Major banks now offering no down payments on home loans l GMA

Bank of America is offering no money down mortgages to some buyers in predominantly Black and Hispanic neighborhoods, but borrowers should consider the risks before taking on debt.

Jennifer Winget

June 01, 2024

2Min Reads

Business

Bank of America is offering no money down mortgages to some buyers in predominantly Black and Hispanic neighborhoods, but borrowers should consider the risks before taking on debt. The cost of borrowing is up, with the Federal Reserve having raised interest rates three times since June to combat inflation, resulting in more expensive home loans. Adjustable rate mortgages, such as the 5/1 ARM, are becoming more popular, but borrowers should remember that they are subject to variable rates, meaning payments could rise significantly. Chase and Bank of America offer programs for those who fall within income requirements, but the risk with zero or lower down payment programs is that monthly bills will likely be higher, so borrowers must do the math and research carefully. As buying a home is a big financial decision, potential homeowners should use online calculators and seek expert advice.

Bank of America is launching a program to offer zero-down mortgages to some homebuyers in predominantly Black and Hispanic neighborhoods, including those in Charlotte, Dallas, Detroit, Los Angeles and Miami. While the program aims to tackle the home ownership gap for minorities, buyers should weigh the pros and cons before taking on the financial commitment. The program is aimed at helping homebuyers who might struggle to save up for a down payment of 20% of the home’s price, which is typically required for a mortgage. The cost of borrowing has risen with the US Federal Reserve hiking interest rates three times since June to combat inflation. As a result, home loans have become more expensive, with the average 30-year fixed-rate mortgage nearly doubling since January to above 6%. Many Americans have been priced out of home ownership and are turning to adjustable rate mortgages such as the 5-1 arm, which lets buyers purchase with lower payments for the first five years. However, these loans are subject to a variable rate, meaning that if they go much higher, higher payments will be required.