In 2024, the US mortgage application rejection rate increased to 20.7%. The biggest reason? Bad credit scores! But here’s the good news: even with a less-than-perfect credit score, there are ways to own a home in the Buckeye State.
Ohio offers various loan programs, such as FHA, USDA, and VA loans, with lower down payments and flexible credit requirements. Apart from that, state-specific loan options are also available to help you navigate the home-buying process. So, start your search now!
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5 Steps to Buy a House With Bad Credit in Ohio
16% of Americans have a poor credit score. If you fall into this category, here’s how you can still buy a home with bad credit in Ohio:
Step 1: Review Your Credit Score
Before you buy a house in Ohio, check your credit report for errors and negative marks that could affect your credit score. If you find mistakes on your credit report, you can dispute them directly with the credit bureau.
Step 2: Look for Mortgage Options With Bad Credit
Not all loans are available for bad credit in Ohio. However, some options can help you buying a home with bad credit. Here’s a list of bad credit loans Ohio and their minimum requirements:
- Conventional Loans: The minimum credit score required for conventional loans is 620 for Fannie Mae and 660 for Freddie Mac. However, a 3% down payment is mandatory.
- FHA Loans: With FHA loans, you can buy a house with a credit score as low as 500 with a 10% down payment. If your score is 580 or above, you can put 3.5% down. However, you can only use FHA loans to purchase a primary residence.
- VA Loans: VA loans are ideal for active-duty military and their spouses in Ohio, home to 830,000 veterans (the sixth-largest veteran population). While VA loans have no strict credit score requirement, most lenders prefer a minimum score of 620.
- USDA Loans: The US Department of Agriculture offers USDA loans to encourage homeownership in rural areas like Columbus, Cleveland, and Cincinnati. While the loans don’t have a minimum credit score, lenders prefer a score of 620 or above.
Step 3: Consider Subprime Lenders
Subprime lenders, like the Ohio Housing Finance Agency (OHFA), offer mortgages tailored for people with bad credit in Ohio. They evaluate factors such as your employment history, income, and ability to pay down, rather than relying solely on credit scores.
These lenders also provide flexible loan terms and accept a higher debt-to-income ratio, often 50% or more for subprime mortgages. However, DTI requirements can vary by lender and loan type, which makes it easier for you to secure financing.
Step 4: Save for a Larger Down Payment
For traditional mortgages in Ohio, the minimum down payment typically ranges from 3% to 20%. However, if you have a bad credit score, a minimum of 10% is usually required.
In the Ohio real estate market, a larger down payment can improve your chances of securing a loan. Lenders also view this as a sign of financial responsibility.
Step 5: Get Pre-Approved
For first-time home buyers in Ohio, a mortgage preapproval is important, especially for those with bad credit scores. It informs you about your mortgage interest rate and monthly payments, and helps you manage your finances better.
How to Get Ohio Loans With Bad Credit?
It can be challenging to get a home loans for bad credit Ohio. But it is possible if you have the right approach. Here’s what to do:
- Pay Off Existing Debt: Before you buy a house in Ohio with bad credit, you should pay back the money you already owe. OH lenders often consider a manageable debt-to-income ratio below 36% as a sign of financial stability.
- Budget Wisely: Factor the cost of living in Ohio into your home-buying budget. This includes utilities, insurance, property taxes, and transportation costs.
- Get a Co-Signed Mortgage: Look for a co-signer with a strong credit score to strengthen your loan application. This person will be responsible for paying back the co-signed mortgage if you default on payments.
- Explore Florida-Specific Programs: Ohio offers programs like the Ohio Housing Finance Agency Homebuyer Program to help buyers with bad credit. It assists low-to-moderate-income residents with lenient credit requirements if their income is 120% or less of their county’s median household income.
- Understand the Mortgage Application Process: You must be well-versed with Ohio’s mortgage requirements, including state disclosures and lender criteria. Prepare documents like income proof and credit explanations to strengthen your application with Ohio lenders.
3 Best Bad Credit Mortgage Lenders in Ohio
1. New American Funding
New American Funding, a highly regarded lender with a $70 billion home loan portfolio, provides various options for borrowers with less than ideal credit.
- ‘Pathway to Homeownership’ Program: Provides qualified buyers in specific areas with financial assistance of up to $8,000 in down payment and closing costs.
- ‘I Can’ Mortgage Program: Offers a large range of loan options for primary residences, such as single-family homes, townhouses, and condominiums.
Some highlights of New American Funding include:
- No Repayment Required: The assistance provided by the ‘Pathway to Ownership’ Program is not a loan. It does not require repayment for first-time homebuyers.
- 14-Day Closing Guarantee: The lender offers a 14-business-day closing guarantee, which ensures quick credit approvals, streamlined loan processing, and fast underwriting.
- Variety of Mortgage Options: New American Funding provides conforming, government-backed, non-QM, and ADU loans to meet most borrowers’ needs.
Here are a few deal-breakers of New American Funding:
- High Fees: According to customer reviews, the company’s fees are higher than those of other lenders.
- Lender Fees Not Disclosed Online: New American Funding does not provide detailed information about their lender fees on their website.
New American Funding has an impressive rating of 4.7 out of 5 stars, based on 950+ reviews on Trustpilot.
2. AmeriSave Mortgage
AmeriSave Mortgage is an online mortgage lender. The corporation has provided over $130 billion in home loans since their establishment over 20 years ago. They offer:
- Mortgage Rate Buydown Program: With this program, you can lower your mortgage rate by 1 percentage point in the first year. You also get a $750 credit towards a future refinance with them.
- Loans for Bad Credit: The lender offers FHA, VA, and USDA loans for buyers with bad credit. These come with easier credit qualifications and lower down payment requirements than conventional loans.
- ‘Ready Buyer’ Pre-approval: AmeriSave Mortgage boasts a quick pre-approval process, that helps you move quickly when you find the right home.
The following are highlights of AmeriSave Mortgage:
- Attractive Loan Terms: AmeriSave offers a wide range of fixed loan terms with no origination fees and highly competitive rates.
- Quick Pre-qualification: Its fast pre-qualifications, with a custom rate quote and no credit pull, make it easier for buyers with bad credit to explore their options.
- Transparent Pricing: AmeriSave offers a flat-fee structure, which simplifies costs and helps you budget better when purchasing a home.
However, here are some deal-breakers for AmeriSave Mortgage:
- Online-Only Service: AmeriSave has no branch locations, which may be inconvenient.
- Personal Details Required: To view rates, you need to submit your personal information for tailored loan options.
The Better Business Bureau has accredited the lender with an A+ rating. AmeriSave Mortgage also has a rating of 4.5 out of 5 stars, based on 14k+ reviews on Trustpilot.
3. Magnolia Bank
Magnolia Bank’s mortgage division is a leading bank originator that issues over $1 billion in home loans annually. Its services include:
- Easy-to-Use Tools: The bank offers essential financial calculators to simplify your mortgage and refinancing choices.
- FHA Loans for Bad Credit: If your credit score is poor, you can get an FHA loan, provided your credit score is at least 580.
- Diverse Loan Options: Magnolia Bank also offers mortgage refinancing rates and reverse mortgages.
Magnolia Bank has the following highlights:
- Low Down Payment: FHA loans require just 3.5% down, which makes homeownership accessible for buyers with limited savings.
- Easy Pre-qualification: You have the option to check your mortgage eligibility online.
- Expert Loan Assistance: Dedicated loan officers provide personalized guidance for unique financial needs.
However, here are some deal-breakers you need to know about:
- No Home Equity Loans: Magnolia Bank does not offer traditional home equity loans.
- Limited Discounts: The lender does not offer lender credits or discounts.
Magnolia Bank has a solid 4.3 out of 5 stars, based on 25 reviews on TrustPilot.
Can I Get a Mortgage With Bad Credit?
Yes! You can get a mortgage with bad credit in Ohio. There are various options available for buyers in this situation. FHA loans need a minimum credit score of 500 with a 10% down payment, while VA loans for veterans have no strict credit score requirements.
Apart from that, lenders also assess more than just your credit score; they also consider your income, savings, and overall financial situation. So, don’t wait! Make your dream of homeownership in Ohio come true today!
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Frequently Asked Questions
Can I get loans for bad credit in Ohio?
Yes. It's possible to get a loan with bad credit in Ohio. You can avail of the First-Time Homebuyer Program or opt for government-backed loans that accept low credit scores.
What are the best loan options in Ohio for buyers with bad credit?
FHA loans are most popular for buyers with bad credit in Ohio. You can also consider USDA loans for rural areas, and VA loans for veterans.
How much down payment is required to buy a house with bad credit in Ohio?
In Ohio, FHA loans require a down payment of 10% if your credit score is below 500. If your score is 580 or higher, you may qualify for 3.5% down.
How can I improve my chances of buying a home in Ohio with bad credit?
There are some steps to buy a house with bad credit in Ohio, like make a large down payment, reduce your debt-to-income ratio, and correct errors on your credit report.
