Kentucky Refinance Options 2026: FHA, VA, USDA and Conventional

First question: will a refinance pay off?

Divide the closing costs by your monthly savings. That’s how many months it takes to break even.

Example: $4,500 in closing costs ÷ $150 a month saved = 30 months. If you’ll keep the home longer than 2½ years, the refinance comes out ahead.

Closing costs on a refinance typically run about 2% to 5% of the loan amount, and they can often be rolled into the new loan. A lower rate isn’t the only reason to refinance, though. Removing mortgage insurance, moving from an adjustable to a fixed rate, or shortening your term can all be worth it.

Rate-and-term vs. cash-out refinance

Kentucky refinance options by loan type

FHA Streamline refinance

If you already have an FHA loan, the FHA Streamline is the simplest way to lower your rate. It typically needs no appraisal and no income verification, and there is less paperwork than a full refinance.

• Seasoning: at least 6 payments made and 210 days since your current FHA loan closed.
• Payment history: no late payments in the last 6 months, and no more than one 30-day late in the last 12.
• Net tangible benefit: the refinance has to lower your payment or move you from an adjustable to a fixed rate.
• Mortgage insurance: a new upfront MIP is charged, but you get a partial refund of your old upfront MIP if your current loan is less than 3 years old.

FHA also offers rate-and-term and cash-out refinances (cash-out up to 80% of value after 12 months of ownership). See the Kentucky FHA loan guide for current FHA guidelines.

VA IRRRL (VA streamline) and VA cash-out

Veterans with a VA loan can use the Interest Rate Reduction Refinance Loan (IRRRL) to lower the rate with no appraisal in most cases and a funding fee of just 0.5%. Veterans who receive VA disability compensation are exempt from the funding fee.

The VA cash-out refinance can go up to 100% of the home’s value, and it can also refinance an FHA or conventional loan into a VA loan to drop mortgage insurance. Full details, fees and seasoning rules are in the Kentucky VA refinance guide.

USDA Streamlined-Assist refinance

Kentucky homeowners with a USDA Guaranteed loan can refinance through the Streamlined-Assist program:

• Your current loan must be a USDA loan with 12 months of on-time payments.
• No new appraisal is required, and the home doesn’t need to be in a currently eligible USDA area.
• The new payment must be at least $50 a month lower than the old one.
• Household income must still be within the USDA income limit for your county.

USDA doesn’t allow cash-out. More on the program in the Kentucky USDA loan guide.

Conventional refinance

A conventional refinance works for any current loan type. It’s the usual choice when you want to:

• Drop FHA mortgage insurance once you have built equity.
• Take cash out up to 80% of your home’s value.
• Shorten your term to 15 or 20 years.

Expect a minimum credit score of 620 and a debt-to-income ratio generally at or below 45% to 50% (see Kentucky DTI requirements). Credit score and loan-to-value drive the price. Full requirements are in the Kentucky conventional loan guide.

Removing FHA mortgage insurance by refinancing

If your FHA loan started after June 3, 2013 with less than 10% down, you pay the annual MIP for the life of the loan. With 10% or more down, it ends after 11 years. For most FHA borrowers, the only way to stop paying it sooner is to refinance into a conventional loan.

• With 20% equity: a conventional loan has no mortgage insurance at all.
• With 5% to 19% equity: conventional PMI can still cost less than FHA MIP when your credit score is strong, and it can be cancelled later (see how PMI works).
• Rising home values help: a new appraisal may show you already have more equity than you think.

Kentucky refinance FAQs

How soon can I refinance after buying a home in Kentucky?

For an FHA Streamline or VA IRRRL, you need 6 payments made and 210 days since your last closing. A USDA Streamlined-Assist needs 12 months of on-time payments. Most conventional rate-and-term refinances have no waiting period, and cash-out refinances generally need 12 months.

Is it worth refinancing to lower my rate by 1%?

Often, but run the break-even math: closing costs divided by monthly savings. If you will keep the home longer than the break-even point, the refinance pays off.

Can I refinance with a lower credit score?

FHA Streamline and VA IRRRL refinances focus on your payment history rather than a new full credit review, though most lenders still set a minimum score around 580 to 620. Conventional refinances need 620 or higher.

Can I take cash out of a USDA loan?

No. USDA does not offer a cash-out refinance. To tap your equity, you would refinance into a conventional, FHA or VA cash-out loan.

How do I get rid of FHA mortgage insurance?

If your FHA loan started after June 3, 2013 with less than 10% down, MIP lasts for the life of the loan. The only way to remove it is to refinance into a conventional loan, ideally once you have 20% equity so no PMI is required.

Can I roll closing costs into my refinance?

Usually yes. Closing costs can often be added to the new loan balance or covered with a slightly higher rate (a lender credit), so there is little or nothing out of pocket.

Get a free refinance review

Tell me what you’re hoping to do and I’ll show you the numbers, including your break-even point, so you can see whether a refinance makes sense. Or call or text 502-905-3708.