Bank of America is launching a pilot program to offer mortgages for first-time homeowners with no down payment, closing costs, or minimum credit score, the bank announced this week.
Called the Community Affordable Loan Solution, the program will be available to select predominantly black and Hispanic individuals in Charlotte, Dallas, Detroit, Los Angeles and Miami.
Applicants do not have to be Black or Hispanic to be eligible for the program. The planned size of the program is unknown.
There is no limit to the number of loans included in the program. The wealth must be in a census tract at least 50% of him African American or Hispanic, the bank said.
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“Homeownership strengthens our communities and helps individuals and families build wealth over the long term,” said AJ Barclay, head of neighborhood and community lending at Bank of America. Our Community Affordable Loan Solutions help more Black and Hispanic families realize their dreams of sustainable home ownership, which is a broader commitment to the communities we serve. It’s part of an effort.”
The Charlotte-based bank also does not require mortgage insurance. These are the additional fees a buyer may face if he purchases less than 20% of the home purchase price. Eligibility is determined based on factors such as timely rent, utility, phone and car insurance payments.
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Prospective buyers must also complete a homebuyer certification course offered by Bank of America and a federally approved housing counseling partner before applying to the program.
According to the latest data from the National Association of Realtors, significant racial disparities in homeownership numbers remained in 2020. About 72.1% of Caucasian households own a home. This compares with 51.1% for Hispanic households and 43.4% for Black households. Black homeownership rates are actually lower in 2020 than they were in 2010, according to the NAR.
“During the pandemic, rising house prices and low housing availability disproportionately affected black households more than any other racial/ethnic group,” the report said.
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However, zero down payment mortgages come with certain risks and downsides. Buyers usually face higher interest rates and end up paying more in the long run without issuing an interest-free down payment.
moreover, housing market In a downturn, buyers are at greater risk of being “submerged.” That means you will be borrowing more money than the house is worth.
The interest rate-sensitive housing market has started to cool significantly in recent months. federal reserve We are tightening policy at the fastest pace in 30 years. Policymakers have already approved rate hikes of 75 basis points in both June and July.
30-year fixed average interest rate mortgage Recent data from mortgage lender Freddie Mac showed it rose to 5.66% in the week ending Sept. 1. This is significantly higher than just a year ago when interest rates were his 2.87%.