Bank of America said it is offering now first-time home buyers in a select group of cities with no down payment, no closing costs to help expand homeownership among Black and Hispanic/Latino communities.
The option will first be available in select neighborhoods in Charlotte, Dallas, Detroit, Los Angeles and Miami. The new mortgage, called Community Affordable Loan Solution, aims to help eligible individuals and families get an affordable loan to buy a home, the bank said.
Applicants do not need to be black or Hispanic to be eligible for the product, a bank representative said.
“Homeownership strengthens our communities and can help individuals and families build wealth over time,” AJ Barkley, head of neighborhood and community lending for Bank of America, said in a statement. “Our affordable community loan solution will help make the dream of sustainable homeownership accessible to more Black and Hispanic families, and it’s part of our broader commitment to the communities we serve.”
The loans require no mortgage insurance — the additional fee typically charged to buyers who pay less than 20% of the purchase price — and no minimum credit score. Instead, eligibility will be based on factors such as timely rent payments and timely utility, phone, and car insurance bill payments. Prospective buyers must also complete a homebuyer certification course provided by Bank of America and federally approved housing counseling partners before applying for the loan program, the bank said.
The racial gap in U.S. homeownership rates remained wide in 2020, the most recent year for which National Association of Realtors data is available.
For white households, the homeownership rate was 72.1%. That compares to 51.1% for Hispanic households and 43.4% for black households. Black homeownership was lower in 2020 than it was in 2010, the NAR said.
“During the pandemic, rising house prices and low housing supply have disproportionately impacted black households more than any other racial/ethnic group,” the NAR said in a report. White households are now 40% more likely to be able to afford a home than black households, the association said.
Bank of America and other major financial institutions like Wells Fargo have a checkered history of mortgages to people of color and potential buyers with disabilities.
Bank of America’s Countrywide Financial, a subprime lender it bought in 2008, was fined $335 million in 2011 for charging black and Hispanic buyers higher interest rates than applicants whites.
In 2012, Wells Fargo agreed to pay $175 million to settle claims that it was targeting people of color with subprime home loans that were more expensive. And the City of Miami sued JPMorgan Chase in 2014, accusing the bank of predatory lending to communities of color.