This week, Bank of America unveiled a zero down mortgage option as part of their Community Homeownership Commitment.
In short, they want to help more “modest-income” and first-time home buyers achieve the American Dream of homeownership.
Specifically, they said they’re targeting “certain Black/African American and/or Hispanic-Latino neighborhoods” throughout the country.
To accomplish this goal, they’ve rolled out some enhancements to their existing Affordable Loan Solution.
This includes both closing cost assistance and down payment help, along with more liberal underwriting guidelines, to tackle affordability constraints.
BofA’s Community Affordable Loan Solution
- Combines a 3% down mortgage
- With an up to 3% down payment grant ($10,000 maximum)
- And up to $7,500 in closing cost assistance
- Borrowers can come to the closing table with basically no money
- No minimum credit score or mortgage insurance requried
- Applies to properties in select markets nationwide
- Borrowers must complete homebuyer education
- Property must be owner-occupied
- Must take out a fixed-rate mortgage
- Can be a conventional, FHA, or VA loan
The new loan program is coined the “Community Affordable Loan Solution,” an enhanced version of their 3% down Affordable Loan Solution.
It is in addition to the bank’s $15 billion Community Homeownership Commitment, which is a goal to help 60,000 individuals/families purchase affordable homes by the year 2025.
Thus far, Bank of America has already helped 36,000+ become homeowners, with more than $9.5 billion in low down payment loans and over $350 million in non-repayable down payment and/or closing cost grants.
And two-thirds of these loans and grants have assisted “multicultural clients.”
The bank highlighted a National Association of Realtors (NAR) report that shows there is a near 30-percentage-point gap in homeownership between White and Black Americans, and a near-20 percent gap for Hispanic buyers.
To alleviate that problem, BofA is focusing on designated markets in Charlotte, Dallas, Detroit, Los Angeles and Miami.
In these cities, borrowers will be able to apply for a zero down mortgage with Bank of America and receive closing cost assistance as well.
Additionally, Bank of America will not require a minimum credit score or mortgage insurance, and will factor in things like on-time rent, utility bills, phone, and auto insurance payments.
Bank of America Down Payment Grant program
Participants in the program can receive up to $10,000 toward their down payment (or 3% of the purchase price, whichever is less) via the “Bank of America Down Payment Grant program.”
This can provide for a no money down mortgage, if that’s what you’re after.
These funds do not require repayment, but maximum income and loan amount limits apply, and the home must be purchased within a certain geographical area.
Additionally, homebuyer education is required from a HUD-approved counseling agency, the property in question must be owner-occupied, and a fixed-rate mortgage must be used.
It should also be noted that the Down Payment Grant program may be considered taxable income, and that a 1099-MISC will be issued.
Bank of America’s Home Grant Program
On top of the down payment assistance, the “America’s Home Grant Program” provides a lender credit to cover closing costs.
So if you’re light on closing cost funds, it might be possible to get a little help in that department as well.
Eligibility depends on both your income and the location of the property.
This credit can only be used for non-recurring closing costs such as discount points (to lower your rate), recording fees, and title insurance.
It cannot be applied toward things such as the down payment, prepaid items, or recurring costs like property taxes and homeowners insurance.
And under no circumstances may the borrower receive cash back.
The good news is the lender credit isn’t a loan and doesn’t need to be paid back.
Even if you do come in with a down payment, you might be able to get the closing costs credit as a standalone perk.
Is the Bank of America Zero Down Mortgage a Good Deal?
While a zero down payment and closing cost assistance sounds pretty sweet, you do need to consider the mortgage rate offered.
Often times, mortgage companies will offer lender credits to cover closing costs in exchange for a slightly higher interest rate.
For example, if the going rate a 30-year fixed is 5%, they might offer a rate of 5.5% in exchange for a credit.
And you can get that part of the deal pretty much anywhere as lender credits are very common.
There are also many banks and lenders that work with state housing agencies to provide grants for down payments as well.
This means it might be possible to find similar deals with other companies throughout the country.
Either way, while Bank of America is lessening the burden at the closing table, nothing is really being done to alleviate the issue of high monthly housing payments.
Both home prices and mortgage rates are pretty lofty at the moment, so while you won’t necessarily need money at closing, it could still be a stretch to afford a home on a monthly basis.
But if down payment and/or closing costs are in fact holding you back, Bank of America’s new zero down mortgage could be just the thing to get you in the door.