What Is a USDA Loan?

USDA loan is a government-backed home loan that can help individuals and families purchase homes in rural and suburban areas. These loans stand out from conventional and non-QM mortgages for their unique eligibility requirements and benefits for eligible borrowers in qualifying regions.

USDA loans offer financial assistance to home buyers with low to moderate income in areas where traditional financing might be challenging to obtain. With minimal or no down payment requirements and competitive interest rates, USDA loans provide an accessible avenue for aspiring homeowners in Ohio to achieve their homeownership goals in less densely populated areas.

USDA Loans vs FHA Loans

If you’re in the market for an affordable mortgage program to help you purchase a property in Ohio, there are two popular options many consider: USDA and FHA loans.

These government-backed programs offer accessible financing solutions for home buyers with varying needs and circumstances. While both aim to make homeownership more attainable, they differ in eligibility requirements, down payment requirements, and other key aspects. Here are some key differences between USDA and FHA loans:

  • Property eligibility: USDA loans are limited to homes in designated rural and suburban areas, while FHA loans can be used for properties in both rural and urban areas.
  • Down payment: USDA Loans often require no down payment, while FHA loans require a down payment of at least 3.5%.
  • Income limits: USDA loans have income limits based on the area’s median income, whereas FHA loans don’t have strict income limits.
  • Mortgage insurance: USDA loans have an upfront and annual guarantee fee, while FHA loans have an upfront and ongoing mortgage insurance premium (MIP).
  • Credit requirements: USDA loans may have more flexible credit requirements than FHA loans, although both programs consider credit history in the approval process.

USDA Loan Requirements in Ohio

Understanding the specific USDA loan requirements in Ohio can help you streamline the application process. These loans come with unique criteria set by the USDA to ensure they’re used by individuals and families who actually need them. Key requirements you’ll need to meet to qualify for an Ohio USDA mortgage are:

  • Property location: Ensure that the property you’re interested in is situated within a designated rural or suburban area as defined by the USDA.
  • Income limits: Verify that your household income falls within the limits set by the USDA based on the area’s median income.
  • Primary residence: Commit to residing in the purchased property as your primary residence within a reasonable timeframe after closing on the loan.
  • Property eligibility: Confirm that the property meets the USDA’s standards regarding its size, safety, and sanitation, adhering to specific guidelines outlined by the program.
  • Guarantee fees: Be aware that USDA loans require an upfront guarantee fee of 1% of the loan amount and an annual fee of 0.35% in 2024. While these fees may be rolled into the loan amount, they increase the overall cost of homeownership.

Pros and Cons of USDA Mortgages in Ohio

While USDA loans come with unique benefits for eligible borrowers, they also come with considerations you should be aware of. Let’s explore the pros and cons of USDA loans to help you make the right choice:

Pros of USDA mortgages in Ohio include:

  • Zero down payment: USDA loans typically don’t require a down payment, allowing you to finance 100% of the loan and making homeownership more accessible for borrowers with limited savings.
  • Competitive interest rates: Because USDA loans are backed by the USDA, they typically come with less risk for the lender. Because of this, these loans typically offer competitive interest rates.
  • Flexible credit requirements: USDA loans may have more lenient credit criteria compared to conventional mortgages, allowing borrowers with lower credit scores.
  • Streamline refinance: If you already have a USDA loan and a lower interest rate becomes available, you can streamline your refinancing process without the need for an appraisal, credit review, or income documentation.

Cons of Ohio USDA mortgages are:

  • Property location restrictions: USDA loans are only available for properties located in USDA- designated rural or suburban areas, which may limit your options.
  • Income limits: Borrowers must meet income limits, which may disqualify those with higher incomes or who exceed the area’s median income.
  • Guarantee fees: USDA loans require upfront and annual guarantee fees, which can increase the overall cost of homeownership.
  • Processing time: Because the USDA is involved in the approval process, USDA loans may take longer to process than conventional mortgages and other home loans offered by private lenders.

How to Qualify for a USDA Home Loan in Ohio

In addition to meeting the USDA’s requirements, you’ll also have to meet your specific lender’s criteria, which include:

  • Credit score: USDA lenders in Ohio typically assess your credit score to evaluate your creditworthiness. While there’s no strict minimum requirement for USDA loans, a higher credit score can improve your chances of approval.
  • Debt-to-income (DTI) ratio: Most lenders prefer a DTI ratio of 41% or lower, although your lender might allow higher DTI depending on other financial factors like your credit score.
  • Waiting period after bankruptcy/foreclosure: If you’ve gone through bankruptcy or foreclosure, lenders typically require a three-year waiting period before you can apply for a USDA loan.
  • Income requirements: USDA lenders in Ohio evaluate your income to ensure you can afford the mortgage payments and don’t exceed the limits set by the USDA. While USDA loans have income limits, lenders may also consider your income stability and employment history.
  • Property eligibility: Lenders verify that the property meets USDA requirements regarding its location, size, safety, and sanitation.

Want to know if you qualify for a USDA loan in Ohio? Download the Griffin Gold app today to explore your financing options.

Work With a Trusted USDA Lender in Ohio

Looking to buy a home in Ohio with a USDA Loan? Griffin Funding is a top lender for hassle-free financing. With our expertise in USDA loans and commitment to customer satisfaction, we simplify the process, helping you secure the financing you need to make your homeownership dreams a reality.

Apply for a home loan with Griffin Funding today.