This article introduces 17 programs that assist home buyers with bad credit to improve their scores and locate resources to purchase a first home.
The second article segment highlights specific home loans for buyers with credit problems.
Let’s begin with the most popular ones.
#1 Neighborhood Assistance Corporation of America (NACA), Cleveland
This HUD-approved corporation counsels between 20-30% of the annual applicants for HUD-funded and insured lending programs.
The NACA offers home mortgages that don’t require a down payment, closing costs, or mortgage insurance.
The below-market interest rate offered to first-time homeowners also doesn’t use a credit score to determine eligibility.
The assistance is restricted to low-income applicants with a cap on the property price. Not all NACA programs are offered in all areas of the state.
Types of Assistance
- One-Dollar Homeownership Program
- HOT-PHA (Section 8/Housing Choice Voucher) purchases
- NACA’s New Construction Home Sales
- Homeowners HomeSave Program
- Homebuyer Purchase and Renovation Program
- No down payment, no closing cost, no credit review mortgages
- Financial management
- Budget counseling
- Pre-purchase education workshops
- Predatory lending education workshops
- Pre-purchase counseling
- Pre-purchase home buyer education workshops
Requirements
- Income caps
- Location restrictions for home purchase
Pros & Cons
Pros
- Assistance for reduced interest mortgages
- Free consumer education counseling
- No down, no PMI, no closing costs home mortgage loans
Cons
- Home buyers must have low income and purchase low-cost homes in prescribed geographic areas.
#2 Habitat for Humanity Ohio Affiliates, Multiple Locations
Habitat for Humanity houses are funded through a program that works with local lenders to finance the home at reduced interest rates. The houses are not given away without any charge.
Homeowners and their families earn sweat equity in the property by completing work during the building of the home, while the remainder of the home cost is financed.
The local Habitat office receives applications and selects the home buyer based on the availability of local financial partnerships and the number of volunteers enrolled to help complete the building project.
The construction is organized by one of the more than 40 Habitat for Humanity locations in Ohio.
Types of Assistance
- Arranging low-interest mortgages with flexible financing
- Home construction
- Homeowner education
Requirements
- Limited to low- and moderate-income households
- Targeted so that families don’t pay more than 30% of their income toward mortgages
- Income caps
- Owners must require housing
- Applicants must qualify for an affordable mortgage
- Homeowners must physically assist in building the home
Pros & Cons
Pros
- Free homeowner education
- Free home budgeting and financial management education
- Low-interest mortgages
- Little or no down payment
- Final qualification happens when the house is approved for occupancy allowing time for credit scores to improve
Cons
- Must have the physical ability to help build your house
- Limited to the geographic areas in Ohio with Habitat for Humanity offices
#3 National Foundation for Credit Counseling
The National Foundation for Credit Counseling is a national organization that offers free, accredited online courses.
These include classes on correcting low credit scores that could disqualify you for home loans or require that you pay higher mortgage rates.
The foundation’s board of trustees include officials from Northwest Bank, Citibank, Wells Fargo, Discover, JPMorganChase and Co., and Synchrony.
Types of Assistance
- Budgeting and finance courses
- Debt management plan creation
- Pre-purchase homeowner guidance
- Managing student debt
Requirements
- Completion of low or no-cost online courses requiring computer access
Pros & Cons
Pros
- Free courses include “Money 101,” “Understanding Your Credit Score,” and “Improving Your Credit Score.”
Cons
- Some courses require payment of fees for online workshops. There’s no obligation, however, to enroll in these classes if you wish to complete only the free online educational offerings.
#4 Ohio State University Extension — Cuyahoga County, Multiple Locations
Ohio State University campuses throughout the state offer extension workshops, counseling and courses to educate first-time home buyers in budgeting, finances, and homeownership.
For home window shoppers with credit problems, OSU Extension workshops are available to guide participants through the specific steps to repair credit so they’re more creditworthy to lenders.
Contact the local county OSU Extension office by phone or through their website for a calendar of the available free workshops and counseling services. Some programs are offered online.
Types of Assistance
- Budget counseling
- Financial workshops
- Credit repair workshops
- Pre-purchase counseling
- Home buyer education workshops
- Money management workshops
Requirements
- The “Money Management “course is recommended for buyers with less than a 640 credit score.
- Potential buyers with a credit score above 640 should take the “Home Buyer Education” course.
Pros & Cons
Pros
- Free education courses and workshops
- Assistance with homeownership and requirements
- Guidance in budgeting with an outstanding mortgage and homeownership expenses
- The certificate of completion given after the course is required by many of the federal home buyer grant and assistance programs
Cons
- Participants need a computer and Zoom software
- Must attend both scheduled sessions to receive a certificate of completion
- Each session lasts four hours; a total of eight hours for the entire workshop
- Sessions are only offered on set dates and times
#5 NID Housing Counseling Agency (NID-HCA), Multiple Locations
This national agency has multiple branch offices, including locations in Ohio in Trotwood, Franklin County, and the Cleveland Stoudermire office.
Home buyer and credit counseling is available either in-person, virtually, or remotely.
Types of Assistance
- Pre-purchase counseling
- Pre-purchase home buyer education workshops
- Online homeowner certificate course
Requirements
- The price for the eHome American online course is $99.
Pros & Cons
Pros
- Flexible course taken on your own schedule
Cons
- Fee-based program
#6 Community Housing Solutions (CHS), Greater Cleveland
CHS’s mission is to provide housing counseling to Cuyahoga County residents.
Their free services offer courses and workshops on how to buy a house in Ohio, including one focused on lending programs and repairing bad credit.
Types of Assistance
- Financial literacy and management
- Budget counseling
- Budgeting workshops
- Credit repair workshops
- Home improvement and rehabilitation counseling
- Predatory lending education workshops
- Pre-purchase counseling
- Pre-puchase home buyer education workshops
- Real estate tax assistance
Requirements
- Current photo ID
- Proof of income (current and prior month)
- Prior 60 days bank statements
- Federal income tax for prior two years
- Copies of recent bills
Pros & Cons
Pros
- Programs and services are free
- Credit repair assistance, including ways to improve credit scores
- Education on finance and types of mortgages
Cons
- Restricted to residents of Cuyahoga County
#7 Asian Services in Action, Inc. (ASIA), Cleveland and Akron
ASIA provides the Northeast Ohio AAPI adult community and dependents with a wide range of services, including bilingual counseling and education workshops to assist in purchasing a home.
Guidance is available for low- to moderate-income home shoppers through U.S. Department of Housing and Urban Development (HUD)-approved group workshops and one-on-one counseling services.
Courses and counseling are both offered in Mandarin, Cantonese, Hindi, Hmong, Korean, and other Asian languages.
Types of Assistance
- Financial management counseling
- Pre-purchase education workshops
- Pre-purchase counseling
- Pre-purchase home buyer education workshops
- Fair housing pre-purchase education workshops
- Credit requirements
Requirements
- None
Pros & Cons
Pros
- Free courses, workshops, and counseling
- Courses qualify for HUD lender certification
Cons
- Services limited to Greater Cleveland and Akron
#8 CHN Housing Partners, Cleveland
CHN is a Cleveland-based non-profit partnership that brings together a private home builder, residential lender, and a housing service provider.
The partners offer a brief online free course that introduces homeownership to low-income families.
The services also include a free, four-session, eight-hour course that meets the HUD-requirements for certification to apply for federal homeowner grants and assistance.
Additional advanced financial education courses are also offered without charge.
Types of Assistance
- Financial management counseling
- Budget counseling
- Financial, budgeting, and credit repair workshops
- Pre-purchase counseling
- Pre-purchase home buyer education workshops
Requirements
- Participants must register for the courses
Pros & Cons
Pros
- Course meets HUD requirements for certification
- No fee for the courses
- Courses are offered online
Cons
- Set dates and times for the courses
- Computer and Zoom software required to take the courses
#9 Mi Casa Housing Program
The Spanish American Committee of Cleveland provides the Mi Casa Housing Program free of charge for low-income families.
Participants can obtain free counseling to learn budgeting and techniques to develop credit. They can also take first-time home buyer education workshops offered in both Spanish and English.
The workshops offer first-time buyers the HUD certification required to apply for certain federal grants and mortgage assistance.
Types of Assistance
- Financial management and budget counseling
- Financial budgeting and credit repair workshop
- Pre-purchase counseling
- Counseling on avoiding predatory lenders, selecting a Realtor
- Education on HUD and FHA Home inspections
- First-time home buyer classes
Requirements
- Must meet low-income requirements
Pros & Cons
Pros
- Programs are HUD-certified
- Walk-in counseling hours are daily from 9-11 a.m.
- Program is an affiliate of UnidosUS (formerly NCLR)
- Mi Casa programs are free
Cons
- HUD-approved courses are offered only four times a month
#10 Home Ownership Center of Greater Cincinnati
The Home Ownership Center of Greater Cincinnati is a private non-profit organization that offers credit assistance and homeowner education courses.
The center works with people living in 20 Ohio and Indiana counties adjacent to Cincinnati. They are a charter member of the NeighborWorks America Network.
The center contracts for education courses with eHome America online services, and participants pay a fee for the services.
Types of Assistance
- Financial management counseling
- Budget counseling
- Pre-purchase counseling
- Home purchase counseling
- Credit repair
- Credit and lending counseling
- Pre-purchase home buyer education workshops
Requirements
- $25 fee per visit for in-person counseling
Pros & Cons
Pros
- Credit repair assistance
- Pre-purchase education courses
Cons
- Fee for services
#11 The Urban League, Multiple Ohio Locations
The Financial Opportunity Center available at the county offices of the National Urban League offers free counseling for low- to mid-income first-time buyers and home shoppers with credit problems.
The Urban League offices are located in Greater Cleveland, Columbus, Greater Cincinnati, Akron, Dayton, and Warren.
Types of Assistance
- Financial management counseling
- Budgeting counseling
- Pre-purchase counseling
- Income and expense tracking
- Money management
- Savings strategies
- Debt reduction planning
Requirements
- None
Pros & Cons
Pros
- Free services
- Counseling in debt management
- Assistance in credit repair
Cons
- Available only in geographic locations where the Urban League has offices
6 Bad Credit Home Loans in Ohio
Most lenders look for applicants with mid-to-high FICO scores and a credit report free from any late fees, credit write-offs, and large debt.
But there are also bad credit-friendly mortgage lenders in Ohio, and this next segment is a list of those lenders.
Private lenders not only fund these federally-backed loans, but they also allow for a lower down payment and closing costs compared with traditional mortgages.
These home loans are available to buyers with low credit scores.
#1 FHA Loans
FHA loans are issued by private local lenders who fund mortgages they typically wouldn’t due to the home buyers’ credit issues. It’s the most common loan used by buyers with poor credit.
FHA loans written by Ohio mortgage lenders are insured against loss by the Federal government. This allows banks or credit unions to give buyers with credit challenges more favorable loan terms.
Home buyers using an FHA loan have reduced down payments, some as low as 3.5%, but the home you purchase must meet FHA restrictions for safety, security, and soundness.
The FHA requirements include lower FICO credit scores, forgiveness for minor report dings, and the loans can be stacked (combined) with other assistance programs and property repair grants.
Private lenders writing these mortgages may have additional requirements, so it’s wise to shop lenders for the best terms.
#2 VA Loans
The U.S. Department of Veterans Affairs (VA) insures a portion of mortgages issued by VA-approved local lenders. This allows the private bank or credit union to offer better lending terms.
VA loans are restricted to veterans, active service members, and eligible surviving spouses of service members. This military benefit can be used multiple times.
VA home loan benefits include no down payment, lower interest rates compared with the mortgage market, minimal closing costs, and no private mortgage insurance (PMI).
#3 USDA Loans
The U.S. Department of Agriculture insures mortgages from department-approved private lenders as part of their Single Family Housing Guaranteed Loan program.
Low- to mid-income qualified buyers as defined by the program include first-time buyers and those who may have had credit issues in the past.
Restrictions apply to income eligibility (115% of the area median household income), American citizenship, and a house or home site in a rural location.
Qualified buyers won’t have any down payment and may also qualify for 100% financing to build, relocate, restore, rebuild, or improve a rural property.
The buyers’ closing costs in Ohio can be rolled into the home loan under this program.
#4 Ohio Housing Finance Agency
The Ohio Housing Finance Agency (OHFA) sponsors a number of first-time home buyer down payment assistance programs in Ohio, including Ohio FHA down payment assistance programs.
The OHFA Homebuyer Program works with private lenders funding FHA, VA, USDA-RD loans to offer first-time home buyers below-market rates and funds to assist in paying the down and closing costs.
OHFA also offers free online classes on how to apply for their specific loan products and also on applying for an FHA loan in Ohio.
#5 Welcome Home Ohio (WHO-P)
This combination cash grant and loan program is funded by the Federal Home Loan Bank of Cincinnati (FHLB), but It’s only available to low-income borrowers from local private lenders.
The buyer’s cash grant of between $10,000 and $20,000 can be used toward a down payment or closing costs for a home purchase.
Buyers must work through specific low-income home assistance agencies (like the ones listed in the first segment of this article) or through cooperating financial institutions.
Program funds are limited. Applicants with the best chance for funding are prequalified in the early spring of each year, and are the first to apply when the call for application reservations is announced.
#6 Good Neighbor Next Door Sales Program
This home purchase program is restricted to pre-kindergarten through secondary school teachers, firefighters, emergency medical personnel, and law enforcement officers.
It offers this group of public service workers an opportunity to purchase HUD properties at half the asking price during the first week of the sale.
Occupants must work in the area where the house is located, and they must occupy the house as their permanent residence for a period of three years.
This program can be stacked with other first-time homeowner programs, and the reduced cost allows people with minor prior credit dings greater flexibility in locating lenders due to the steady employment field of the buyer.
Bottom Line
In Ohio, there are options to get a loan with a bad credit score, but most of them will require you to take homeowner education classes, which you can do for free.
No matter your credit score, sellers generally want to list and sell their homes quickly.
Organizing your financial portfolio and going through the home loan pre-approval process gives you the freedom to move quickly to make an offer and get a mortgage.
Get pre-approved for a home loan online without any risk of lowering your credit score with a hard inquiry.
