Bank of America is offering mortgage loans to first-time homebuyers with no down payments, minimum credit scores or closing costs as part of a program aimed at increasing homeownership rates among black and Hispanic first-time homebuyers.
Under a pilot program announced last week, Bank of America will offer loans to people in certain predominantly black and Latino neighborhoods in Charlotte, North Carolina; Dallas; Detroit; Los Angeles and Miami. Eligibility for the program, called the Community Affordable Loan Solution, is based on income and location and does not require mortgage insurance.
AJ Barkley, Bank of America’s head of consumer and consumer lending, said the goal of the program is to help individuals and families, particularly blacks and Latinos, grow wealthier over time.
“This allows us to revitalize minority communities,” she said, noting that anyone who wants to buy a home in one of the designated areas can apply for a loan under the program. She said the bank is looking to expand the program to other cities in the future and will also offer educational resources to help buyers navigate the process.
Black and Hispanic homeowners face additional barriers to buying a home compared to white homeowners. According to data from the US Census Bureau for the second quarter of this year, the share of black homeowners in the country was 45%, while the share of white homeowners reached 75%.
Rashon Ray, a senior fellow at the Brookings Institution, said Bank of America is taking a big step in the right direction.
“It’s forward-thinking, and it’s important to do,” he said. The bank’s decision not to require a minimum credit score was also key, Ray said, because black people were excluded from some lending opportunities. It was also important that Bank of America did not require down payments, which can be a major obstacle for black buyers, who are less likely to receive help from their families or other funds, such as proceeds from the sale of other property.
Banks have contributed to the racial disparity in home ownership rates by approving fewer loans with less favorable terms to black applicants than to white borrowers with similar credit profiles.