Bank of America is introducing new zero down payment, zero closing cost mortgage products to assist people in minority neighborhoods buy their first houses in an effort to close the homeownership gap between Black and Hispanic-Latino populations.
The initiative, known as the Community Affordable Loan Solution, will be made available to a select group of consumers, including neighborhoods in Charlotte, North Carolina, Dallas, Detroit, Los Angeles, and Miami that are predominately Black and/or Hispanic/Latino.
The loans are put through a rigorous underwriting process and are determined by a set of credit criteria, including timely payments of all bills, including rent, utilities, phone, and auto insurance. Qualification is determined by household income and location. Mortgage insurance and a minimum credit score are not necessary.
To be eligible for the loans, applicants do not need to be Black or Hispanic/Latino.
Applicants must successfully complete a homebuyer certification course offered by housing counseling partners recognized by Bank of America and the Department of Housing and Urban Development before submitting an application.
“Our community affordable loan solution will help make the dream of sustained homeownership attainable for more Black and Hispanic families, and it is part of our broader commitment to the communities that we serve,” Bank of America’s AJ Barkley, who oversees neighborhood and community lending, issued a comment.
Research has demonstrated how difficult it may be for minority individuals and families to become homes, prompting the Wall Street bank’s efforts.
According to a recent LendingTree research, Black borrowers face a mortgage denial rate twice as high as that of the general population.
“The problem does exist,” Senior economist at LendingTree Jacob Channel recently told CNBC. “We have data that backs that up.”
“But there are solutions, and Black homebuyers shouldn’t lose faith that they’ll never be able to become homeowners,” he said.
The National Association of Realtors discovered in past study that the homeownership rate for Black Americans is over 30 percentage points lower than that of White Americans.
According to the study, the homeownership rates for Black Americans were 43.4%, Hispanic Americans were 51.1%, and Asian Americans were 61.7% as the U.S. homeownership rate increased to 65.5% in 2020, the largest annual increase on record.
The National Association of Realtors also discovered that Black and Hispanic mortgage applicants were more likely to have their loan applications denied (each with 7% odds) than white or Asian applicants (4% and 3%, respectively).
Bank of America has separately committed to assisting individuals and families buy affordable homes by 2025 with a $15 billion community homeownership pledge. The initiative offers educational opportunities, grants, and low-cost mortgages. More than 36,000 individuals and families have now become homeowners thanks to the program. According to the company, two thirds of the loans and subsidies provided under the program have assisted ethnic consumers in becoming homes.
Until the Neighborhood Assistance Corporation of America, Bank of America has also committed to lending low- to moderate-income homebuyers a total of $15 billion through May 2027.
Additionally, Bank of America announced the launch of a new grant-based small-enterprise down payment program aimed at assisting women and minority business owners in obtaining loans and investing in commercial real estate. Atlanta, Chicago, Charlotte, Dallas, and Los Angeles will all start that program. In 2023, there are plans to reach out to new markets.