Home Mortgage Rates in Ohio

So Much to Discover.

While every state has interesting details, Ohio is one of the few states with three separate cities which all qualify as large within the context of that state’s size. With the Columbus, Cleveland, and Cincinnati metropolitan areas all being of size, there are interesting dynamics within Ohio as residents may move from one city to another, without crossing state lines. As different industries choose to locate primarily in one city or another, the growth rates of these locations can fluctuate rapidly. Despite this apparent diversity, Ohio tends to be a fairly homogeneous population and real estate prices tend to move roughly in tandem. General price levels have remained consistent with national trends, but average prices are at the very low end of the spectrum. Available mortgages as well as foreclosure procedures are very standard.

The General Price Level

In spite of the interesting dynamic created by having three “large” cities, Ohio real estate has remained relatively stable across the state. Not surprisingly, the concentration of higher valued homes is near these three cities, with more rural areas falling below the state average. Recently, the trends in each of these cities have remained fairly consistent, with each experiencing declines in average price levels of 25 to 35%.

In terms of specifics, Ohio falls at the bottom of the average home value list, with Indiana. The recent average home value for the state was below $176,000, and was probably far lower when one considers that the average high-priced area of the state fall just above the $169,000 level. This would suggest that the state’s average is, in fact, far lower. The countervailing force is that the population of Ohio tends to be concentrated near these cities. As way of placing these figures into perspective, the recent average home values in California and New York (the two states falling at the top of the spectrum) were upwards of $400,000. This means that the average home value in the two least expensive states in the country is less than half of what it is in the two most expensive.

Growth in Ohio

While the trend across the state has been fairly stable, Cincinnati has been at the top of the growth spectrum. A city that was once meant to compete with Chicago as the economic capital of the Midwest, the city has flung off its Jerry Springer days and made a significant push for re-gentrification. By growing its tax base, and trying to become a technology leader, especially through the efforts of local hospitals and medical schools to be at the forefront of Children’s medicine, the city has made some progress.

On the opposite end of the spectrum, some of the industrial production capacity in Cleveland that has become less relevant has been slow to be replaced. While Cleveland is the largest of the three cities, part of the reason for the more stable population, the negative pressure caused by the manufacturing void has had an impact of that city’s recent-term growth.


Mortgage Types Available in Ohio

Fixed Rate Mortgages – Still one of the most popular and common mortgage types across the country, Ohio residents are no exception in this capacity. Including a fixed interest rate for the entire length of the loan, the 30-year fixed is the most common choice, followed by a 15-year option. Recently, some of these mortgages have been modified under federal programs, receiving longer maturities, but this option is rarely available directly from the lender. In rare instances, a lender may be willing to extend the term of a loan to achieve a specific purpose. The genesis of the 30-year fixed was that the longest available maturity on treasury bonds was once 30 years. This gave lenders a means to offset some risk. The convention has remained, despite the various alterations to available treasuries.

Adjustable Rate Mortgages (ARMs) – With an adjustable rate mortgage, the borrower is typically able to secure a lower interest rate in the near-term because the rate may be increased later if rates in the general market increase. This is appealing to a lender because it allows the bank to ensure that it is not carrying an excess of loans that are significantly below currently effective rates – it is, in essence, a form of protection for the lender against shifts in interest rates. There are two time periods of which to be aware: the amount of time before the initial rate may be reset, and how long thereafter each subsequent adjustment may occur. The term of most ARMs is 30 years. This type of loan can be particularly attractive to home buyers who do not plan to stay in the home for an extended period of time. These individuals can take advantage of the lower rate on the assumption that they will move before the rate sets itself high enough to be disadvantageous. Before taking this approach, one should understand the risks, because the loan can continue to reset, even if you decide to stay in the home. At that point, refinancing may be appropriate – but a higher rate will likely have to be paid.

Interest-Only Loans – Once a more popular option before being blamed in part for the real estate crisis of recent years, an interest-only loan is designed to give a borrower an extended grace period during which only interest is paid. These loans tend to be structured to have tax advantages as well, since interest paid on one’s principle residence is tax deductible. During the initial period, the homeowner saves both on taxes and by not having to make principal payments. The issue that arose which made this type of loan less common is that once the principal repayment period begins, many borrowers discovered that they could not afford the increased monthly payment. While it is possible to structure these loans so as to smooth the payments over the life of the loan, most were structured aggressively to get home buyers into homes, leaving the mess to unravel later. These loans are occasionally still available, but their rates are not as attractive as they once were.

Flexible Payment Loans – This type of loan, which has all but disappeared, allowed the borrower to decide how much he or she wished to pay from month to month. The individual could make an interest-only payment, skip a payment, or make a full principal and interest payment. While this seems like a counterintuitive way to loan money, lenders making these loans believed that with the massive appreciation in the real estate market, foreclosure more than covered their risk. The option was appealing to homeowners with fluctuating incomes, so all parties were pleased until prices began to fall. While it may be possible to find such a loan, the underwriting standards will likely be prohibitively complex and stringent.

Home Equity Lines and Loans – These two options allow a homeowner to borrow against the value of their property, often for more than 100% of the total value. With a home equity line, the lender grants the borrower with a revolving line of credit that may drawn down and repaid much like a credit card. With a home equity loan, a one-time payment is made. The later is more common for home improvement projects, where the additional funds are used to raise the value of the home.

Foreclosure Rules in Ohio

What follows are some of the most important rules and procedures. This is in no way a comprehensive list, and those facing foreclosure are encouraged to consult an expert.

  1. Lenders in Ohio are limited to judicial foreclosure. This means that, as a lien state, in order to foreclose and move against the property, a lender must file the case with a court. This provides the borrower with a degree of protection because it controls the pace of the process.
  2. Foreclosed homes in Ohio are sold at a sheriff’s auction, but the sale price is required to be at least two-thirds of the home appraised value. This protects borrowers by preventing lenders from selling a home at a drastically reduced price just to satisfy the loan’s principal balance. This approach is viewed as punitive and is prohibited. As a recourse state, however, if the home is sold for less than the value of the principal balance on the loan, the lender can still move against the borrower to recover the rest of the money from alternate sources.
  3. After a home is sold at auction, the borrower has eight days until the sale is considered confirmed. During this period prior to confirmation, the borrower may redeem the loan by paying off all liens against the property, including the cost that the lender has incurred during the foreclosure process and any interest that would have accrued. If this is done, the sale is cancelled and the borrower retains ownership of the home.
  4. After a sale is confirmed in Ohio, the borrower has no recourse to redeem the loan or recovery the property. He or she may file with the court to receive any excess proceeds that resulted from the sale, but this is the extent of the remaining rights.

As in all states, the right of borrowers are lenders are balanced to protect both and ensure the orderly operation of the system.