs to make an informed decision.
How to lock in a mortgage rate?
Locking in a mortgage rate involves securing a commitment from a lender to provide a specific interest rate for a certain period. It is sometimes necessary to pay a fee to the lender to obtain a lock for 30, 60, or even 120 days.
How do mortgage interest rates work?
Mortgage interest rates are determined by a complex interplay of economic factors, including the Federal Reserve’s monetary policy, inflation, and unemployment rate. But the rate any individual homebuyer is offered is also dependent on their personal financial circumstances.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SOHL-Q324-072
More home loan resources.
-
First-Time Homebuyer Guide
-
First-Time Homebuyer Programs and Loans
-
Mortgage Preapproval Process