First-Time Homebuyer Programs in Ohio

Purchasing a house for the first time is both exhilarating and overwhelming. Coming up with a down payment can be a major obstacle. Thankfully, federal and state programs for first-time homebuyers can ease the process. MoneyGeek looks at programs for first-time homebuyers in Ohio to help you choose the best one for your needs.

Before buying a home, you’ll need to consider how much you can pay upfront. This amount is called the down payment. Usually, lenders recommend a down payment of 20% of the home's cost. This amount is sufficient to reduce your debt, helping you save money over time.

However, not all first-time homebuyers have 20% of the purchase price. Government and Ohio first-time homebuyer programs can reduce this amount to 3.5%, depending on the program. You can also significantly reduce your down payment through conventional, FHA and FHA 203(k) loans. USDA and VA loans have no down payment requirements at all.

Ultimately, a financial assistance program can help you purchase a home sooner than you might have expected.

Zero-down-payment loan programs offer home financing without putting money down. These programs include USDA and VA loans.

USDA home loans help low-to-moderate-income borrowers purchase homes in eligible rural areas. The loans are issued by the U.S. Department of Agriculture and offer competitively low rates.

While these loans are not exclusively for first-time homebuyers, USDA loans are a great starting point to finance your home. They can also be used for renovations on an existing home or to build a new home.

Your income should be less than 115% of the median income in the home's neighborhood to qualify for a USDA loan. In addition, these loans have no credit score requirements, making them accessible to borrowers with poor credit.

Veterans, active service members and their family members may apply for loans from the U.S. Loans Department of Veterans Affairs (VA). VA loans offer competitively low-interest rates and limited closing costs. They don’t require down payments or private mortgage insurance (PMI).

The VA provides various types of home loans, including:

• Home purchase loan
• Cash-out refinance loan
• Interest Rate Reduction Refinance Loan (IRRRL)
• Native American Direct Loan (NADL)

Your length of service, duty status and character of service determine your eligibility for a VA loan. You must also meet income requirements, have an acceptable credit score and a valid Certificate of Eligibility (COE).

Low-down-payment loan programs, like conventional loans, FHA loans and FHA 203(k) loans, can help secure a loan with down payments starting at 3%.

Banks, credit unions and other private lenders offer conventional home loans. Although the government does not back them, conventional loans are the most popular home financing option.

Fannie Mae and Freddie Mac regulate conventional loans. They set loan limits, such as the $647,200 one-unit loan Oregon Bond Residential Loan program. Loan amounts within this limit are conforming loans and require a minimum credit score of 620. Loans larger than the set limit are called non-conforming loans, require a minimum credit score of 700 and can be more difficult to get.

You can secure a conventional loan with as little as 3% down. However, you will need to purchase private mortgage insurance to protect the lender if you default on the loan. You also need a debt-to-income (DTI) ratio that’s 45% or lower.

FHA loans make it easier for borrowers to get a home loan by setting lower credit requirements and requiring smaller down payments. These loans are underwritten by private lenders but insured by the Oregon Bond Residential Loan program.

Homebuyers can be approved for FHA loans with down payments as low as 3.5%–10%. A credit score of 579 or higher allows you to put 3.5% down, while a credit score between 500 and 578 requires a 10% down payment. You can use the Department of Housing and Urban Development’s (HUD) online tool to determine your maximum loan amount.

Lower credit requirements, however, don’t guarantee approval of your loan. Even if you pass the FHA requirements, the granting of the loan lies in your lender's hands.

An FHA 203(k) combines the cost of purchasing a home and the cost of any necessary renovations. FHA 203(k) loans are also known as rehabilitation mortgages, renovation loans or Section 203(k) loans.

This loan is an ideal option for homebuyers who are planning to purchase an old house or a fixer-upper. Some homebuyers choose to buy these homes because they’re less expensive.

FHA 203(k) loans eliminate the hassle of taking out different loans for buying your home and renovating it. The house must be at least a year old and need renovations costing more than $5,000. In addition, the home’s purchase price cannot exceed the loan limit for your county.

In addition to federal programs, Ohio first-time homebuyer programs offer several opportunities to turn your homeownership dreams into reality.

The YourChoice! program helps you pay for your down payment by letting you borrow 2.5% or 5% of the purchase price of your home.

Government agencies, counties, cities and towns offer a wide array of first-time homebuyer programs in Ohio.

MoneyGeek provided responses to some of the most frequently asked questions concerning first-time homebuyer programs in Ohio that might help you get a home of your own.