First-Time Home Buyer Guide for Ohio

Alex Long

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Alex Long

May 22nd, 2022
Updated May 22nd, 2022

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First-time buyer requirements | Programs and grants | Down payment assistance | Mortgage assistance | Tax credits | Home buying process | FAQs

In Ohio, numerous programs make home buying easier and more affordable for first-time home buyers.

First-time home buyers can benefit from loan programs that offer:

  • Lower down payment requirements
  • Discounted interest rates
  • Grants (funds that don't need to be repaid)
  • Easier credit score and income requirements

🏠 Housing market in Ohio

  • Ohio is a seller's market right now. Buyer demand exceeds how many homes are listed, and most are going off the market quickly.
  • Property values are rising. During 2022, homes in Ohio are expected to appreciate by approximately 8%.
  • Mortgage rates are historically low. In Ohio, mortgage rates average 2.37% for a 15-year mortgage and 2.95% for a 30-year mortgage.
Even in a competitive market, first-timers have opportunities to buy a home. And if Ohio's growth continues, buying now could mean benefiting from appreciated value in the long run.

» READ: 8 Definitive Steps to Buying a House in Ohio

What are first-time home buyer requirements in Ohio?

To qualify for a first-time home buyer program in Ohio, you must:

  • Be purchasing your first home
  • Have gone at least three years without owning a home, or
  • Be buying in a target area — where the state is encouraging homeownership

The Ohio Housing Finance Agency (OHFA) is a good place for many first-time home buyers to start their journey. OHFA works with pre-approved lenders, credit unions, and mortgage companies across the state to offer loans to qualified borrowers.

All OHFA qualified borrowers must meet:

  • Income and purchase price limits. For example, a two-person household in Adams County must earn a maximum of $90,360 annually, and the home can cost no more than $381,303.
  • Debt-to-income ratios for their loan type
  • Credit score requirements

OHFA programs also require buyers to complete free home buyer education.

Loan type
Minimum down payment
Credit score
DTI ratio
Best for...
Conventional fixed-rate
20%
620+
45%
Buyers with average credit who want a consistent loan payment for the life of the loan
3% + PMI
Federal Housing Administration
3.5%
580+
43%
First-time borrowers who may have lower credit or want to make a smaller down payment
10%
500–579
U.S. Department of Agriculture
None
Varies by lender
41%
Low- or moderate-income borrowers in rural or suburban areas
U.S. Department of Veterans Affairs
None
580+
41%
Veterans and active duty service members

» LEARN: Improve your credit score to expand your borrowing options

What are the first-time home buyer programs in Ohio?

Programs for first-time home buyers are designed to minimize barriers to homeownership. This means lower down payments and softer requirements on debt and income, assets, credit score, and so on. Doing so should not only financially benefit first-time home buyers, but yield economic benefits for their communities as well.

The Ohio Housing Finance Agency (OHFA) offers multiple government programs that assist first-time home buyers with:

Down payments and closing costs | Mortgages | Tax credits

Tools lenders use to evaluate home buyers

Lenders use a credit score to determine a borrower's trustworthiness.

» READ: What Credit Score Is Needed to Buy a House?

Lenders evaluate a borrower's debt-to-income ratio to prevent the borrower from taking on too much debt and defaulting on their loans. Typically, lenders want your DTI to be 36–43% of your gross income.

To calculate your DTI, add all of your recurring monthly debt payments, plus your estimated mortgage payment, and divide it by your gross monthly income (before taxes).

» READ: How to Find High DTI Mortgage Lenders

Lenders use a loan-to-value ratio to ensure they provide ONLY the absolutely necessary amount of money to a borrower.

To determine your LTV, lenders divide your home loan amount by your property's value.

An LTV of more than 80% is considered risky, since it means the lender will lend more money to their customers. However, that doesn’t mean a lender won't offer a loan to a borrower with a high LTV.

Lenders use private mortgage insurance to protect their investment in case a borrower defaults on their loan. PMI usually equals 0.3–1.15% of the loan amount.

Lenders typically require PMI on conventional mortgages where the borrower's down payment is smaller than 20%.

Lenders will cancel PMI automatically once a mortgage's LTV reaches 78%.

» READ: How Much Will My Mortgage Payment Be?

Lenders use a price-to-income ratio to calculate housing affordability.

To calculate PTI, lenders divide median home prices by median household income.

If the PTI of a location is over 2.6, it usually means home prices exceed what people can afford based on the local median household income.

First-time home buyer grants

Most of OHFA's programs are interest-free loans that are forgiven — meaning they don't have to be repaid — if the property is owned long enough, effectively making them grants.

These grants are generally used to assist buyers with down payments (which can cost 3–20% of the purchase price of a home) and closing costs (typically 3–6%). In Ohio, the average amount paid in closing costs is $2,568.

» LEARN: Ohio Buyer Closing Costs: How Much Will You Pay?

What are the first-time down payment assistance programs in Ohio?

Most mortgage programs require home buyers to have some equity, established by a down payment.

A higher down payment generally means a lower monthly mortgage payment, and vice versa. This is because a larger down payment lowers the total loan amount, while also potentially giving you a lower interest rate. A down payment below 20% also means your lender might require you to pay private mortgage insurance.

» LEARN: Terms home buyers need to know

Here are some government programs Ohio offers to assist with down payments and closing costs:

Your Choice! offers 2.5% or 5% of the purchase price toward your down payment and closing costs if you don't sell or move within seven years.

Grants for Grads provides down payment assistance of 2.5% or 5% of the purchase price. You must have graduated within the past 48 months from an accredited college or university to participate in this program. OHFA forgives the grant after five years if you don't move or sell the property.

If you qualify for 2.5% from Your Choice! or Grants for Grads, you can pair that assistance with the Mortgage Tax Credit.

» JUMP: Tax credit programs for first-time home buyers in Ohio

USDA and VA loans both have 0% down payment options.

What are the first-time mortgage assistance programs in Ohio?

Mortgage assistance programs are designed to set homeowners up for success. That means free home-buyer education, lower interest rates, or easier qualification requirements.

The OHFA (Ohio Housing Finance Agency) pairs qualified buyers with approved lenders offering loans based on what suits the buyer’s needs best.

You can also combine assistance from OHFA programs to maximize the amount you receive — for example, an FHA loan plus down payment assistance.

OHFA also requires all participants to complete free home-buyer education to help them know their options and select what's right for them.

Ohio Heroes provides a discounted mortgage rate for service professionals, such as veterans and active military, police officers, and firefighters. This program can be used with other OHFA loans, as well as conventional, FHA, USDA, or VA loans.

Grants for Grads provides a 0.125% discount on your mortgage rate. Eligible borrowers must have graduated within the past 48 months from an accredited college or university to participate in this program.

On a $200,000 loan, for example, the difference between an interest rate of 3.875% and 4% is $14 per month or $168 per year.

What are the first-time home buyer tax credit programs in Ohio?

Offering tax credits allows home buyers to save some money at tax time for the interest they pay all year on their mortgage. Ohio offers two tax credits.

Loan or property type
Tax-deductible mortgage interest
Mortgage Tax Credit Plus
OHFA Loan
40%
Mortgage Tax Credit Basic
Bank-owned property
30%
Property in target area
25%
All other properties
20%

If you get a loan through OHFA, the maximum tax credit is $2,000 every year.

Using the Mortgage Tax Credit Plus could mean a slightly higher interest rate, but you may also be able to pair the tax credit with down payment assistance of 2.5% from Your Choice! or Grants for Grads.

» JUMP: Down payment assistance programs for first-time home buyers in Ohio

What low-income home loan options exist?

A handful of mortgage loans — particularly from OHFA —are designed to help low-income home buyers acquire their first home.

Although low-income borrowers can get financing without OHFA programs, they'll still need to meet individual lender requirements. That usually means selecting a home that fits a required DTI ratio.

Buying a house for the first time?

Step 1: Evaluate your financial situation

When lenders evaluate your loan application, they'll consider factors like your income, work history, and assets. Know the answers to these questions:

  • How much income did you claim on your most recent tax return?
  • How much money do you have in checking and savings, stocks and bonds, or CDs?
  • How long have you worked at your current job?

Step 2: Choose the right neighborhood

Zeroing in on an area will be a useful first step in finding your next home. You'll want to determine what a reasonable price range is and then locate areas that meet your other needs as well, such as good schools or proximity to work.

If you’re applying to special loan programs, like USDA loans, you'll also need to verify the properties you want still qualify for that particular loan type.

» FIND: The Most Affordable Places to Live In Ohio

Step 3: Find a great real estate agent in Ohio

Finding a great agent will help you through the rest of the home buying process. We can help you there.

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Step 4: Get pre-approved for a mortgage

Getting pre-approved usually requires compiling certain documents, such as recent tax returns and pay stubs, to verify you meet income requirements.

You’ll also want to ensure your credit is in good standing — paying off low-balance revolving debt, like credit cards, might be a quick and easy way to improve your score.

If you're applying for an OHFA loan, make sure your lender is on its approved list.

Get Pre-approved Today!

Get matched with a lender who can tell you how much house you can afford. To get started, where do you plan on buying?

Step 5: Start house hunting in Ohio

While searching for your next house, stick to your price range. Remain patient and avoid falling in love with the first house you see.

Especially in a competitive market like this, you may need to make offers on multiple properties before finding your next home.

» LEARN: 30 Mistakes Every First-Time Home Buyer Makes

Step 6: Make offers

This may seem obvious, but don’t offer more than you can afford for a home. If you really want a house, it can be tempting to offer a lot — maybe thousands — over asking price. But you'll eventually have to start paying for that house.

Don’t take it personally if your initial offer is rejected or countered — you should expect to negotiate when making a purchase this large and important.

Step 7: Inspections and appraisals

Many lenders will require inspections and appraisals. These are generally good practices, as they give you an estimate of fair market value and make you aware of any significant property defects.

Step 8: Final walkthrough and closing

This is your final chance to see the property and make sure you really want it. Once you’ve decided this is the one for you, you can proceed with closing. Congrats! You’re a homeowner!

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FAQs for a first-time home buyer in Ohio

Generally, first-time home buyers have never purchased a home before, haven’t owned one in the past three years, or are buying in an area where the state wants to attract new homeowners.

Yes, the Ohio Housing Financing Agency (OHFA) offers a variety of programs for first-time home buyers in Ohio. In addition, the OHFA assists first-time buyers with evaluating their options and pairing them with the best lender and program suited to their situation.

You'll need a credit score of at least 640 to qualify for Ohio Housing Financing Agency (OHFA) loans and assistance programs. Other programs require credit scores as low as 500 — though you'd typically need to pay a higher interest rate or additional fees.

Closing costs typically range 3–6% of a home's purchase price. In Ohio, that means home buyers pay a median of $2,568 in closing costs. Some programs offer assistance in easing that burden.

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