2024 Ohio First-Time Homebuyer Programs and Loans

Higher home prices in Ohio are making it harder for Ohioans to come up with funds they need to buy their first home. As a first-time buyer, you need to save money for a down payment, closing costs, lender fees and more. While many people lack the funds to realize their dream of homeownership, a first-time homebuyer loan or grant can be the key to making it happen.

First-time homebuyer programs in Ohio

First-time homebuyers in Ohio can find a variety of programs to make buying more affordable, especially if they’re considered low-income. Some Ohio first-time homebuyer programs to check out include:

• Your Choice! Down Payment Assistance
• Grants for Grads
• Ohio Heroes
• Communities First – Ohio

Your Choice! Down Payment Assistance

The Ohio Housing Finance Agency’s (OHFA’s) Your Choice! program gives homebuyers with low and moderate incomes their choice of down payment assistance: either 2.5% or 5% of the home’s purchase price. The funds can be used for your down payment, closing costs or related expenses, and they’re fully forgiven once you’ve lived in the home for seven years.

Requirements

• Minimum credit scores of 640 for conventional, USDA and VA loans
• Minimum credit score of 650 for FHA loans
• Income and purchase price limits vary by county

Grants For Grads

OHFA also offers a 2% or 5% down payment assistance grant for recent graduates, as an incentive for college grads to buy homes in Ohio. Grants for Grads funds come in the form of a loan that’s forgiven at 20% each year you live in the home and fully forgiven once you’ve lived there for five years. Buyers eligible for this first-time homebuyer program can also get a 0.125% discount on their mortgage APR.

Requirements

• Minimum credit scores of 640 for conventional, USDA and VA loans
• Minimum credit score of 650 for FHA loans
• Maximum debt-to-income ratio (DTI) of 50%
• Associate’s, bachelor’s, master’s or post-graduate degree obtained within the prior 48 months

Ohio Heroes

The Ohio Heroes program from OHFA gives homebuyers a 0.25% mortgage discount and either a 2.5% or 5% forgivable down payment assistance loan. The Heroes program is available for qualifying public servants, including certain teachers, nurses and veterans.

Requirements

• Minimum credit scores of 640 for conventional, USDA and VA loans
• Minimum credit score of 650 for FHA loans
• Must be a veteran, full-time servicemember or surviving spouse, first responder, qualified healthcare practitioner or qualified educator

Communities First – Ohio

Communities First – Ohio is homebuyer assistance available to homebuyers throughout the state of Ohio. This program gives first-time and repeat buyers mortgage financing, along with a 3% to 5% grant (that’s funding you don’t have to repay) for their down payment or closing costs.

Requirements

• Minimum FICO credit score of 620
• You can earn up to 115% of Area Median Income (AMI)
• Down payment of 0% to 5%

Ohio first-time homebuyer qualifications

In Ohio and most of the U.S., you can be considered a first-time homebuyer (FTHB) even if you’re not buying your first home. Repeat buyers are eligible for OHFA programs and other assistance if they haven’t owned any part of their residence within the prior three years, if they’re honorably discharged veterans or if they’re purchasing a home in a target area. Other requirements typically include maximum income and purchase price limits and minimum credit scores.

Steps to apply for a first-time homebuyer program

Each one of Ohio’s FTHB programs has a different application process, but here’s what you can generally expect from each one:

Understanding Ohio first-time homebuyer down payment assistance

As a first-time buyer, you’ll come across terminology that’s new to you. In particular, there are types of assistance that might have unfamiliar names and terms. Here’s a breakdown of what they mean:

Deferred second mortgage

A second mortgage, or a junior-lien, is a loan used to cover your down payment and/or closing costs. Like your first mortgage, these loans are secured against your house as collateral. However, if you have a deferred second mortgage, you don’t have to start paying it back until you refinance your first mortgage, fully pay off the first mortgage or sell your home.

Forgivable second mortgage

A forgivable second mortgage is a loan that’s forgiven under specific circumstances: usually after you live in the home for a set number of years. These loans are usually forgiven gradually, by a certain percentage each month or year. If you sell your home, refinance your mortgage or pay off your home before the designated time period ends, you’ll have to pay the remaining balance.

Grant

Grants are funds that don’t have to be paid back. For first-time homebuyers, grant programs can help make homebuying more affordable by giving you money for some or all of your down payment and closing costs. With some FHTB programs that offer a combination of mortgages and grants, you don’t have to use any of your own money to purchase a home.

Mortgage credit certificate

A mortgage credit certificate (MCC) is a tax credit that reduces your tax bill and can help you qualify for a mortgage that’s otherwise unaffordable. If you have an MCC, you can get a dollar-for-dollar reduction in your annual tax bill up to $2,000 for interest charges paid on your mortgage.

You might qualify for an MCC if you’re a first-time homebuyer, you’re purchasing a home in a target area or you’re a servicemember or veteran. You can learn more at the OHFA website or by calling 888-362-6432.

Keep these things in mind about DPA programs

Homeowners may have to pay taxes on certain FTHB funds. Any time you receive a grant or have a debt forgiven, the IRS may consider the money to be taxable income. While the IRS is unlikely to tax FTHB grants from government and nonprofit programs and debt canceled on forgivable second mortgages, state tax rules vary.For more guidance on filing taxes as a homeowner, you can contact the Ohio Department of Taxation or consult with a tax professional.

How much of a down payment do I need to buy a house in Ohio?

According to our first-time homebuyer study, the average down payment made by first-time buyers in Ohio was $25,841 in 2023, and the average mortgage was $227,695. That means, if we assume no other funding was used to complete those purchases, Ohioans put down about 10% on average. Whether your down payment will be more or less depends on a number of factors, including whether or not you use a government-backed loan and/or an FTHB assistance program.

Can I qualify for down payment assistance in Ohio?

Each down payment assistance program in Ohio has different requirements to qualify. You’re likely to qualify for multiple programs if you have low-to-moderate income and your credit scores are 650 or higher. To find out if there’s a program you qualify for, search for down payment assistance programs in your state, city and county and review the requirements.

How do I apply for Ohio first-time homebuyer down payment assistance?

Each FTHB program in Ohio has a different process to apply. Usually, you need to contact one of the program’s participating lenders to get started. You can find out more about each program’s requirements by visiting the website of the program you’re interested in.

 Here’s what you need to know about the process of applying for a home loan.

Other first-time homebuyer loan programs

Conventional loans

Conventional loans are available to first-time and repeat home buyers through most banks and credit unions. Unlike FHA, VA and USDA loans, these loans are not insured by government agencies. The interest rate, down payment and other requirements to qualify for a conventional loan are generally higher than other loan types; however, you’ll likely save money by choosing a conventional loan if you have excellent credit and money saved for a down payment.

FHA loans

FHA loans are insured by The Federal Housing Administration (FHA) and they’re available through most mortgage lenders. Compared to conventional loans, the interest rates on FHA loans in Ohio are consistently lower and you can qualify with a down payment as low as 3.5%. For a borrower with a small down payment or low credit scores, an FHA loan is often the most affordable choice.

VA loans

VA loans are loans backed by the U.S. Department of Veterans Administration (VA) and available through mortgage lenders, including banks and credit unions. You may be eligible for a VA loan if you’re a veteran, service member, National Guard or U.S. Army Reserves member, or a surviving spouse. VA loans have low APR, low closing costs, no PMI, and you’re not required to make a down payment to qualify.

USDA loans

The U.S. Department of Agriculture (USDA) offers Single Family Direct Home Loans for low-to-moderate income borrowers in need of housing, and who want to buy homes in rural Ohio. You may not need a down payment to qualify for a USDA loan and, depending on your income, your interest rate could be between 1% to 4.5%.

What are the best first-time homebuyer loans?

There’s a wide enough variety of loans for first-time homebuyers, that it’s impossible to say which one type is best for every buyer. To find the best FTHB loan for you, consider what’s most affordable based on your credit scores and financial situation, including the amount of funds you have available for a down payment.

Home price trends in Ohio’s major areas

For someone who wants to own a home in Ohio, higher home prices are making that harder to do. In 2023, home prices in the U.S. increased by 6.5%, but throughout the state of Ohio they rose by 9.23%. However, that’s just a blip in comparison to the last five years, when Ohio home prices went up by more than 60%, according to a Federal Housing Finance Agency report.

If you’re looking for affordability, you may want to avoid the areas where prices shot up most. That includes the Dayton-Kettering metro area, which spans Greene, Miami and Montgomery counties, where prices went up by 9.8% in 2023. In Akron and the Cleveland-Elyria metro area, which now includes Ashtabula County, prices increased by more than 10%.

Is there a first-time homebuyer tax credit in Ohio?

Ohio’s mortgage credit certificate (MCC) gives first-time homebuyers a tax break. With the MCC, you can reduce your federal tax bill by as much as $2,000 a year while you’re paying off your mortgage. As far as federal tax credits go, a new credit for homeowners was proposed in March of 2024; however, there has not been a federal credit available since 2010.

What are the current mortgage rate trends in Ohio?

Ohio interest rates on 30-year mortgages have moved lower since the start of the year for all credit score ranges. Rates on 15-year loans have been consistent for those with higher credit scores, while rates on 5/1 ARMs have trended slightly upward in the first three months of the year for most scores.