Federal Rules Decide the Loan. Kentucky Decides the Tax, and Not on Your Service.

Program and regulatory figures verified October 10, 2026. Details change; confirm your scenario with us.

By Mike Certo, Cornerstone First Mortgage · NMLS #260555 · Updated October 10, 2026

The loan file and the tax file share a veteran and almost nothing else, and in Kentucky they share even less than usual.

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★★ Full entitlement, and the sentence that qualifies it

The VA loan-limits page: with full entitlement, "You don't have a loan limit (as long as you can afford the loan amount and the property appraisal supports the purchase price of the home)."

And immediately after: "Even if you have full entitlement (your COE shows that your basic entitlement is $36,000), your lender will still need to approve you for a loan."

★★ Both halves are load-bearing. The guaranty is uncapped; the underwriting is not. And $36,000 is basic entitlement, not a ceiling on what you can borrow.

★★ When a deposit comes back, and why that is not purely bad news here

With remaining bonus entitlement the VA says a lender "will use your remaining bonus entitlement to determine the maximum amount they'll loan you without requiring a down payment" and may require one "if you don't have enough remaining bonus entitlement for a 25% VA guaranty for the loan amount you want."

★ That is the only case where Kentucky's $832,750 county figure does any work. The arithmetic.

★★ Worth saying out loud in this state: in a market where 13 of 20 metros fell, a required deposit is also an equity cushion. The thing that feels like a restriction is the thing that keeps a short-hold borrower above water. Why that matters here.

★★ The loan needs no disability. Kentucky's exemption needs a total one.

VA loan eligibility turns on service history and entitlement. A veteran with no rating and full entitlement buys with nothing down.

★★★ Kentucky's homestead exemption is the mirror image: it does not ask about service at all. Ky. Const. § 170 reaches an owner who is 65 or older or classified as totally disabled. All three tests side by side.

The funding fee and its five exemptions

Receiving VA compensation for a service-connected disability.
Eligible for it but receiving retirement or active-duty pay instead.
Receiving Dependency and Indemnity Compensation as a surviving spouse.
★★ A service member with a proposed or memorandum rating before the closing date.
★★ An active-duty member with evidence of a Purple Heart by closing.

★★ Numbers 4 and 5 get missed. A memorandum rating dated before closing is in the VA's own list, so if a claim is in progress, where that paperwork sits is a closing-date question. The rates and the timing.

★★ And note the Kentucky asymmetry: a compensable rating waives the fee, but only a total one reaches the state exemption. Plenty of Kentucky veterans are in that gap.

★ What we decide, and what we do not

We are a lender and we are not affiliated with the VA. We do not issue your COE, rate your disability, grant your fee exemption, or decide any Kentucky tax question. We underwrite the loan on what those bodies determined.

Mike Certo, NMLS #260555. (480) 296-6513 · mcerto@cfmtg.com.

Frequently asked questions

Is there a VA loan limit in Kentucky?

Not for a borrower with full entitlement: the VA states you have no loan limit, as long as you can afford the loan and the appraisal supports the purchase price, though the lender must still approve you. Where a limit applies, all 120 Kentucky counties are at $832,750.

What does the $36,000 on my COE mean?

It is basic entitlement, not a cap on what you can borrow. The VA shows basic entitlement as $36,000 even for a borrower with full entitlement and therefore no loan limit.

Do I need a disability rating for a VA loan in Kentucky?

No. VA loan eligibility turns on service history and entitlement. A rating matters separately for the funding-fee exemption, and a total disability classification matters for Kentucky's homestead exemption, which does not ask about service at all.

Is a required down payment always a disadvantage?

Not in a falling market. A deposit required because of remaining bonus entitlement also creates an equity cushion, which matters in Kentucky where thirteen of twenty metros declined over the year to August 2026.

Mike Certo · NMLS #260555 · Cornerstone First Mortgage NMLS #173855 · Equal Housing Lender. Educational content about VA home loan financing, not a loan commitment and not legal, tax or financial advice. Cornerstone First Mortgage is a private lender and is not affiliated with, endorsed by or acting on behalf of the U.S. Department of Veterans Affairs or any government agency. VA entitlement, funding-fee exemption and disability ratings are determined by the U.S. Department of Veterans Affairs. Kentucky's homestead exemption is established by section 170 of the Constitution of Kentucky and KRS 132.810 and is administered by county Property Valuation Administrators, not by Cornerstone; the amount is reset every two years by the Kentucky Department of Revenue and the tax effect depends on local rates. Housing market figures describe the twelve months to August 2026 and are not a forecast. Figures here carry the date we verified them against primary sources. All loans are subject to borrower, property and program qualification.