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  • Writer's pictureNathan Zarcaro

Don't Miss These Ohio First-Time Home Buyer Programs

Updated: Jun 7, 2023


Buying a home in Ohio can be challenging, especially for first-time buyers. With an average home price of $205,553, according to Zillow, home prices have increased by over 15% in the past year, pricing many would-be buyers out of the market.


And with mortgage rates surging in 2022 to levels not seen in years, mortgages are costlier than they have been in some time. Luckily, Ohioans are not alone to fight this housing market and its' exorbitant prices. The state has four main programs available to Ohioans, offered by the Ohio Housing Finance Agency.


These four programs are:


  1. Ohio's Your Choice! Down Payment Assistance

  2. The Grant for Grads program

  3. Ohio Heroes

  4. Mortgage Tax Credit



Ohio's first-time homebuyer programs


The four programs that will be covered within this article are structured in a few different ways:


  • Second mortgages

  • Forgivable loans

  • Grants


Second mortgages are mortgages on top of your main mortgage. They can be structured in a few different ways. For example, a payment may not be required until the home is sold, or it can be structured in a way where the entire balance is forgiven over time!


Essentially, forgivable loans are a type of second mortgages. They may simply be a way for institutions like the Ohio Housing Finance Agency (OHFA) to structure their programs. Remember that these forgivable loans may forgive a certain percentage per year until the balance is gone. If you sell the home, you may owe a pro-rated amount of the benefits you were granted.


Finally, grants are funds that are given to you to assist you in purchasing a home.




The Ohio Housing Finance Agency programs


The Ohio Housing Finance Agency offers a handful of distinct programs for first-time homebuyers. As a reminder, they are:


  1. Your Choice! Down Payment Assistance

  2. Grants for Grads

  3. Ohio Heroes

  4. Mortgage Tax Credit


Before we cover these programs one by one, let's cover the process of working with OHFA. To be eligible for the programs listed above, you'll need to apply for and take a mortgage through OHFA. You'll just need to follow the list of simple steps below.




1. Work with an OHFA approved lender


This is easier than it sounds - The Ohio Housing Finance Agency has a lengthy list of qualified lenders across the state that you may opt to work with. The lender that you work with will ask for a multiyear commitment to your new home in order to retain eligibility for the benefits of the program you select.


Your lender (and OHFA) will require the following documents to process your loan and admittance into any OHFA first-time homebuyer programs:


  • Two years of tax returns

  • Two years worth of W-2 forms

  • Two or more most recent paystubs

  • At least one month of bank account/investment account statements


These are likely to be the minimum and you may be asked for more information in addition to this. This information should be enough for lenders to prequalify you for a mortgage with an estimated interest rate.


Don't be afraid to shop OHFA approved lenders within a narrow window of time, as you may be offered a lower interest rate from a second, third, or fourth lender.



2. Buy a Home


With your prequalification letter(s) in hand, it's time to go (home) shopping! Since you've been prequalified up to a certain amount, you have a good idea as to what homes are in your price range.


Remember to take into account the amount of savings you have on hand to cover a potential down payment and closing costs as well.



3. Apply and finalize your mortgage paperwork


After you've had an offer on a home accepted, you'll need to return to the lender you've selected and formally apply for your mortgage loan. OHFA offers a few different types of mortgages, including:


  • Fixed-rate conventional (30-year)

  • FHA loans

  • VA loans

  • USDA-RD loans


You may need to provide updated financial information if enough time is passed, but the preapproval process is designed to make this part of the process easier. As a requirement of taking a home loan from OHFA, you'll be required to complete a homebuyer education course, which is offered electronically by OFHA at no cost to you.



4. Close on your new home


Once you've satisfied all of the requirements and your lender is satisfied, you'll be issued a "clear to close," meaning that you've fulfilled all obligations and the bank is ready to issue the loan.


Once you close, the home is yours, and your mortgage payments will begin a short while later. If you close at the end of May, for example, you can expect your first mortgage payment to come due on July 1st.


 

Now that we've covered the process of securing an Ohio Housing Finance Agency loan, let's dig deeper into the potential programs available to you.



Your Choice! Down Payment Assistance


This program rewards homebuyers to receive down payment and closing cost assistance worth either 2.5% or 5% of a home's purchase price. It is issued as a forgivable loan that is completely forgiven after seven years. But if you refinance or sell your home before the seven years are up, you will be required to repay the amount of assistance that you were granted.


Ohio's Your Choice! Down Payment Assistance program is available to those that meet the following requirements:


  • A credit score of at least 640 for conventional, VA, and USDA loans

  • A credit score of 650 or higher for FHA loans


In addition to these credit requirements, you'll also need to meet county specific income and home purchase price limits.


You can located that information at this link to the OHFA website.



Grants for Grads


Ohio's Grants for Grads program is available to recent graduates who earned an associate's, bachelor's, master's, or doctorate degree within the preceding 48 months. Program participants will receive either 2.5% or 5% down payment assistance. To retain eligibility for this program, you'll need to remain in Ohio for at least five years


If you leave the state of Ohio before the five year period is over, you'll be asked to repay some of the money you received. Funds received "vest" at 20% per year, so if you leave after three years, for example, you'll be on the hook to repay 40% of the benefits that you received.



Ohio Heroes Program


The Ohio Heroes program is a homebuyer program for:


  1. United States veterans, active duty military members, reserve members, and surviving spouses

  2. Police officers, EMTs, paramedics, and firefighters

  3. Teachers, administrators, and counselors

  4. Physicians, NPs, and nurses


Rather than being structured as a loan or grant based program, Ohio Heroes actually offers a discounted interest rate to those that are eligible. At this time, the reduction is 0.25% off the prevailing market rates, which can save you tens of thousands of dollars over the life of the loan.



Ohio Mortgage Tax Credit


The fourth program is the Ohio Mortgage Tax Credit program, which is also issued by OHFA. The agency provides first-time homebuyers in the area with a tax credit of up to 40% of their annual mortgage interest, if they are using an OHFA mortgage loan.


The maximum benefit of this program is capped at $2,000, but can help nonetheless, since each dollar of tax credit offsets a dollar of your federal tax liability. So if you were on pace to owe the federal government $1,200 come tax time, you'll actually receive an $800 refund instead, if you receive the maximum benefit.



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About Nathan Zarcaro

Nathan Zarcaro is the founder of The Student Debt Destroyer and is passionate about personal finance related causes.  A 2018 graduate of Providence College's Liberal Arts Honors Program, Nathan studied Finance, and has worked for industry leaders in both finance and healthcare.  In his free time, Nathan enjoys playing golf and traveling with his wife Brigid.

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