If you’re looking to buy a home and you don’t have a 20% down payment, Bank of America is now offering mortgages with as little as 3% down.
While a low down payment mortgage is not a new product, it’s the first time the bank will grant the mortgage without borrowers needing to pay for private mortgage insurance.
The new loan program is aimed at helping low- and moderate- income borrowers get home loans for up to $417,000.
To qualify for the program borrowers must make as least the median income for their area and need a credit score of at least 660.
The home must also be the applicant’s primary residence.
As with most mortgages, applicants must still have a debt-to-income ratio of no more than 43%. But Bank of America will also examine non-traditional forms of credit — like daycare expenses, health club memberships and rental history — to help determine credit history.
Interest rates on the loans will be determined by a borrower’s creditworthiness and score. Bank of America’s loan option will be cheaper than FHA’s rate, the bank claims.
There is a simple caveat, First-time buyers will have to attend a homebuyer education program.
Bank of America will turn around and sell the mortgages to nonprofit loan fund Self-Help, which will then sell them to Freddie Mac.
In the fourth quarter of 2015, the average down payment on a conventional 30-year mortgage was 17.5%, according to LendingTree.