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I've seen this movie before: Bank of America’s new home loan program lets borrowers buy homes in select cities with 0% down and no closing costs


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They've been doing it for a long time now through a program called NACA, which takes 6-9 month on average. 


For this new program, here is some info from a Bank of America LO that was shared end of last week:


  • Program is only available for properties located in majority black and/or Hispanic census tracts in select cities.
  • Race of buyer does not matter.
  • 132k income limit in Dallas.
  • 50% DTI Max.
  • All manual underwrites and a full doc underwrite is required for pre approval .
  • We give 10k towards down payment and cover all non recurring closing costs (we do not cover escrow).
  • No mortgage insurance.
  • 2-4 unit allowed at 95% LTV.
  • Primary residence only.
  • Only first time buyers (no property owned in previous 3 years)
  • In person 8 hour homebuyer education.
  • Here are some basic credit guidelines. 12 months on 3 tradelines, traditional or non traditional. No lates in last 6 months, no more then 1 30 day late in 12 months.
  • No reserves with 12 months rental history. 3 months reserves without rental history. Most of your other credit guides mirror conventional.
  • Approximate pricing as of this morning 550 FICO 7.125%, 640 FICO 7.00%, 720 FICO 6.5%.
Edited by liverichly
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There are five cities listed as being in the opening "phase" of this really bad idea:  Charlotte, Dallas, Detroit, Los Angeles and Miami.  Where to start with how bad this is.  Well, in Dallas, LA and Miami the property taxes and insurance on the home will be sky high too.  The article doesn't even mention home owners insurance or taxes.  Having this program in LA is ludicrous considering you can't find a home for less than $750k that isn't a fire sale.  Charlotte and Dallas home prices are well above market right now as well.  The most ludicrous statement is this one: 


"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."


If these people had savings they wouldn't need a special loan program to buy a home.  The odds are stacked against them from the start to use a program like this.  Chances are high they buy a home needing a LOT of repairs or renovations, they skip the inspection, never mind appraisals.  ALL of this assumes that a seller even accepts their purchase offer in this market.  


I bought my home last year in Las Vegas another highly competitive market.  I had at least 5 offers rejected waiting for a cash offer from out of state buyers.  Another 2 rejected because I was using my VA loan even though I was already approved.  1 backed out when I wouldn't waive inspection or appraisal.  No big deal there I ran from that house.  What were they afraid of?  Ultimately I got a GREAT house that wasn't over priced that passed inspection with flying colors.  I used my VA loan and have a fixed rate mortgage locked in at 2.5%.  Even though I was pre-approved there were several sellers who just didn't want to deal with the VA loan and their fears were unfounded.  I went from contract to close in 29 days with NO issues.  Buyers using this loan program may not face hesitation from the bank but you can't force buyers to accept their offer with that financing and many won't even look at the offer when faced with others with far fewer risks.


Attempting to increase home ownership by returning to the mistakes of 2008 has disaster written all over it.


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