Buying a Home in Ohio with USDA Loans

Purchasing a home is an exciting milestone, but it can also be intimidating, especially when trying to find the right mortgage loan. For prospective homeowners in rural areas and small towns of Ohio, USDA home loans offer affordable financing options. Keep reading to learn more about how these government-backed loans work and see if you might qualify for one.

Overview of USDA Home Loans

USDA home loans, also known as Section 502 direct loans, are mortgages insured by the U.S. Department of Agriculture (USDA). They help low- to moderate-income buyers in eligible rural areas and small communities obtain home financing

Some key features of USDA loans include:

• No Down Payment Required USDA loans don’t require any down payment unlike conventional loans that typically need at least 3-20%. This makes it easier to qualify.

• Low Interest Rates: Interest rates on USDA loans are fixed and below market rates, making monthly payments more affordable. Rates currently start around 4.75%.

• Flexible Credit Guidelines USDA has more flexible credit standards than conventional loans, so you may qualify even with a lower credit score or other credit issues

• Low Mortgage Insurance: USDA loans require an upfront guarantee fee of 1% of the loan amount and ongoing annual fees of 0.35-0.5% of the loan balance. This is less than FHA loans.

• No Income Limits: There are no maximum income limits to qualify for a USDA loan. You just have to be below the income threshold for your area.

• Down Payment Assistance: Some borrowers may qualify for a subsidized “payment assistance” loan that covers a portion of their mortgage payment for up to 3 years.

Checking Your Eligibility

To qualify for a USDA home loan in Ohio, you must meet certain eligibility criteria:

• Location: The home must be located in a USDA-designated rural or suburban area. You can check your address on the USDA Property Eligibility Site. Over 75% of Ohio’s land area qualifies.

• Income: Your household income must be below the limit for your county’s median income. Limits range from $64,000 to $103,000 depending on location.

• Credit: You must have a credit score of at least 640. Some exceptions can be made for those with lower scores.

• Debt-to-Income Ratio: Your total monthly debt payments, including the new mortgage, should be less than 41% of your gross monthly income.

• Citizenship: You must be a U.S. citizen, U.S. non‐citizen national, or qualified alien.

• Home Type: Single family homes, townhomes, and condos are eligible. Manufactured and mobile homes are also allowed if built after June 1976.

• Usage: You must make the home your principal residence and live there full-time.

How to Apply for a USDA Home Loan in Ohio

If you meet the basic eligibility requirements, follow these steps to get a USDA loan in Ohio:

• Get Pre-Qualified: Work with a USDA-approved lender to go through the pre-approval process. This involves documenting your income, assets, debts, and credit history.

• Find a Home: Once pre-qualified, you can start home shopping! Only focus on homes in USDA-eligible areas within your approved price range.

• Make an Offer: When you find the perfect home, make an offer contingent upon getting USDA loan approval. Allow extra time for the appraisal and underwriting process.

• Complete Loan Application: Your lender will guide you through the full loan application, including paperwork to verify your financial situation. Rural Development reviews and gives final approval.

• Close on Your Home: The final steps are the home inspection, appraisal, and closing. Then you can move into your new home!

It’s a good idea to get pre-qualified early so you know your price range. The entire process typically takes 30-60 days from completed application to closing.

USDA Lenders in Ohio

You can work with any USDA-approved lender to get a USDA home loan in Ohio. Here are a few top lenders known for great customer service:

• Guaranteed Rate – National lender with several branches across Ohio. www.rate.com

• eLEND – Online lender available in all 50 states. www.elend.com

• New American Funding – Large retail lender based in Ohio. www.newamericanfunding.com

• Supreme Lending – Regional lender with 10+ branches in Ohio. www.supremelending.com

• Caliber Home Loans – Nationwide lender with a strong Ohio presence. www.caliberhomeloans.com

Shop around and compare mortgage rates and fees from multiple lenders. Going with an experienced USDA lender can help ensure a smooth home buying process.

Alternatives to USDA Loans

Some other home loan programs available in Ohio besides USDA include:

• FHA loans – Best for low down payments and lower credit scores. www.fha.com

• VA loans – For veterans and active military. No down payment required. www.valoans.com

• OHFA first-time buyer loans – Down payment help for qualifying first-timers. www.ohiohome.org

• Conventional 97 loans – Only 3% down payment needed. www.fanniemae.com

Compare all programs you’re eligible for. While USDA loans have excellent benefits, it depends on your specific situation. Connect with a trusted loan officer to discuss your options.

Tips for Getting Approved for a USDA Home Loan

Here are some tips to increase your chances of getting approved for a USDA home loan in Ohio:

• Improve your credit – Pay down debts, avoid new credit applications, correct errors on your reports

• Save for closing costs – Expect to pay around 3-6% of the loan amount at closing

• Lower your debt-to-income ratio – Pay down revolving balances like credit cards

• Provide all documentation – W2s, tax returns, bank statements, etc. Avoid delays

• Add a co-borrower – A co-signer with better credit can help you qualify

• Explain credit issues – Write a letter of explanation for any red flags on your application

With proper preparation, documentation, and a little patience, you can get approved for an affordable USDA home loan in Ohio. This can help you achieve the dream of homeownership if your finances currently hold you back from a conventional mortgage.

Finding a USDA-Eligible Home

Focus your Ohio home search on properties that meet USDA’s location and home type requirements. Here are some tips:

• Check the USDA Property Eligibility Site by address to validate rural status

• Search real estate sites for homes labeled as USDA-eligible

• Look in small towns and communities outside of big metro areas

• Avoid large suburban subdivisions zoned as “urban” instead of rural

• Consider attached housing and condos to maximize affordability

• Seek homes advertised as accepting USDA financing

• Get pre-approved first so you know your exact budget

With programs subsidizing both home purchases and repairs, USDA loans open doors to buyers who may have thought owning was out of reach. Connect with a USDA specialist to start the path to affordable homeownership.