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Bank of America Affordable Loan Solution Program

Bank of America Affordable Loan Solution Program

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru
  • Affordable Loan Solution Mortgage Program Overview
  • Bank of America offers the Affordable Loan Solution Mortgage Program to help low-to-moderate income home buyers afford mortgages. The Affordable Loan Solution program, offered in conjunction with with Self-Help Ventures Fund and Freddie Mac, enables home buyers to buy a home with a down payment as low as 3.0% of the property purchase price with no minimum borrower financial contribution and no private mortgage insurance (PMI).

    The most important feature of the Affordable Loan Solution program is that the borrower is NOT required to pay private mortgage insurance (PMI) or mortgage insurance premium (MIP)

    Bank of America, Self-Help and Freddie Mac are collaborating on the Affordable Loan Solution program to offer borrowers a low down payment mortgage option that potentially saves them money as compared to other mortgage programs.  Self-Help is a community development lender that focuses on borrowers underserved by traditional financial institutions.  Freddie Mac is a government-sponsored enterprise that provides mortgage capital to lenders.  In short, Freddie Mac buys mortgages from lenders which in turn enables lenders to offer more mortgages. 

    The Affordable Loan Solution Mortgage Program competes with the Wells Fargo yourFirst Mortgage, Fannie Mae HomeReady and FHA Mortgage programs. These programs also enable borrowers to buy a home with a down payment as low as 3.0% - 3.5% and no personal financial contribution. The programs, however, require borrowers to pay PMI or FHA mortgage insurance premium (MIP) which is an additional expense on top of your monthly mortgage payment. By eliminating PMI, the Affordable Loan Solution Program reduces your total monthly housing expense and potentially saves you money as compared to other no or down payment programs.

    Borrowers can combine a Affordable Loan Solution mortgage with a personal gift, employer program, down payment grant, closing cost assistance program or qualified subordinated second mortgage to pay for a down payment, closing costs or property renovations, allowing the borrower to purchase a home with no personal financial contribution. Down payment and closing cost assistance grants as well as qualified subordinated second mortgages, also referred to as Community Second mortgages, are provided through state or local housing agencies or commissions.

    • Review information on Community Seconds and other mortgage assistance programs in your state STATE PROGRAMS
  • Important Affordable Loan Solution Program Considerations
  • Pros Cons
    • Ability to purchase a home with a 3% down payment and no borrower contribution
    • No FHA mortgage insurance premium (MIP) or private mortgage insurance (PMI)
    • Potentially lower total monthly housing expense as compared to an FHA mortgage and other conventional low / no down payment mortgage programs
    • Non-traditional borrower credit profiles considered
    • No borrower reserves required
    • Higher interest rates for borrowers with lower credit scores
    • Relatively conservative borrower debt-to-income ratios
    • Borrower income limits
    • Limit on mortgage amount
    • Limited funds available for program
    • Restrictions on Property Type
  • How the Affordabale Loan Solution Program Works
  • Borrowers apply for and obtain Affordable Loan Solution mortgages through Bank of America which then sells the loans to Self-Help which services the mortgages.  From the borrower’s perspective this means you get your mortgage from Bank of America and then make your mortgage payments to Self-Help which is also the organization you contact if you have any issues with your mortgage after it closes.  Self-help also provides post mortgage-closing counseling for borrowers that face financial challenges and struggle to make their mortgage payments.  If you are interested in the program your first step is to contact Bank of America by calling, visiting the Bank of America web site or going to a local branch.

    We recommend that you compare terms including interest rate, closing costs and monthly payment for an Affordable Loan Solution mortgage to the terms for other low down payment programs.  Contact lenders in the table below to learn about the low down payment programs they offer.  Compare loan terms and programs to find the mortgage and lender that are right for you.

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  • Affordable Loan Solution Borrower Qualification Requirements
  • In order to qualify for the Affordable Loan Solution Mortgage Program a borrower must meet certain eligibility requirements.  We review the key borrower qualification requirements below:

    Credit Score

    The Affordable Loan Solution Program typically requires a minimum borrower credit score of 660 although non-traditional credit profiles will also be considered. If you do not have a credit score or traditional credit profile the lender may consider your payment history (e.g., rent, gym, child care) and other non-traditional forms of credit to assess your credit-worthiness. We recommend that you review your credit score six months to a year before you start the mortgage process to avoid negative surprises and address potential issues you identify with your credit profile.

    Borrower Debt-to-Income Ratio

    The program applies a maximum borrower debt-to-income ratio of 43% to determine what size mortgage a borrower can afford. In short, a debt-to-income ratio is the ratio of how much you spend on monthly debt payments such as your mortgage and credit card bills to your monthly gross income. The higher the debt-to-income ratio used by the lender, the larger the mortgage you can afford. The debt-to-income ratio limit used by the Affordable Loan Solution program is lower than the debt-to-income ratio used for standard mortgage programs (50%) and some other low or no down payment mortgage programs which means borrowers Affordable Loan Solution program participants may qualify for a smaller mortgage amount.

    Borrower Income Limit

    A borrower’s income cannot exceed the area median income (AMI) for the county in which the property is located.  You can use Freddie Mac’s Affordable Income Eligibility Tool to determine the AMI for your county.  Please note that the Wells Fargo yourFirst Mortgage Program as well as the FHA and VA mortgage programs do not apply income limits.

    Borrower Counseling Class

    First-time home buyers are required to take a home buyer education class from a HUD-approved housing counselor.  The class focuses on helping borrowers understand how mortgages work as well as the financial obligations required by home ownership. Bank of America lets borrowers know if home buyer counseling is required when you apply for your home loan.

    First-Time and Repeat Home Buyers

    The Affordable Loan Solution Program is available to both first-time home buyers and borrowers who have previously owned a home.

    Borrower Financial Reserves

    The program does not require borrowers to hold reserves in savings at the time the mortgage closes although we recommend that you hold enough savings in reserve to cover three-to-six months of total monthly housing expense including your mortgage payment, property tax and homeowners insurance.

    Use our mortgage quote feature to compare free, no obligation proposals from top-rated lenders. Our quote form is easy-to-use and requires minimal personal information. Comparing mortgage quotes is the best way to save money on your loan.

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  • Program Costs and Fees
  • Mortgage Rate

    The interest rate you pay depends on several factors including your credit score and loan-to-value (LTV) ratio. Borrowers with a credit score of 720 and above receive the program’s best interest rate while borrowers with lower credit scores and higher LTV ratios pay higher interest rates. For borrowers with good credit scores, the interest rate for an Affordable Loan Solution mortgage is comparable to other conventional low / no down payment programs but higher than the interest rate for government-backed low and no down payment programs such as the FHA, VA and USDA mortgage programs. Affordable Loan Solution program participants, however, are not required to pay mortgage insurance which helps offset the higher interest rate.

    Private Mortgage Insurance (PMI)

    The Affordable Loan Solution Program does not require borrowers to pay mortgage insurance.  This reduces your total monthly housing expense and saves you money as compared to almost all other no or low down payment mortgage programs which require borrowers to pay an up-front and/or ongoing mortgage insurance fee.  Not requiring mortgage insurance distinguishes the Affordable Loan Solution Program from other programs and is a major benefit for borrowers.

    Extra Fees

    Borrowers are required to pay standard lender fees and closing costs with the Affordable Loan Solution Program. Aside from a small fee to pay for the home buyer counseling class, if necessary, borrowers are not required to pay additional fees to apply for the program. Borrowers using a down payment or closing cost grant may be required to pay a separate fee to the housing agency or commission to apply for that program.

    Impound Account

    Along with their mortgage payment, the program requires borrowers to pay property tax and homeowners insurance into an impound account on a monthly basis.  An impound account is a trust account controlled by the lender from which expenses such as taxes and insurance are paid when due. The impound account does not affect the amount of fees the borrower is required to pay for the mortgage.

    Use the FREEandCLEAR Lender Directory to search for twenty-five loan programs including many no or low down payment programs.

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  • Mortgage Type and Loan Amount
  • Mortgage Program

    The program only applies to thirty year fixed rate mortgages. Adjustable rate mortgages (ARMs) and interest only mortgages are not eligible for the program.

    Loan Limit

    The program only applies to conforming loan amounts ($484,350 or below for a single unit property in most counties) which limits the size of mortgage you can obtain.

    Mortgage Type

    The Affordable Loan Solution Program only applies to home purchase mortgages.  Refinancings are not permitted under the program.

  • Property Eligibility
  • Owner occupied, single-family primary residences are eligible for the Affordable Loan Solution Program. Investment properties, second homes and multi-family properties are not eligible.

    Related FREEandCLEAR Resources

    Sources:

    Affordable Loan Solution Program: https://www.bankofamerica.com/mortgage/affordable-loan-solution-mortgage/

About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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