There are a dozen FHA down payment assistance programs in Ohio that offer buyers special advantages in purchasing a home.
I’ll detail those in this article and also introduce supplemental programs that provide cash for a down payment and closing costs.
Let’s start.
#1 Your Choice! Down Payment Assistance by Ohio Housing Finance Agency (OHFA)
The OHFA sponsors the Your Choice! down payment assistance program.
Your Choice! allows low- to mid-income buyers to work with approved local lenders, credit unions, and banks to receive financial help of 2.5 to 5% of the property purchase price for use as a down payment and to pay closing costs.
Requirements
- Borrowers must use an OHFA-approved local lender, bank, or credit union.
- There are restrictions on both household income and the location of the purchased property. These vary from county to county and are updated annually.
- The assistance can be used in conjunction (stacked) with an FHA loan.
- All borrowers must complete an HUD-approved homeowner finance education class to qualify.
- The property must be owner-occupied for all seven program years.
- Buyers must have a FICO score of 650 or higher to qualify.
Pros & Cons
Pros
- The home buyer can apply for assistance forgiveness after living in the property for seven years.
- Required free online homebuyer education course and use of online financial planning tools.
Cons
- All assistance must be repaid if the buyer fails to meet the program terms.
- Buyers must use an OHFA-approved local financial institution for the home loan.
- Applicants must meet FHA debt-to-income ratios to qualify for the assistance.
- The education course is mandatory, including for loan co-signers.
#2 Cuyahoga County Department of Development Down Payment Assistance Program
This county-wide assistance program is administered by CHN Housing Partners to help first-time buyers purchase a house.
It provides qualified low-to-middle income buyers a cash down of 17% of the total property transaction amount.
Requirements
- Must be a single-family property.
- Can be an existing house or a new construction.
- The house must be occupied by the seller, or vacant for at least 90 days prior to the closing.
- Property inspections are required to demonstrate the house meets all building, safety, and health codes, as well as lead paint restrictions. If there are violations, all of these must be corrected before the closing.
- Loan-to-Value (LTV) of the first mortgage cannot exceed 80%.
- Housing debt-to-income ratio must not exceed 80% of the buyer’s total income.
- Total debt-to-income (DTI) ratio cannot exceed 43%.
- Cash grants have Income limits for assistance.
- Buyers may not have owned a home during the prior 36 months.
Pros & Cons
Pros
- Offers 17% of the total transaction amount to be used as a down payment.
- Can be used for new construction.
Cons
- Buyers must not have any outstanding federal, state, and local tax debt.
- Income limits include all family members.
- Houses requiring major fixes must be repaired prior to receiving assistance.
#3 Ohio Housing Finance Agency (OHFA) Down Payment Assistance
The Ohio Housing Finance Agency (OHFA) Down Payment Assistance program facilitates lending for first-time buyers with low or moderate incomes who plan to be in the home for a minimum of seven years.
First-time buyers can receive assistance to apply for 3.5% down for an FHA mortgage or a 30-year fixed rate conventional mortgage.
This assistance can also be applied to closing costs and various other pre-closing fees.
Requirements
- Buyers must meet county income limits.
- Restricted to single-family housing, defined as one to four units.
- Property purchase price must be within the county’s set limits.
- Targeted areas may qualify for flexible income and purchase price limitations.
- Completion of a free HUD-approved homebuyer education course is required.
- Partners with local Ohio lenders participating in the program.
- While FHA official minimum credit score is 500, FHA loan applications in Ohio may require you to have a minimum of 650 because of the individual lender’s requirements.
- Borrowers must meet loan debt-to-income ratios.
Pros & Cons
Pros
- Provides financial assistance for the down payment, closing costs, and pre-closing fees.
- Access to free HUD-approved homebuyer program and education.
Cons
- If the home is sold before the seven-year residency requirement is met, the buyer will be charged for the original assistance.
- Requires passing a home finance education class.
#4 Grants for Grads
Recent grads living full time in the Buckeye State have the ability to apply for a grant of 3.5% of the purchase price from the state to assist in making a down payment for a government-backed FHA loan.
Requirements
- Restricted to graduates of programs within the last 18 months
- Income limitations by county
- Purchase price limits set for counties
- Restricted to single-family properties
- Targeted areas receive better loan terms
- Local area lenders participating in the program
- FICO credit score of 650 or higher
- Debt-to-income ratio for the FHA loan
- Must be a first-time homebuyer without any ownership interest in a property during the prior 36 months
- Completion of a free HUD-approved homebuyer education course
Pros & Cons
Pros
- Down payment assistance is forgiven after living in the house for five years when the buyer remains in the state.
- Free homebuyer resources through the Power of Home for those who qualify for the grant.
- The grant can partner with loans from any cooperating credit unions, lenders, or mortgage firms.
- Graduates with an associate or bachelor’s degree qualify.
- Advanced and post-grad degrees from an accredited college or university also qualify.
Cons
- If the buyer sells the property and moves out of state before the five-year program requirement, all or a portion of the grant will have to be repaid.
- Income limits include all members of the family.
- Restricted to single-family houses.
- Purchase price limits are determined according to the property location.
#5 Good Neighbor Next Door (GNND)
The HUD-sponsored Good Neighbor Next Door program provides local Ohio law enforcement officers, teachers, firefighters, and emergency medical technicians a chance to buy homes in targeted revitalization neighborhoods where they work.
These workers have first bidding rights on HUD real estate-owned properties, and the program discounts the house for these buyers by 50% of the asking price.
Homebuyers bring their own lender, and HUD takes a loan for the other 50% of the price. Once the buyer meets all the terms of the agreement, the second mortgage lien is removed from the property.
Buyers do not pay anything for the principal or any interest on the HUD second mortgage during the time they live in the property.
The buyer may also qualify for home improvement grants and rehab loans to do home repairs.
Requirements
- Buyers must work full time as K-12 teachers, firefighters, emergency medical technicians, or in law enforcement.
- Work or service must be in the same area as the property to be purchased.
- Purchase property must be located in an area and on the HUD revitalization area listing.
- With multiple bidders, properties are sold by using a random lottery.
- Bids for this program must be done within seven days beginning when the property is first listed.
- Law enforcement officers must be employed by the federal or state government, or Indian tribal government.
Pros & Cons
Pros
- Ability to combine this program with any first loan.
- The property price is discounted by 50% from the asking price.
- Offers first-time buyers a de facto down, given the property price is reduced by half.
Cons
- Limited property inventory.
- HUD loan terms must be met or buyers will be charged for the principal and interest on the second mortgage from the time of the purchase.
- Buyers may have trouble refinancing a first mortgage by using this program due to HUD’s subordination finance regulations.
- Limited number of days to bid on properties offered.
- Restricted to specific employment.
- Annual certification that owners live in the property and follow up by the National Servicing Center (NSC).
#6 The Columbus American Dream Downpayment Initiative (ADDI) Program
Columbus offers the ADDI program that defers or forgives down payment loans for a first-time homebuyer to help with new homeownership.
The program is paid for via a non-federal Neighborhood Economic Development (NED) Fund.
Requirements
- The property must be within the legal Columbus corporation limits.
- Buyers must agree to occupy the home for at least five years.
- The property may not be leased, rented, or sold during the first five years.
- The purchase price cannot exceed the fair market value as set by Uniform Residential Appraisal Report (URAR). Any price above that limit requires the buyer to make up the price difference.
- The buyer must be a first-time owner, as defined by ownership within the last 36 months.
- Satisfactory completion of home buyer finance course.
- Income and debt ratio restrictions.
- Minimal down from buyer’s own funds.
Pros & Cons
Pros
- Loans might be forgiven after five years of on-time regular payments when the buyer makes a forgiveness request.
- Other grants, including Housing Development Programs (HDP), can be combined with this program.
Cons
- Operating funds come from flexible federal and state governments and may be limited.
- Restricted to certain geographic areas and neighborhoods.
- Homeowners moving or selling during the five-year program requirement will be charged for the original assistance.
#7 Communities First/The Port of Greater Cincinnati Development Authority
The Greater Cincinnati Development Authority, in partnership with the Communities First program, provides cash assistance for first-time purchasers figuring out how to buy a home in Ohio.
Homebuyers can also combine the down payment and closing costs assistance from this program with an FHA loan.
Requirements
- Lender qualification is based only on borrowers’ income, not household income. The income limits are 115% AMI for government-insured loans, including FHA.
- Restricted to owner-occupied properties, and occupancy must be within 60 days of closing.
- A minimum FICO score of 620 is necessary to qualify.
- Application is through a participating lender.
Pros & Cons
Pros
- No restrictions on reselling or refinancing a home loan.
- Assistance doesn’t need to be repaid. It’s a grant, not a loan.
- Income limits are on the borrower, not the entire household.
Cons
- Income restrictions apply.
- Restricted to participating lenders.
#8 Housing Choice Voucher (HCV) Homeownership Program
Ohio Public Housing Agencies have the option of allowing people receiving Housing Choice Vouchers (HCV) to use those to purchase a local property.
The federal program permits voucher holders to utilize those as a down payment or for closing costs in Ohio, but the county agency has final approval for the use.
Check with the area Public Housing Agency for program participation.
Requirements
- Restricted to people currently receiving vouchers.
- Public Housing Agency approval is necessary.
Pros & Cons
Pros
- The voucher cash can be used for down payment or closing costs.
Cons
- Agency approval isn’t guaranteed.
#9 Ohio Homebuyer Plus
The Ohio Homebuyer Plus program is a savings account that is established to be used to purchase a property at below-market mortgage rates.
The account may also qualify for a reduction on state income tax filing, depending on the homebuyer’s filing status.
Requirements
- Restricted to Ohio residents over 18 years.
- Savings account must be used as a down or for closing costs for an owner-occupied Ohio property.
- Minimum account balance.
- Account cap of $100,000.
- All funds must be used within five years of the account opening date.
- Available only from participating Ohio banks, credit unions, and savings and loans.
Pros & Cons
Pros
- Structured approach to saving for a down payment.
- May qualify the saver for a state income tax deduction.
- Can be used with an FHA loan.
Cons
- Restricted to current home inventory. Funds can’t be used for land purchases, new house construction, or vacation homes.
- Funds must be used within five years.
- Minimum account balance is required.
#10 Individual Development Accounts (IDAs)
Individual Development Accounts (IDAs) are available through participating Ohio banks and credit unions unlike the previous savings account offered by the state directly.
These help first-time buyers save funds for a down payment and closing cost fees with matching funds and higher interest rates compared with other available financial and banking products.
Requirements
- Ohio uses a one-to-one to a four-to-one match to provide funds.
- Restricted to people with incomes at or below 200% of the annual Federal Poverty Guidelines.
- Available only to U.S. citizens or permanent residents.
- Completion of a mandatory financial literacy program.
- Funds must be used to pay for a down payment or closing costs.
- Includes a cap on the total contributions, including any matching funds.
- Time limit to use the savings, generally three years.
Pros & Cons
Pros
- Matching helps build account funds for down payment and closing costs.
- Free consumer education course as part of the requirements for the account.
Cons
- Saving cash takes time to accumulate enough for a down payment.
- Time limit restrictions to use money in the account.
- Income restrictions limit participation to those meeting the annual guidelines.
- Has a cap on other matching funds.
#11 Employer Assistance
Some companies have programs to assist employees who are first-time homebuyers. These may include cash for a full- or partial-down payment and closing costs.
Firms may have established partnerships with local lenders who write FHA-backed mortgages so the worker receives more favorable loan terms or cash for a down payment.
Requirements
- Workers must be employed at the firm or a newly contracted employee.
- Assistance typically requires an employment contract for a set period of time.
Pros & Cons
Pros
- Cash from an employer can assist with a down payment or for closing costs. Some employers also work with local real estate agents to assist in locating a property.
Cons
- Assistance may be limited to the term of employment. Repayment might be required if and when you leave the job.
#12 Gifts
Cash gifts are another method to collect money to use as a down payment or for closing costs.
As part of FHA loan requirements in Ohio, borrowers must document the source for all cash used as a down payment and for closing costs.
Loans insured by the FHA allow gifts, provided the borrower presents written evidence that the amounts don’t require repayment.
Requirements
- Gift letters must include specific language, including the amount and identification of the gift giver. The legal document must also have a “no repayment” clause.
- The formal letter must include the source of the gift money and proof of funds transfer documentation. The donor may also need to provide proof of the account cash transfer.
Pros & Cons
Pros
- Cash can fund, or help fund, a down payment and pay for closing costs.
Cons
- Locating gift cash may be difficult.
- Gift givers cannot have a financial stake of any sort in the property.
Bottom Line
We’ve reviewed the first-time homebuyer assistance programs in Ohio, many of which can be combined to provide more benefits.
The number of programs and the qualifications may seem overwhelming, but as an experienced loan originator, I can assist you in finding the best one — or stack programs — for your first-time home purchase.
It’s important to remember that homeowners usually want to sell quickly.
Having your financial portfolio organized and getting mortgage pre-approval means you can move quickly when you find a home and want to apply for a loan.
Get pre-approved for a mortgage online now without the risk of lowering your credit with a hard inquiry.
