Can No Down Payment Mortgages Close the Homeownership Gap?

This week, Bank of America announced that it will be offering zero down payment mortgages for first-time buyers in historically Black and Hispanic neighborhoods in five U.S. cities, Realtor.com reports. Borrowers will qualify if they show on-time rent, utility, and other payments, but if the housing market slips into a downturn, the recipients of these loans could end up owing more than their homes are worth.

The initiative aims to close the homeownership gap and rectify decades of housing discrimination against communities of color by making sustained homeownership more attainable for those who qualify. The bank is providing borrowers with grants between $10,000 and $15,000, and those interested must go through a Bank of America-approved homebuyer certification course before applying to the program.

After centuries of systemic racism in the U.S., the homeownership rates of people of color significantly lag white households. About three-quarters of white households are homeowners, at about 74.6% in the second quarter of this year, according to the most recent U.S. Census Bureau report. However, the homeownership rate is just 45.3% for Black households, 48.3% for Hispanic households, and 61.1% for Asian households.

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