Writer: Jerrica DuBois
2 min read September 2022 — Both the global and national challenges of the last few years have made it even more difficult for first time buyers to afford a home. These struggles of affordable homeownership have been particularly challenging for minority communities.
Prices have increased an average of about $80,000 for a typical home since 2019, and housing inventory has steadily dropped, according to a report posted earlier this year by the National Association of Realtors. The report also found half of that inventory was only in the price range of those households with a minimum annual income of $100,000. In Hispanic households, nearly 25% earn over $100,000. In Black households, that number drops to almost 20%.
According to an NAR analysis based on income levels and home availability, the most affordable states for African Americans purchasers are Maryland, West Virginia, Kansas, Ohio and Indiana. The least affordable states are Utah, Oregon, California, Nevada and Rhode Island.
Black homeownership is lower than it was a decade ago at 43.4%. White homeownership is at 72.1%, a percentage difference of nearly 30 points. In contrast, the Hispanic homeownership rate is on the rise, hitting over 50% for the first time, and the Asian homeownership rate is 61.7%.
“One of the biggest challenges is affordable housing,” Lloyd Devaux, president and CEO of Sunstate Bank told Invest:. “Rents have gone up 30% to 40%. Affordable housing in South Florida has been an issue for a number of years, but it has gotten much worse because of inflation and with so many people relocating to the area.”
To that end, Bank of America recently announced its new Community Affordable Loan Solution, which has been created to allow for more equity in the housing market. The program features mortgages with no down payment and no closing costs for first-time homebuyers located in specified minority neighborhoods. The pilot program has been launched in Miami, Charlotte, Dallas, Detroit and Los Angeles and is scheduled to expand to more cities if it is proven to be successful.
In addition to the down payment and closing costs benefits, the program also does not require a minimum credit score or mortgage insurance, which is typically charged when less than 20% is given as a down payment. In lieu of the credit score, first-time homebuyers will be evaluated on their history of making timely payments for rent, utilities, phone service and auto insurance.
The Community Affordable Loan Solution also requires the completion of a homebuyer certification course. The education component will demonstrate the borrower’s ability to meet current financial obligations as well as create a financial plan to sustain homeownership for the long term.
Borrowers do not need to be Black or Hispanic to qualify for a Community Affordable Loan Solution. Eligibility is based on income and home location. Bank of America will also make a down payment on behalf of borrowers, which will immediately give them equity in their new home. “Homeownership strengthens our communities and can help individuals and families to build wealth over time,” AJ Barkley, head of neighborhood and community lending for Bank of America, said in a statement. “Our Community Affordable Loan Solution will help make the dream of sustained homeownership attainable for more Black and Hispanic families.”
