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Bank of America is launching a new mortgage product that would allow first-time homebuyers to purchase a home with no down payment, no mortgage insurance and zero closing costs.
In an effort to close the racial homeownership gap, the Community Affordable Loan Solution will launch in markets with predominantly Black and Hispanic neighborhoods, including Charlotte, Dallas, Detroit, Los Angeles and Miami, and may later expand to other cities. It will not require a minimum credit score and will instead consider other factors for eligibility.
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Is Bank of America’s new zero-down mortgage worth it?
Home buying is a notoriously expensive process and has gotten even more costly as property values have increased over the years. When you consider a modest 5% down payment, lender fees, which can run you up to 1% of the home’s value, and closing costs, which can be as high as 6% of the loan’s value, buyers can pay close to $46,800 upfront for a $400,000 home — this still excludes other charges like the underwriting fee, title check, home inspection and appraisal fees.
Offering a loan that doesn’t require a down payment, mortgage insurance or closing costs could lower the barrier to entry for homeownership. And when you spend less money on down payment and closing costs, you can reserve more of your savings for paying for serious home repairs that need to be taken care of, or emergency expenses that could arise as soon as you move in.
Just keep in mind, though, that making no down payment means that your home loan will cover the entire value of the property and your monthly payments can be higher than they’d be if you paid a little upfront. You’ll need to work with a financial planner or mortgage lender to make sure that the monthly payments will fit into your budget.
Who will be eligible?
While the goal of the program is to bring Black and Hispanic borrowers closer to homeownership, people of all races can qualify for the Community Affordable Loan Solution.
Eligibility will be based on income and the location of the property. It will also use credit guidelines based on factors such as timely rent, utility bill, phone and auto insurance payments to determine creditworthiness, though, there is no minimum …….