Bank of America announced a new loan program to help low- and moderate- income borrowers qualify for a mortgage with down payments as low as 3 percent of the purchase price. The loans have financing available up to $417,000.
Eligible borrowers must not earn more than the median income for the area and are required to have a credit score of at least 660. The home the borrower is looking to purchase must also be their primary residence. Applicants must also have a debt-to-income ratio of no more than 43 percent.
Bank of America announced it will also consider non-traditional forms of credit, such as daycare expenses, health club memberships, and rental history in determining credit history.
“There are creditworthy borrowers — people who have shown good experience paying off debts who fit income restrictions — and except for the fact that they don’t have the money for a down payment, they would be good home owners,” says Terry Francisco, a spokesman for the bank.
Low down-payment mortgages are becoming more common. Freddie Mac and Fannie Mae announced last year that they would start backing loans with down payments as little as 3 percent. The Federal Housing Administration also offers low-down payment loans, but FHA also requires borrowers to pay monthly insurance premiums with the mortgage payments.
Bank of America officials say its 3 percent loans will have a less expensive mortgage rate than FHA loans. Rates, however, will be set by a borrower’s creditworthiness and credit score.