Officially known as the Section 502 Single Family Housing Guaranteed Loan Program, the USDA loan is a $0 down mortgage option available to rural and suburban homebuyers in the United States. USDA loans are issued by qualified lenders and guaranteed by the U.S. Department of Agriculture (USDA).
The purpose of a USDA loan is to provide low-to-moderate income households with the opportunity to own a home in eligible rural areas. In addition, each USDA loan is against default. This guarantee allows for benefits, such as zero down payment, low rates and lenient credit requirements.
Buying your first home is an exciting milestone, but it can also feel overwhelming navigating the world of mortgages. If you’re a first-time homebuyer in Ohio exploring financing options, USDA loans deserve a close look. These government-backed mortgages offer 100% financing and low rates to help rural residents achieve homeownership.
In this comprehensive guide we’ll explain everything you need to know about USDA loans in Ohio including
- USDA Loan Overview
- Benefits of USDA Loans
- USDA Loan Requirements
- How to Apply for USDA Loans in Ohio
- USDA Loan Eligible Homes
- USDA Loan Limits in Ohio
- USDA Loan Interest Rates
- USDA Loans vs. Conventional Loans
Overview of USDA Loans
USDA loans are mortgages insured by the U.S. Department of Agriculture. They help low- to moderate-income homebuyers in rural and suburban areas obtain affordable financing.
USDA loans offer several perks including no down payment requirement low interest rates and flexible credit guidelines. They’re an excellent option for first-time homeowners ready to stop renting.
Nearly 33,000 USDA home loans were issued in Ohio between 2019-2021. So these mortgages are commonly used, especially outside major cities.
Benefits of USDA Loans
A USDA home loan provides the following advantages versus conventional mortgages:
No Down Payment: USDA loans offer 100% financing. No cash is needed for a down payment. You can put your savings toward closing costs instead.
Lower Rates: USDA mortgage rates are typically 0.5 to 1% lower than conventional loans. Lower rates equal lower monthly payments.
Low Mortgage Insurance: Upfront and annual mortgage insurance costs are lower with a USDA loan. This saves borrowers money.
Less Strict Credit Guidelines: USDA has more flexible credit standards than conventional loans. Minimum 620 FICO scores are allowed.
No Income Limits: USDA loans don’t have maximum income caps like other government programs. Your income just must be adequate to repay the mortgage.
For buyers struggling to save for a down payment, USDA loans provide an affordable path to homeownership.
USDA Loan Requirements
To qualify for a USDA home loan in Ohio, you must meet certain eligibility standards:
Income Limits – No maximum income limits, but household income must be adequate to repay mortgage obligations.
Credit Score – Minimum 620 FICO score for all borrowers. No minimum required for manual underwriting.
Debt-to-Income Ratio – DTI of 29%/41% or less with compensating factors.
Homebuyer Education – First-time buyers must complete an approved homebuyer education course.
Property Type – Single family homes, townhomes, manufactured homes, or units in USDA-approved condos/PUDs.
In addition, you must be a U.S. citizen or permanent legal resident and unable to secure traditional financing. Debt issues like foreclosure or bankruptcy must be at least three years in the past.
How To Apply for USDA Loans in Ohio
Follow these steps when applying for USDA mortgages in Ohio:
1. Check Eligibility
Confirm you meet location, income, and credit requirements using USDA’s eligibility tools.
2. Find an Approved Lender
Work with a lender approved to offer USDA mortgages in Ohio. This includes banks, credit unions, and online lenders.
3. Submit Loan Application
Provide financial, employment, and property information. Complete a homebuyer education course if first-time buyer.
4. Get Home Appraised
The lender orders an appraisal to verify the property’s fair market value.
5. Receive Loan Approval
The lender reviews your application and issues a loan decision within 30 days if complete.
6. Close on Your USDA Loan
Finalize loan documents, conduct a final inspection, then close and receive loan funds.
Now you can move into your new home!
USDA Loan Eligible Homes
Not all homes qualify for USDA financing in Ohio. The property must meet these criteria:
Location: Home must be in an eligible rural or suburban area as defined by USDA maps. Check eligibility using USDA’s property eligibility tool.
Purchase Price Limits: Varies by county but typically up to $375,000 for existing homes and $393,000 for new construction.
Occupancy: Home must be owner-occupied as your full-time residence.
Property Type: Single-family homes, townhomes, manufactured housing, and eligible condos/PUDs. Duplexes also permitted with total financing under $882,500.
Condition: Existing homes must be structurally sound, functionally adequate, and in good repair.
Run potential homes through the USDA site to confirm eligibility before making an offer.
USDA Loan Limits in Ohio
The maximum USDA mortgage amount you can borrow depends on which Ohio county you buy in. Here are current purchase price limits for select counties:
| County | Limit (Existing Home) |
|---|---|
| Franklin County | $375,000 |
| Cuyahoga County | $375,000 |
| Hamilton County | $375,000 |
| Summit County | $331,000 |
| Montgomery County | $359,000 |
| Lucas County | $331,000 |
Higher limits up to $393,000 are available for new construction homes. You can look up limits by specific address using USDA’s property eligibility tool.
USDA Loan Interest Rates
Current USDA mortgage rates in Ohio average around 4.75% as of January 2023. Rates fluctuate daily based on market conditions.
Here’s how USDA interest rates typically compare:
| Loan Type | Interest Rate |
|---|---|
| USDA Loan | 4.75% |
| Conventional Loan | 5.5% |
| FHA Loan | 5.25% |
| VA Loan | 4.5% |
So USDA loans offer competitive interest rates that are often lower than both conventional and FHA financing. Lower rates equal lower monthly payments so USDA loans are affordable for borrowers.
USDA Loans vs Conventional Loans
How do USDA home loans stack up against conventional mortgages in Ohio? Here’s a comparison:
Down Payment – USDA requires 0% down vs 3-5% on conventional loans.
Credit Scores – Minimum 620 FICO for USDA vs 620-660 on conventional.
Mortgage Insurance – 1% upfront and 0.35% annual for USDA loans vs 0.5-1% upfront and 0.5-1% annual for conventional.
Interest rates – USDA averages 0.5-1% lower than conventional loan rates.
Loan Amounts – USDA goes up to $375k vs conventional loans with no limits.
Location – USDA restricted to rural areas vs conventional available anywhere.
For buyers who don’t have cash saved for a down payment or don’t quite meet credit requirements, USDA loans provide a great alternative to conventional financing.
The Bottom Line
USDA home loans help first-time buyers in Ohio achieve affordable homeownership. These mortgages offer 100% financing, low rates, and flexible credit standards not seen with conventional loans. They provide a real opportunity for rural and suburban residents ready to stop renting and buy their own home.
In this article, we covered everything Ohio homebuyers need to know about USDA loans from benefits to eligibility and how to apply. Use this as an information guide as you navigate the mortgage process and decide whether a USDA loan is your best option. With their help, you can join the thousands of Ohioans who become homeowners each year.
3 USDA Home Loan Programs
Loan Guarantees
The USDA guarantees a mortgage issued by a participating local lender, similar to an FHA loan and VA-backed loans, allowing you to get low mortgage interest rates, even without a down payment. However, if you put little or no money down, you will have to pay a mortgage insurance premium.
Direct Loans
Issued by the USDA, these mortgages are for low- and very low-income applicants. Income thresholds vary by region. With subsidies, interest rates can be as low as 1%.
Home Improvement Loans and Grants
These loans permit homeowners to repair or upgrade their homes. Packages can also combine a loan and a grant, providing up to $27,500 in assistance.
Advantages of USDA Loans
USDA guaranteed loans aren’t right for every buyer. But, any first-time or repeat buyer looking for homes outside of major cities should check their eligibility for the program.
- Lower down payment than conventional or FHA financing
- Lower mortgage insurance than conventional or FHA loans
- More lenient credit score requirements than for conventional loans
- Unlike VA loans, there is no military service requirement
- The only zero-down loan on the market besides the VA mortgage
Buying a House Using USDA Rural Development Loan ($1,000 DOWN)
FAQ
How to qualify for a USDA loan in Ohio?
Which one is better a USDA loan or an FHA loan?
How high does your credit score need to be for a USDA loan?
What does USDA mean in a mortgage?
Are USDA home loans a good option in Ohio?
USDA is often one of the best alternatives to conventional loans and has helped many families in Ohio achieve their dreams of homeownership. In this blog post, we will discuss USDA Home Loans and all the qualifying and eligibility requirements buyers will need to know. What are USDA Home Loans?
What is a USDA no money down home loan?
USDA will allow the seller to pay all closing costs toward the purchase of the home or, closing costs can be financed directly into the loan. This is a no money down home loan for buyers looking to purchase a home in eligible areas of Ohio, and insured/guaranteed by the government.
What is a no money down home loan in Ohio?
This is a no money down home loan for buyers looking to purchase a home in eligible areas of Ohio, and insured/guaranteed by the government. Maximum loan limit is up to $417,000, and rates on a Ohio Rural Development loan are fixed and very competitive.
Where can I buy a home with USDA financing?
The program is designed to help low to moderate-income households purchase homes in rural-defined locations in the U.S. Many locations in Ohio, even suburbs just outside of Cleveland, Cincinnati, and Columbus are still eligible for USDA financing.