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What once seemed like a far-fetched dream is now becoming a reality – you can now purchase a home with no down payment.

More and more banks are offering mortgages that don’t require a large down payment, making it easier for first-time buyers to get on the property ladder. This is good news for potential homebuyers who may not have the funds for a traditional 20% down payment.

In the spotlight,  Bank of America’s recently announced a “zero down mortgagesloan program for first-time homebuyers in predominately black and Hispanic neighborhoods. 

The plans aim to eliminate racial disparities in homeownership by providing zero-down mortgages to first-time homebuyers of all races in 21 cities. Similar programs offered by JPMorgan, Chase, and TD Bank could reduce racial homeownership disparities – but they haven’t been effective.

New zero-down payment mortgages: A brief outline

Bank of America’s new Community Homebuyers Program offers low-income and first-time homebuyers the opportunity to purchase a home with a zero-down payment. 

While the program is not race-based, income and location are key qualifying factors. Another generous feature of the program is that borrowers are not subject to mortgage insurance premiums – which most other low-down-payment conventional and FHA loans come with. According to Felton, this could be seen as “the poor pay more.”

This solution is designed to help first-time buyers in African-American or Black and Hispanic-Latino neighborhoods who may not have the resources for a traditional down payment. The program is currently available in Charlotte, Dallas, Detroit, Los Angeles, and Miami but will be available to more cities after the testing period.

As part of Bank of America’s new $15 billion Community Homeownership Commitment, prospective buyers must complete a ten-hour homebuyer certification course through a Bank of America or HUD-approved housing counseling partner before applying for a mortgage.

The program will help 60,000 individuals and families purchase affordable homes by 2025 by offering affordable mortgages, industry-leading grants, and educational opportunities.

Who can apply?

  • The Community Affordable Loan Solution program will be available initially for testing in certain markets, including majority Black and/or Hispanic/Latino neighborhoods in Charlotte, Dallas, Detroit, Los Angeles, and Miami. This program is designed to help those who may have difficulty accessing traditional financing options. Note: This program will probably be extended to more cities after the testing period, including Boston
  • People with an ITIN or social security number can qualify for this type of loan.
  • Credit guidelines include a minimum credit score of 580 for those with W2 and 620 for self-employed people.
  • These loans are available to anyone, regardless of race or ethnicity.
  • Homebuyers must complete a homebuyer certification course offered by a housing counseling partner approved by Bank of America, such as eHome America.
  • Borrowers need renters insurance and a home warranty to qualify.

What do these zero-down mortgages mean for people with ITIN?

ITIN, or Individual Taxpayer Identification Number, is a tax processing number for people who cannot get a social security number.

Many lenders don’t offer mortgages to borrowers with ITIN, and others request a minimum down payment of 20% of the total cost of the house.  However, Bank of America zero down payment mortgages are a great opportunity for people with ITIN to get into homeownership without having to save a 20% down payment.

This program allows borrowers to put zero down and still receive a competitive interest rate. However, it’s important to mention that if the borrower decides to put in a 3-5% down payment, it would reduce their interest rate. 

The program can help close the inequality gap and provide stability for families with ITIN instead of a Social Security Number (SSN). Note that this program is not only for people with ITIN. Other borrowers, such as those with SSNs, can apply as well.

Potential impact in the future 

According to Chris Herbert, joint director of Harvard’s Joint Center for Housing Studies, the Bank of America program could help low- and middle-income families and individuals purchase homes. In his view, homeownership is hindered by the lack of savings for a down payment, and the program could make a significant difference.

He stressed the importance of tracking and monitoring the pilot program’s results to gauge its effectiveness. This would involve assessing which groups are participating, whether residents are getting good opportunities to own homes, and the impact the program has on communities.

“These are all vital questions that need answers,” Chris said.

In our opinion, The Bank of America Zero Down Mortgages Program will profoundly impact future home buyers. This innovative program offers true zero-down mortgages, with no down payment required from the borrower. This will open the door for many families who otherwise would not be able to afford a home, to finally achieve the dream of homeownership.

Also, it’s important to note that even though borrowers can buy a house without a down payment, if they put in a 3-5%  down payment, their monthly mortgage payments would be lower, thus reducing their interest rate.

In addition, this program will also help to stimulate the economy by increasing the demand for homes and creating new jobs in the construction and real estate industries.

Contact us if you want to learn more about this program.

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