To help narrow a homeownership gap among Black and Hispanic-Latino communities, Bank of America is launching new zero down payment, zero closing cost mortgage products to help people in minority communities buy their first homes.
The program — called the Community Affordable Loan Solution — will be available to certain markets including majority Black and/or Hispanic/Latino neighborhoods, in Charlotte, North Carolina; Dallas; Detroit; Los Angeles and Miami.
The loans are subject to rigorous underwriting and based on credit guidelines including on time bill payments including rent, utilities, phone and auto insurance payments. Eligibility is based on income and home location. No minimum credit score or mortgage insurance is required.
Applicants do not have to be Black or Hispanic/Latino to qualify for the loans.
Before applying, applicants must complete a homebuyer certification course provided by housing counseling partners approved by Bank of America and the Department of Housing and Urban Development.
“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,” AJ Barkley, head of neighborhood and community lending at Bank of America, said in a statement.
‘The problem does exist’
The Wall Street bank’s efforts come as research has shown how difficult it can be for minority individuals and families to become homeowners.
A recent report from LendingTree found the mortgage denial rate for Black borrowers is twice that of the overall population.
“The problem does exist,” Jacob Channel, senior economist at LendingTree, 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.
In research from earlier this year, the National Association of Realtors found the homeownership rate for Black Americans is almost 30 percentage points lower than white Americans.
As the U.S. homeownership rate climbed to 65.5% in 2020 in the highest annual rise on record, the homeownership rate was 43.4% for Black Americans, 51.1% for Hispanic Americans and 61.7% for Asian Americans, according to the research.
Moreover, Black and Hispanic mortgage applicants were more likely to be rejected for loans, each with 7%, compared to white or Asian applicants, at 4% and 3%, respectively, the National Association of Realtors found.
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Bank of America separately has made a $15 billion community homeownership commitment to help individuals and families purchase affordable homes by 2025. The program includes affordable mortgages, grants and educational opportunities.To date, the program has helped more than 36,000 individuals and families become homeowners. Two-thirds of the program’s loans and grants made through the program have helped multicultural clients become homeowners, according to the firm.
Bank of America has also made a separate $15 billion commitment to provide mortgages to low-to-moderate income homebuyers through the Neighborhood Assistance Corporation of America through May 2027.
Bank of America also announced the launch of a new small business down payment program aimed at helping minority and women business owners obtain credit and purchase commercial real estate through grants. That program is launching in Atlanta, Chicago, Charlotte, Dallas and Los Angeles. There are plans to expand to additional markets in 2023.