Bank of America is launching a mortgage with no down payment or closing costs that aims to promote homeownership in minority communities in five U.S. cities.
The new program is geared toward first-time homebuyers, including in designated neighborhoods in Charlotte, Dallas, Detroit, Los Angeles and Miami. Bank of America said the program will not take a borrower's credit score into account when applying for a home loan. Instead, creditworthiness will be based on such factors as timely payment of rent as well as phone, auto insurance and utility bills.
"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, Bank of America's head of neighborhood and community lending, said in a statement.
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 of America 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.
Editor's note: The initial version of this story wrongly stated that only Black and Hispanic borrowers are eligible for a mortgage under Bank of America's Community Affordable Loan Solution program. In fact, the program is eligible to all borrowers based on their income and home location.
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