New "zero-down" mortgage program targets Detroit
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A new "zero down payment" lending program is launching in Detroit as part of a nationwide effort to increase minority homeownership.
Why it matters: Obtaining a mortgage is a persistent obstacle for economic equity and wealth-building.
- For Black applicants in Detroit, 27% of home purchase loans were denied in 2020 compared with 13% for white applicants.
Driving the news: Bank of America recently announced "zero down payment" loans for first-time homebuyers in predominantly Black and Hispanic neighborhoods who meet certain income requirements, Axios' Emily Peck reports.
- The program is starting in Detroit, Charlotte, Dallas, Los Angeles and Miami.
What they're saying: “This program looks promising in terms of reducing costs to borrowers and making mortgages accessible to more people," Julie Schneider, director of the city's Housing and Revitalization department, tells Axios. "It's also great to see banks finding ways to extend opportunities to more people through programs that rely on more than just someone’s credit score."
Between the lines: Bank of America's "zero down payment" loans are a bit of a misnomer. They do technically require a down payment, but the bank is offering grants up to $15,000 to cover it.
The big picture: Two other banks, JPMorgan Chase and TD Bank, offer similar programs. If they were adopted widely in both the public and private sector, programs like these could make a dent in the racial homeownership gap — but so far they haven't.
- Tailoring such programs to specific people is difficult because it requires so much outreach and verification of eligible borrowers.
Yes, but: Success could be more likely in predominantly Black cities like Detroit because it's easier to reach the intended potential homebuyers, research shows.
What's next: Detroit Future City, which has done extensive research on homeownership, tells Axios it will soon release a catalog of local down payment assistance programs for people making $50,000 a year or less.