When applying for a mortgage, a popular option is a loan backed by the Federal Housing Administration (FHA) because of its lenient eligibility requirements. However, FHA loans come with annual loan limits that restrict how much house a borrower can buy. In Ohio, the FHA loan limit in 2024 for a single-family home is $498,257 — except in high-cost areas, where the maximum is $546,250.
The Federal Housing Administration’s mortgage insurance program has helped millions of Americans realize their dream of homeownership FHA loans offer flexible credit requirements and low down payments, making them popular with first-time homebuyers and those with limited savings However, FHA home loans do come with specific eligibility criteria borrowers must meet. This comprehensive guide covers everything you need to know about FHA loan requirements in Ohio, including credit scores, down payments, and debt-to-income ratios.
Overview of FHA Loans
FHA loans are government-insured mortgages that require a low down payment of just 3.5%. Borrowers pay an upfront mortgage insurance premium at closing and an annual premium included in the monthly payments. This protects the lender from taking losses if the borrower defaults.
With an FHA loan you can finance up to 96.5% of the home’s purchase price. The minimum credit score is 580 for those making a 3.5% down payment. With a 10% down payment, the minimum score drops to 500. There are no income limits.
FHA loans offer flexible guidelines for borrowers who may not qualify for conventional mortgages with stricter requirements. If your finances have improved since a past credit problem an FHA loan can help you get approved.
FHA Loan Limits in Ohio
The maximum FHA loan amount you can borrow depends on the county where the home is located. Most Ohio counties have a limit of $498,257 for a single-family home in 2024. However, for properties in higher-cost areas like Delaware, Fairfield, Franklin, Hocking, Licking, Madison, Morrow, Perry, Pickaway, and Union counties, the limit rises to $546,250.
You can also use an FHA loan to buy a 2-4 unit multifamily property in Ohio as long as you live in one of the units. Here are the FHA loan limits based on the number of units:
- 2 units: $637,950
- 3 units: $771,125
- 4 units: $958,350
FHA Loan Requirements in Ohio
While FHA loans offer more flexible qualifying guidelines than conventional mortgages, you still must meet certain criteria. Here are the key eligibility factors lenders will evaluate:
Credit Score
For borrowers making a minimum 3.5% down payment, the minimum FHA credit score requirement is 580. If you put down 10% or more, you can qualify with a 500 credit score. The higher your score, the better your interest rate and overall loan terms will be.
Lenders may make exceptions for certain borrowers with scores below 580 who have additional cash reserves or residual income.
Down Payment
The minimum down payment for an FHA loan is 3.5% of the purchase price. So if you buy a $250,000 house, your down payment would be $8,750. You also have the option of making a down payment of up to 10% if you want to get a lower interest rate.
The down payment can come from your own savings, gifts from relatives, grants, your employer, or other sources.
Debt-to-Income Ratio
Your debt-to-income (DTI) ratio compares your total monthly debt payments to your gross monthly income. FHA lenders generally want to see your DTI at 43% or lower. They may approve DTIs up to 50% with good credit scores and cash reserves.
To calculate DTI:
Total Monthly Debt Payments / Gross Monthly Income x 100 = DTI %
For example, if your total monthly debt is $2,000 and your gross monthly income is $5,000, your DTI is 40% ($2,000 / $5,000 x 100 = 40%).
Cash Reserves
If you have a thin credit file or past credit problems, the lender may require 1-3 months of mortgage payments available in your bank account. These reserves provide a financial cushion in case you lose your job or have another disruption.
Homebuyer Education
First-time homebuyers must complete a HUD-approved homebuyer education course to qualify for an FHA loan in Ohio. This helps prepare you for taking on a mortgage.
Occupancy and Property Types
You must plan to use the home as your primary residence for at least a year. FHA loans can be used to purchase single-family homes, townhomes, condos and 2-4 unit homes. Manufactured and mobile homes also qualify.
Credit History
Lenders will review your credit report to see your history of repaying debts. In most cases, you need at least 3.5% down and a 580 FICO score if you’ve had a bankruptcy or foreclosure in the past three years. Major derogatory events older than that are not an automatic disqualifier.
Documents Needed for an FHA Loan
When you apply for an FHA mortgage, you’ll need to provide various documents to verify your identity, income, assets, and eligibility. Here are some common items the lender will request:
- Photo ID
- Social Security card
- W-2s and tax returns
- Pay stubs covering the last 30 days
- Bank statements
- Retirement and investment account statements
- Proof of homebuyer education completion
- Divorce decree or separation agreement
- Documentation of gift funds
Self-employed borrowers may need to provide additional documentation such as business tax returns and profit/loss statements.
Finding an FHA Lender in Ohio
There are hundreds of FHA-approved lenders in Ohio you can work with to get a mortgage. This includes banks, credit unions, and online lenders. Be sure to shop around and compare interest rates and fees. Here are a few top lenders to consider:
- Quicken Loans
- LoanDepot
- Fairway Independent Mortgage Corp
- CrossCountry Mortgage
- Absolute Mortgage Company
Reach out to multiple lenders to see who can offer you the best FHA loan terms. Pay attention to origination fees, closing costs, and of course, the interest rate. Even a small difference of 0.25% in rate can save you thousands over the loan’s term.
Alternatives to FHA Loans
FHA loans give homebuyers flexibility, but they aren’t the only option out there. Here are a few alternatives to consider:
Conventional 97: This program offered by Freddie Mac and Fannie Mae allows a 3% down payment on a conventional loan. Mortgage insurance is still required. Credit score and income minimums are higher.
VA Loans: These zero-down payment mortgages are for veterans and service members. No mortgage insurance is required. Credit score minimum is 620.
USDA Loans: For low-income buyers in rural areas, USDA loans offer 100% financing. Credit score and income limits apply.
Down payment assistance programs: First-time buyers may qualify for down payment help from nonprofit organizations, state housing agencies, or employers. These can supplement your own funds.
Be sure to discuss all your options with a loan officer. They can help you find the right mortgage product to fit your financial situation.
Wrap Up
FHA loans open the door to homeownership for buyers who can’t afford a large down payment or have less-than-perfect credit. Just be sure you understand the requirements and have your financial documentation in order before applying. This ensures a smooth process from pre-approval to closing day!
How are FHA loan limits determined?
Each year, the FHA resets the loan limits according to the guidelines listed in the National Housing Act. To do so, it uses a percentage of the national conforming loan limit set by the Federal Housing Finance Agency (FHFA) for conventional mortgages guaranteed or owned by Fannie Mae or Freddie Mac.
The FHFA set the 2024 national conforming loan limit at $766,550 for the purchase of a one-unit property. To set the “floor,” or the lowest maximum loan amount, the FHA took 65% of this amount, or $498,257. Most counties in the country utilize this loan limit. For areas where the cost of living is higher, the FHA set a “ceiling,” or highest loan amount limit, of $1,149,825, which is 150 percent of the national conforming limit. In areas in Alaska, Hawaii, Guam and the U.S. Virgin Islands where building costs are even higher, the ceiling could be higher.
How to qualify for an FHA loan in Ohio
To qualify for FHA loans in Ohio, homebuyers will need to share employment history, a record of income and other personal and financial information. While eligibility requirements can be less stringent than those with a conventional mortgage, borrowers still have to demonstrate an ability to repay the loan as well as pay a down payment and all closing costs when finalizing the property purchase. As such, lenders will review the following:
→ Credit score: For borrowers paying 3.5% down on the loan, the minimum credit score is 580; the minimum credit score drops to 500 for borrowers paying 10% down.
→ Debt-to-income (DTI) ratio: DTI ratio refers to your total monthly debt divided by your gross monthly income. The maximum DTI ratio for FHA loans is 43%; for borrowers with high credit scores and sufficient cash reserves, the DTI ratio could be higher.
→ Mortgage insurance: FHA loans require borrowers to pay for mortgage insurance to help offset the risk that comes with lower down payment and credit score requirements. Borrowers are required to pay for both upfront and annual mortgage insurance premiums.
→ Income limits: There are no income limits for FHA loans.
→ Residency: All FHA borrowers must use the property as their primary residence for a minimum of one year.
→ Cash reserves: If borrowers have fair or poor credit, the lender may require them to maintain a minimum amount of cash reserves to cover several months of mortgage payments.
The Good and BAD of FHA Loans | NEW FHA Loan Requirements 2023
FAQ
What are the requirements for an FHA loan in Ohio?
What will disqualify you from an FHA loan?
Is it hard to get an FHA loan?
How do I get a home loan in Ohio?
Find an OHFA-approved lender in your area, along with tips to help you with the application process, or call us toll-free at 888.362.6432. For advice on improving your credit score, please contact a HUD-approved counseling agency in Ohio. Homebuyers must meet debt to income ratios for their loan type.
What are the FHA loan requirements?
FHA loan requirements include a minimum credit score of 500 as well as limits on your total monthly debt load. Some or all of the mortgage lenders featured on our site are advertising partners of NerdWallet, but this does not influence our evaluations, lender star ratings or the order in which lenders are listed on the page.
How do I qualify for an FHA loan in Ohio?
In addition to loan limits, to qualify for an FHA loan you must live in the home as your primary residence. If you’re purchasing a multi-family home, the monthly Fair Market Rent (FMR) for the property must exceed 1% of the purchase price. FHA loans cannot be used for commercial real estate investment purposes or “flipping” homes in Ohio.
Can OHFA help you buy a home in Ohio?
The Ohio Housing Finance Agency’s (OHFA) homeownership products can help. Thousands of low- and moderate-income Ohioans have purchased homes of their own thanks to OHFA. The competitive interest rates and mortgage options on our 30-year, fixed-rate mortgage loans make it affordable for qualifying buyers to realize the dream of homeownership.