Black and Hispanic homebuyers can get a mortgage from Bank of America without a down payment or closing costs under a new program the company is offering in five U.S. cities that aims to address the racial homeownership gap.
The program, announced this week, is geared toward first-time homebuyers of color in Charlotte, Dallas, Detroit, Los Angeles and Miami. Bank of America said applicants under this program will not have their credit score taken into account when applying for a home loan. Instead, loan processors will look at if the applicant has paid their rent, phone, auto insurance or utility bills on time.
The program, announced Tuesday, is intended to help Black and Hispanic families own a home and start building wealth, according to AJ Barkley, Bank of America’s head of neighborhood and community lending. “What we don’t want to do with this program is place people in homes they cannot stay in,” Barkley told Bloomberg News.
Black and Hispanic families typically don’t have a large stash of cash on hand to fund a home down payment and closing costs, so Bank of America removing those barriers will certainly help someone on the hunt for home, Indiana University finance professor Jun Zhu told CBS News.
“If you have a program with no down payment and no closing costs, it can help minority families to fill the gap between available savings and upfront cash needed,” said Zhu, an expert on mortgage financing and housing affordability.
To qualify for the bank’s Community Affordable Loan Solution program, applicants must seek to buy a home in one of the five cities and complete a U.S. Department of Housing and Urban Development-certified homebuyer course. Applicants won’t need mortgage insurance after they’ve acquired the loan.
Rates of homeownership vary dramatically across racial and ethnic groups, thanks to differences in wealth and the legacy of historic discrimination. About 7 in 10 White households own homes, while only 4 in 10 Black households and 5 in 10 Hispanic households do, according to the National Association of Realtors.