FHA Loans
Ohio
The purchase price of a home is often the primary obstacle to overcome for those who want to become homeowners in Ohio. Most cannot afford to pay cash upfront for the entire listing price. Instead, they will take out a home loan and pay it back over the course of the loan plus interest.
However, conventional loans are not the most accessible option for Ohio borrowers. First-time homebuyers may not have enough income, savings, or strong credit history to qualify for a conventional mortgage.
If you are uncertain about your eligibility for a conventional mortgage, then your best option could be an FHA loan. This government-backed loan is designed to be accessible to a wider range of borrowers, including those with limited means or short credit histories.
What Are FHA Loans?
FHA stands for the Federal Housing Administration, a branch of the United States government that falls under the umbrella of the Department of Housing and Urban Development (HUD). FHA loans are backed by the government to make it easier for FHA-approved lenders to lend money to borrowers who may not qualify for conventional mortgages. As a result of the government’s involvement, more Ohio borrowers are able to acquire home loans.
Last year, the program offered financing to 478,000 first-time homebuyers, and over 30% of all loans went to borrowers of color. The Department of Housing and Urban Development has also been critical in ensuring equal access to financing for LGBTQ+ individuals, having released a mandate in 2012 that required FHA lenders not to discriminate against anyone regardless of perceived or actual sexual orientation or gender identity. This makes the program a crucial way to reduce housing disparity for marginalized people.
Ohio FHA loans are ideal for individuals with limited financial resources or shorter credit histories. Each lender evaluates the risk of lending money to a prospective homebuyer based on the likelihood of default. With the government backing FHA loans, the lender assumes less risk, even if the homebuyer presents a higher risk compared to those who would qualify for a conventional loan.
If you have a lower income, a less-than-perfect credit score, or insufficient savings for the 5% down payment required for a conventional loan, an FHA loan may be the right choice for you.
Benefits of Federal Housing Administration Loans in Ohio
Ohio FHA loans come with several significant benefits for borrowers. If you meet the qualifications the individual lender requires, these are the advantages you will enjoy with an FHA loan.
Small Down Payment Options
The minimum down payment for an FHA loan is 3.5% of the home’s sale price if you have a credit score of at least 580. Currently, the median sale price of an Ohio home is $259,500, meaning that someone with a score around this metric would need about $9,000. When you add in closing costs, this can be difficult to afford with a sizable down payment. Some lenders may recommend saving up for a 10% down payment if possible. This lower down payment requirement makes it easier for a first-time homebuyer who is struggling to save up substantial funds for a home purchase.
However, some may still struggle to save up this amount, particularly marginalized borrowers, who are more likely to be in debt. Pride Lending has access to a variety of local, state, and national down payment assistance programs that can provide you with grants or second liens to help afford this.
In Ohio, you may choose to work with the Ohio Housing Finance Agency (OHFA), which offers forgivable second loans. If you stay in your home for at least seven years without selling, transferring, or refinancing, the entire amount can be forgiven. We’ll also search for any city-wide or county-wide options, as well as work with our national partners to find you the assistance you need.
Competitive Interest Rates
If you are interested in an FHA loan in Texas, then you should understand the benefits of this option. Here are a few advantages Texas homebuyers will experience with FHA loans.
Flexible Underwriting Guidelines
Underwriting is the process of evaluating a borrower’s risk. Since these borrowers are in more precarious financial situations, most applications are underwritten manually. What loan officers look for during the underwriting process is usually more flexible with FHA loans, whereas a conventional product would have more strict requirements.
Assumable Mortgages (Buyer Can Take over Existing FHA Loan)
An FHA mortgage on a house in Texas may be eligible as an assumable mortgage for a new buyer. Essentially, instead of taking out a new loan to buy a house, you take over the debt and payments for an existing FHA mortgage and become the new owner of the house. This is an excellent option for people with spotty credit reports.
FHA Loan Requirements
Every lender will have their own requirements for the FHA program. However, the typical Texas FHA loan requirements are as follows.
Minimum Credit Score
To qualify for an FHA home loan, you should aim for a credit score of 580 or better, as they will allow you to access the best rates and lowest upfront expenses. Lenders approving FHA mortgages may allow for scores as low as 500 if they offer at least 10% upfront.
Down Payment Amount
As mentioned previously, the minimum down payment for an FHA mortgage is 3.5% for those with a score of 580 or greater; those with scores between 500 and 579 must make a minimum payment of 10%. Although this is a low down payment and makes homes more affordable, it also means you would pay a private mortgage insurance premium (MIP).
We understand that even 3.5% can feel like a challenge depending on your personal finances, but Pride Lending is here to assist. We’ll connect you with local, state, and nationwide down payment assistance programs that can provide you with grants or second liens.
Numerous organizations in Texas offer assistance for those who can’t afford their upfront costs. For example, you may choose DPA programs from the Texas State Affordable Housing Corporation (TSAHC) or the Texas Homebuyer Program from the Texas Department of Housing and Community Affairs.
Debt-To-Income Ratio (DTI)
DTI compares your monthly debt payments to your gross monthly income. You divide your debt total by the gross income each month and then multiply by 100 to get a percentage. The typical lender will require a maximum DTI of 43%. Lenders can make an exception to a maximum DTI of 57% if the borrower has a good credit profile and provides a larger down payment.
Property Standards
Since the government is backing this mortgage, approval for the property type is needed before the loan is given. An appraisal will ensure the property is safe to occupy and up to standards for liveable conditions.
Additionally, this home must become your primary residence to qualify. However, it is possible to purchase a property with up to 4 units and rent up to 3 units, as long as one is used as your permanent residence.
Mortgage Insurance Premiums (MIP)
Everyone, no matter how much they put down, needs to pay the upfront mortgage insurance premium, which is 1.75% of the loan amount. You’ll also have to pay ongoing annual mortgage insurance premiums, though this may not be for the entire length of the loan.
If you make a 10% down payment or more, the MIP will be removed after 11 years, but if you make less than this, you’ll have MIP for the entirety of the loan. It’s also possible to refinance into a conventional loan once you have 20% equity, which would remove mortgage insurance.
FHA Loan Limits in Ohio
The HUD has limits on how much you can borrow, typically about 65% of how much you could get in a conventional mortgage.
Ohio FHA loan limits are controlled by two primary factors: the county where the property resides and the type of property being purchased. For example, the FHA loan limit in Franklin County is not the same as the FHA loan limit in Montgomery County. Also, the loan limits differ depending on if you are buying a single-family home, two-family home, or multi-family home. In most counties, this limit is $498,257, though there are some exceptions.
Here are some of the FHA loan limits for a single-family home in the largest Ohio counties.
Franklin County – $546,250
Cuyahoga County – $498,257
Hamilton County – $498,257
Summit County – $498,257
Montgomery County – $498,257
The FHA Loan Process
If you hope to qualify for an FHA loan, there is a straightforward process for applying, getting pre-approved, and eventually finalizing your mortgage. Many lenders work with LGBTQ+ and minority borrowers to help them achieve their dreams of homeownership in Ohio. Here are the steps to acquiring your FHA loan.
See if you meet the requirements
Evaluate if you have a credit score of 580 or greater, a DTI of 43% or lower, and that you meet the down payment requirement of 3.5%. You may still qualify if you have a score as low as 500 or a DTI of 57%, but this may limit your choices.
Contact Pride Lending
When you reach out to us, we’ll begin your loan consultation by reviewing your options with you. FHA-approved lenders are qualified to give out these mortgages, and finding the right loan partner is the key to a positive homebuying experience.
Apply and get pre-approved
Pre-approval will prepare you for a smoother buying experience and help you understand what you can afford. You will need many documents for your application, including tax returns, paychecks, and bank statements.
Shop for the perfect home
Once you’ve been preapproved, we’ll discuss your budget with you and send your preapproval letter to your realtor. You can then begin shopping for the right property in your area.
Submit an offer
You and your realtor will decide on a competitive bid and submit the letter to the seller.
Complete the application
The application is called the Uniform Residential Loan Application and will include many of the same details you needed for preapproval; however, it will also include property details, which the lender will use to determine whether the property meets their standards.
Offer acceptance
The seller will decide if they find your offer acceptable. If they do, then you’ll sign a purchase contract that tentatively agrees to buying the home.
Inspection
While not strictly necessary for the program, the lender will likely require you to have the property inspected, ensuring that there are no significant issues.
Conditions
If you’re happy with the inspection results, then our team at Pride Lending will walk you through the sales contract and make sure everything is correct.
Underwriting
We will submit all the details that you have provided to the lender, whose underwriting team will now take over. They will carefully investigate each facet of the loan and ensure that there are no issues with you or the home.
Appraisal
An approved appraiser will evaluate the property to determine if it is a fair value, is safe to live in, and meets the property requirements for FHA home loans.
Loan approval
Once the appraisal is complete and the details of the loan have been reviewed, the lender will proceed with the final approval of your loan so that you can close on the transaction. We will schedule the closing date with you and the title company will send the information regarding how to pay the upfront expenses.
Close on the home
All the documents will be signed, the title will be transferred to you, the closing costs will be paid, and you will become the new owner of that house with the help of an FHA home loan.
Why Choose Pride Lending for Your Texas FHA Loan?
When you need the right team on your side to navigate the Texas FHA program, a loan officer from Pride Lending is ready to help. We serve all our clients with the same care, offering excellent customer service and a streamlined application process to make homeownership affordable and accessible.
Our team is composed of allies and members of minority communities, including LGBTQ+ and BIPOC individuals. We’re here to help everyone, no matter their identity, and serve as an advocate for those who may feel underserved by the mortgage industry.
First-time homebuyers and repeat buyers alike can work with Pride Lending whether they want to buy a single-family home or learn about an FHA reverse mortgage. Call us today at 725-231-0192 to learn more about Texas FHA loans.