FHA Loan Requirements in Ohio – Everything You Need to Know

Buying a home is an exciting time, but it can also be overwhelming trying to understand all the loan options and requirements. If you’re looking for a low down payment mortgage in Ohio, FHA loans are a great choice to consider. With an FHA loan, you can purchase a home with as little as 3.5% down and have flexible credit requirements. However, there are some specific FHA loan requirements you need to be aware of. In this article, we’ll break down everything you need to know about FHA loan requirements in Ohio.

Overview of FHA Loans

FHA loans are government-insured mortgages backed by the Federal Housing Administration (FHA). The FHA insures these loans, so lenders can offer lower down payments lower credit scores and more flexible qualifying guidelines versus conventional loans. Here are some key advantage of FHA loans

• Low Down Payments – Only 3.5% down required for qualified borrowers. On a $300,000 home, that’s just $10,500.

• Lenient Credit Requirements – Minimum 580 FICO score required in most cases. Lower scores may also qualify with additional downpayment.

• Low Mortgage Insurance – Upfront 1,75% insurance premium and 085% annual mortgage insurance, Cancelable after 11 years for most borrowers

• Low Closing Costs – FHA caps allowable fees lenders can charge. This keeps closing costs lower.

• Gift Funds Allowed – Can use gifts from family for downpayment and closing costs.

While FHA loans offer more flexible qualifying, there are requirements you must meet to be eligible. Let’s take a closer look at the key FHA loan requirements in Ohio.

FHA Loan Limits in Ohio

The first thing to check is whether the FHA loan limits in your county allow for the purchase price and down payment you need. Here are the 2023 FHA loan limits for Ohio:

• 1-Unit Home Loan Limit: $433,080

• 2-Unit Home Loan Limit: $544,250

• 3-Unit Home Loan Limit: $651,050

• 4-Unit Home Loan Limit: $824,375

These are the baseline maximum FHA loan amounts for most Ohio counties. However, in high cost counties like Franklin, Delaware, Licking, and others, the FHA limits go up to $1,048,800. You can check the FHA loan limits by county using the FHA loan limit lookup tool.

Minimum FHA Down Payment and Mortgage Insurance

To qualify for an FHA loan in Ohio, you’ll need at least a 3.5% down payment. On a $300,000 home purchase, that would be $10,500 minimum. You also must pay the upfront mortgage insurance premium of 1.75% of the loan amount and the annual mortgage insurance premium of 0.85% of the loan amount.

This mortgage insurance protects the lender in case you default. FHA allows this insurance premium to be rolled into the loan amount so you don’t have to pay it upfront.

FHA Credit Score Requirements

To qualify for the best FHA interest rates, you’ll generally need a minimum credit score of 580. Some lenders may approve scores as low as 500 with strong compensating factors. The higher your credit score, the better FHA loan terms you can qualify for.

Here are sample FHA interest rates in Ohio for different credit score ranges:

• Credit Scores 500-579: estimated 4.25% – 5.25%
• Credit Scores 580-669: estimated 3.75% – 4.75%
• Credit Scores 670+: estimated 3.25% – 4.25%

In addition to your score, lenders will review your credit report and look for at least 2 years of established credit history. Collections, judgments, foreclosures, and bankruptcies within the past 1-2 years can lead to denial.

Debt-to-Income Ratio Limits

Your front-end and back-end debt-to-income (DTI) ratios are important in qualifying for an FHA loan. Here are the FHA DTI requirements:

Front-End DTI: This includes your mortgage payment (principal, interest, taxes, insurance) divided by your gross monthly income. It can’t exceed 31% in most cases.

Back-End DTI: This includes all your monthly debt payments including credit cards, auto loans, student loans, child support, etc divided by your gross monthly income. It can’t exceed 43% in most cases.

Some lenders may allow exceptions above these limits, but the higher your DTI, the harder qualifying becomes. Having a DTI in the 30-36% front end and below 43% back end range is recommended for an easier approval process.

Required FHA Home Inspection

To complete an FHA loan, a home inspection must be conducted by a certified FHA inspector. They will check for any structural or safety issues that need to be repaired prior to closing. Common items noted include cracks in foundation, faulty electrical, leaks, or outdated roofing.

If repairs costing more than $500 are required, the seller typically has to fix these issues. Any inspection repairs must be completed for the FHA loan to be eligible.

FHA Appraisal Requirements

An FHA appraisal has additional requirements compared to a conventional mortgage:

• Performed by an FHA approved appraiser

• Includes both interior and exterior inspection

• Appraiser confirms home is safe, sound, and structurally sound

• Detailed checklist completed testing functionality of mechanical systems, foundation, roof, etc.

The appraised value must come in at or above the purchase price, or the difference must be covered by a larger downpayment.

Additional FHA Loan Requirements

Beyond the major requirements above, you’ll also need to meet these stipulations to qualify for an FHA loan in Ohio:

• Have at least 2 years of employment history in the same line of work

• Have income that can be verified and is stable

• Have a bankruptcy discharge at least 2 years old if applicable

• Have at least 6 months reserves after closing for mortgage payment and other debt

• Occupy the home as your primary residence

• Pass a background check

• Not currently be delinquent on any federal debt

• Intend to keep the home long term and not use for investment

Finding an FHA Lender in Ohio

There are hundreds of lenders in Ohio that offer FHA loans. This includes national lenders, local banks and credit unions, and online mortgage companies. Be sure to shop rates from multiple FHA lenders to find the best deal.

When comparing FHA loan offers, look at both interest rates and fees/closing costs. Taking the lender with the lowest rate doesn’t always mean the best deal once you calculate the final costs. Leverage an online marketplace like LendingTree to quickly view multiple lender offers side by side.

The Bottom Line

FHA loans can be a great mortgage option for Ohio homebuyers that need flexible qualifying standards. Just be sure you understand all the FHA requirements upfront, and pick an experienced FHA lender to guide you through the process. This will set you up for success in getting approved and finding the best FHA mortgage rate for your situation.