Lowering the Cost of a New Home in Ohio, Two Tools Worth Understanding

Almost every buyer walks in with the same question. How do I make this affordable. There are two levers that get talked about constantly and understood rarely. One is the mortgage rate buydown, which changes what you pay each month. The other is down payment assistance, which changes what you need to bring to closing. They solve different problems, they can sometimes be used together, and both have rules that catch people off guard. If you are still deciding between a new build and an existing home, we compared the two here.

Part one, what a rate buydown really does

A buydown means somebody pays money up front so the interest rate on your loan is lower than it otherwise would be. The money has to come from somewhere, and who pays it and for how long is what separates the two kinds.

The temporary buydown, year by year. A temporary buydown does not change your loan. Your note, your loan amount and your permanent payment are all exactly what they would have been. What changes is that a separate escrow account is funded at closing, and each month that account contributes the difference between your reduced payment and your real payment. You send the smaller amount. The servicer pulls the rest from escrow and the lender gets paid in full.

The common structure is a 2-1 buydown. Year one your payment is calculated as if your rate were two points lower. Year two, one point lower. Year three the escrow is empty, the subsidy stops, and you pay the full note payment for the remaining twenty eight years.

That third year is the part people miss. Nothing gradual happens. The payment steps up on the first payment of month twenty five and stays there. Fannie Mae caps the buydown period at three years, caps total reduction at three points, and requires the increase not exceed one point per year.

Two rules protect you. First, you are qualified at the real rate. The lender must underwrite you on the note rate with no consideration of the bought down rate, so you cannot use a buydown to squeeze into a house you could not otherwise afford. Second, the money is not forfeited if your plans change. Buydown funds sit in a custodial account. Refinance or pay off early and the remaining balance is credited to your payoff or returned. Sell to a buyer who assumes the loan and the funds can keep reducing payments. Read your agreement and find out which applies.

The permanent buydown. Discount points. You pay a fee at closing and the note rate itself is lower for the life of the loan. No escrow, no step up, no expiration.

The comparison that matters is not which has the lower first year payment, the temporary one always will. It is how long you plan to keep the loan. Spend a fixed amount on a two year temporary buydown and the payment starts well below the permanent option, then climbs past it in year three and stays higher forever. Spend the same on points and you never get the dramatic first year, but you save a smaller amount every month for as long as you own the loan. In the illustration they break even a little under five years in.

If you expect to refinance or move within a few years, the temporary structure puts the benefit where you will be. If you expect to hold, the permanent buydown quietly wins and keeps winning.

Who pays. Buydown money can come from the seller, builder, lender or buyer. Most often on a new home it comes from an interested party, meaning anyone with a stake in the transaction closing. That matters because those contributions are capped. Conventional primary residence, the cap is three percent of value above ninety percent loan to value, six percent between roughly seventy five and ninety, nine percent at seventy five or below. FHA generally allows six. VA treats concessions above four percent as excessive. A buydown counts against those caps and competes with closing costs for the same room. If someone offers to cover both, ask whether both actually fit. Temporary buydowns are allowed on primary residences and second homes, not on investment properties or cash out refinances.

Questions to ask a lender

Our financing information page covers how we work with lenders, and these are the questions worth bringing to the first conversation.

• What is my note rate, and the payment at that rate with no buydown
• The payment in each buydown year, and in the first month after it ends
• Total dollar cost of funding the buydown escrow
• If that money went to points instead, what permanent rate and payment does it buy
• At what month do the two break even
• What happens to unused funds if I refinance, sell or pay off early
• Are the dollars from an interested party, and does the total still fit under the cap with my closing costs
• Am I being qualified at the note rate

Part two, down payment assistance in Ohio

A buydown addresses the monthly payment. It does nothing for the cash you need at the table. That is the Ohio Housing Finance Agency. Assistance also stacks with local property tax relief, and in much of Hamilton County that means a CRA tax abatement on the value of new construction.

Verified against ohiohome.org on September 10, 2026. Confirm current figures with an OHFA approved lender.

OHFA does not lend directly. It works through approved lenders and its products attach to thirty year fixed conventional, FHA, VA and USDA loans.

Down Payment Assistance. Three percent of purchase price on conventional, three and a half on government. Goes toward down payment, closing costs or other pre closing expenses. Forgiven after seven years. Sell before seven and you repay all of it. A lot of third party articles still say two and a half or five percent under an older program name. Out of date.

Grants for Grads. Same assistance, forgiven after five years if you stay in Ohio, plus a discounted rate. Must have graduated within eighteen months with an associate degree or higher.

Ohio Heroes. Discounted rate for veterans and active duty and reserve military, police, firefighters and volunteer firefighters, EMTs and paramedics, physicians, nurse practitioners, nurses and STNAs, and teachers, administrators and counselors pre K through twelve. Assistance can be added.

Mortgage Tax Credit. Federal credit on part of your mortgage interest, up to two thousand a year, separate from the interest deduction. With an OHFA loan through MTC Plus it is forty percent of interest and can combine with assistance. With a non OHFA loan, twenty percent in a target area and fifteen elsewhere. Non refundable, so you need tax liability to use it.

Next Home. For buyers who are not first time buyers, thirty year fixed that can also pair with assistance.

The caps. Income limits for standard non target programs run $109,900 for a one or two person household and $126,385 for three or more in Hamilton, Butler, Warren, Clermont and Brown. Dayton area counties of Montgomery, Greene and Miami are $103,000 and $118,450. Most other Ohio counties, $98,800 and $113,620. Target areas raise those meaningfully.

Purchase price limits are far more generous than buyers expect. Across most of Ohio, including every county we build in, the single family limit is $566,355 non target and $692,211 target. That is the statewide default rather than any local advantage, and a few counties sit above it, Franklin is $618,475 non target. You will still see articles quoting the low three hundreds. Those are years old.

Credit minimums are 640 conventional, USDA and VA, 650 FHA. Free homebuyer education is required through any HUD approved Ohio agency, completed after you submit your application rather than before.

How this interacts with building. This is what trips up new construction buyers, and it is all timing. Our build process lays out the stages, and the financing has its own clock running alongside it.

Your income eligibility is set by the limits in force when your loan is reserved, and those get republished. Purchase price limits move too. On a build running many months from contract to closing, a limit table can change underneath you, and a raise or bonus during construction can change your qualifying income. Neither is a reason to avoid the programs. Both are a reason to talk to your lender early and revisit eligibility as the build progresses instead of assuming day one numbers hold.

Lock your rate with a construction timeline in mind. OHFA reserves your funds and locks your rate for a set window, and that window varies by lender and by which OHFA product you use. On a new build the clock matters more than it does on a resale, because your closing date is months out instead of weeks. Ask these four questions at contract, not at drywall. How long is the reservation and rate lock period on the specific OHFA product I am using. What does an extension cost, in dollars or in rate. What happens if my closing slides past the lock, do I re-lock at current market rates or lose the reservation entirely. And who pays for the extension if the delay is on the builder's side. As a reference point, OHFA's current program guidelines give loans reserved through its Lender Online system a rate lock of up to seventy calendar days, charge a 0.375 percent extension fee for every thirty days beyond that, and provide that extension fees may not be charged to the borrower or the seller except in limited cases, which is exactly why the fourth question is worth asking out loud. Get the answers in writing before you sign. A buyer who asks these four questions up front never gets surprised at the closing table.

Third, the forgiveness clock starts at closing, not at contract. Seven years, five for Grants for Grads. If there is any chance you move inside that window, know the repayment terms before you accept the assistance.

Fourth, occupancy. This one applies to every OHFA program, not just one of them. The home must be your principal residence, you must occupy it within sixty days of the loan closing date, and you must keep it as your principal residence for at least one year after closing unless you sell in that first year. On a build that slips, sixty days from closing can arrive faster than you expect, so plan build schedules and lease end dates around it.

Finally, ask your lender directly whether assistance and a buydown can coexist on your specific loan, and whether buydown dollars from an interested party still fit under the contribution cap once assistance is layered in. That answer is loan specific and worth getting in writing.

Where to start

Talk to an OHFA approved lender early, before you are attached to a plan or a lot. Ask for the payment at your note rate first, then ask what each affordability tool changes and what it costs. Every one of these programs has real rules underneath it, and a lender who walks you through them line by line is worth more than one who quotes you a number. If you are weighing a new build in Greater Cincinnati, Dayton or Southwest Ohio, Cristo Homes has been building here since 1963 and our team can walk you through how these programs fit the plan and homesite you are considering.