Mortgage Program to Combat Racial Inequality in Detroit

mortgage program to combat racial inequality

Bank of America recently launched a new mortgage program to help combat racial inequality due to the racial wealth gap. The program is called the Community Affordable Loan Solution. They are testing it out in 5 different metro areas, one of which is our very own Detroit. The program is targeted at first-time homebuyers in predominantly Black and Latino communities. It is important to note that race is not taken into consideration for this loan. It is based on location and income.

How it Works

First-time homebuyers in Black and Latino communities will be able to purchase homes with

  • No money down
  • No minimum credit score
  • No closing costs
  • No mortgage insurance (PMI)

Homebuyers will be required to take a certification course in order to participate in this mortgage program that combats racial inequality.

 

How the Mortgage Program Combats Racial Inequality

So how does a mortgage program help combat racial inequality? Throughout history, there has been gaps in minority homeownership. Primarily due to lower income and discriminatory lending practices of the past. This has resulted in a large deficit of wealth for minorities because, for most Americans, homeownership is their greatest source of wealth. The industry wants to change this and Bank of America is leading the way. By increasing the amount of homeownership in Black and Latino communities, the people in these communities will be able to grow their wealth. This will create better opportunities for themselves, their families, and future generations.

The Pros

Homebuyers that may not have qualified for a loan before will now be able to purchase their first home. Hopefully, over time this will help to bridge the wealth gap for Blacks and Latinos. Homebuyers that qualify for this program have an amazing opportunity to make a huge difference in their future. The increase in wealth that they will build up over time in the form of equity can be used for things such as paying for college, starting a new business, or future investing. This mortgage program really could combat racial inequality in Detroit and help increase the overall economy of the area.

The Cons

As amazing as this program is, there certainly are risks involved.

For the economy

Lenient lending practices with no down payment and no minimum credit requirements is part of what led to the housing crash. If to many borrowers were to default, it could really devastate the mortgage and real estate industries as a whole.

For the borrowers

By not qualifying the buyers as rigorously, there may be many buyers who purchase more than they can afford and end up defaulting on their loans. This would be disastrous for their credit and their ability to find housing after the fact.

 

Overall

Buyers will just need to be extra cautious, do their due diligence, and make sure that they can really afford a home and the additional expenses that come with it such as taxes, insurance, repairs, and lawn maintenance. However, if they truly can afford the payments, then this is an extraordinary opportunity for them to make the American dream of homeownership a reality.

 

Thanks for reading!

Chrissy Myers

MI Home Team Realtors

 

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