3 BIG FLAWS of Bank of America's down payment assistance grant

Certified Mortgage Advisor
NMLS 1701021
July 21, 2021

New Grant from Bank of America

Bank of America has a pretty interesting grant that's relatively new. It's up to $10,000 for the down payment and up to $7,500 for closing costs.

What's the review of this new grant?

Now, I want to ask those of you who went through the program. What was your experience like? The overwhelming response was it's slow. It's so frustrating. Frustratingly slow and day by day extension by extension. I feel time slipping past me and I hope the seller maintains our offer and approves our extension. And I feel it deep weary in my bones. Okay, it's slow, but is it that bad?

An advice from someone who already used the program

So someone commented and said the process was initially pretty simple. But due to delays on Bank of America's part, my closing has now been delayed three times. My advice is to stay in daily communication with your loan officer. I'm just praying that my seller accepts this recent extension. And here's the big problem with a lender being slow is it's not just an inconvenience.

Problem with a lender being slow

Actually, it can cost you both money that you put in with inspections and maybe earnest money. If your contract doesn't actually close and it can ask you actually cost you the home. Because if we think for a minute, when we get under contract, let's say we get under contract here at this point in time.

And our contract is going to cover until the closing date. We told the seller that we were going to close within a particular period of time. So it covers everything up to the time that you gave the seller. The problem is we had a contract that says, we're going to close on the date that you promised to close on that date. So the minute that we can't close on that date, and we actually say, we need a little bit more time. Maybe that's seven days.

What we can potentially lose when there's delay

At that point, it's up in the air. The seller could say, Nope, we're going to move on to another offer or they can accept it. So what can be difficult here is that.

If we work with the lender, who's not nailing our contract close time. That's when we can run jeopardy again of losing earnest money, losing the inspection money that we put up because maybe we won't be able to get the house. If the seller doesn't move forward with accepting our external.

Yes, it's really a good program

Now to be fair. This is a really solid loan program compared to a lot of other types of loan programs. There are some really great low-down-payment options. Like USDA's 0% down loan, but outside of that, this is one of the best down payment assistance programs or grants that really I've ever seen. And for those of you who watched my channel, I'm not a huge fan of down payment assistance programs because most of them tend to be a little bit more expensive and do not have great terms to them.

One of the main reasons this program is great is that there's no repayment and the rates appear to be low. I can't go through it myself cause I'm not actually in the process of buying a home or getting approved for a loan. But from what I've seen, the rates do appear to be really favorable and comparable to other programs. However, there are some big drawbacks here that you definitely want to consider. If you're looking at this as an option and comparing amongst other different types of loans.

1. Certain Market is only available

So number one, it can be tough to find. So only certain markets are available and not every home qualifies for both grants. So it may be eligible for one grant or the other.

Remember there's a down payment grant and a closing cost grant and the home may only qualify for one of them. If even that and Bank of America, thankfully does have a website where you can explore homes that are eligible in different areas. And so they have a tag in the top, that says home buyer, And basically, it will show you an icon next to the homes that do qualify.

2. You need to work with BoA

Then number two, another big drawback is you do have to work with Bank of America. So you can't go take this grant and work with the lender that you have been working with. If you've already been approved, you have to work with Bank of America. Which could be a good thing, could be a bad thing.

Sellers don't want to work with big banks

Some of the drawbacks are that not only could they be slow, like one common are mentioned, but sellers are also aware of some of the Bank of America. Issues with timing like that and can be afraid to accept offers from quote-unquote, big banks. And this isn't just a Bank of America issue.

There are a lot of listing agents who would recommend their sellers to actually not work with a client who works with a buyer who might be approved through a bigger bank because they can have those issues of lack of communication and possibly longer closing time and the seller, they want their money, but they also want to close on time too. They don't want to have to deal with extensions. From a non-communicative bank.

Now Bank of America still does a lot of business. Don't get me wrong there. Like they might have a bad reputation for being slow amongst listing agents or sellers, but they still do a lot of business. And I'm sure they have plenty of loans that still close on time or earlier than the contract closing date. But sellers can be leery of some of those offers that come in with this like big bank lender reputation compared to a local lender that has a really great reputation and all of the agents know and that they trust and have worked with to see that they're reputable, it's actually close on a deal.

Look for different options

And this is why I highly recommend that. Even if you're looking at this program and you're like this. I really want to look at this and apply for it and see if I can get it. You still need to shop around and explore different lenders and see what they can offer you because there's no point in just looking at one loan. There's no harm in looking at the different options that you have available to you.

Quality of customer service is important

And the lender is more than just the programs that they offer. Also, have to consider the quality of the customer service. Will your loan officer be available to answer when you have a question or when a problem needs to be addressed, will they be there to answer that.

What I mean by this is not, you don't need somebody who's going to answer the phone at two in the morning, or at night, but you do want some level of responsiveness from your loan officer.

Customer's review

One commoner said, "I was pre-qualified for this, but can never get my banker on the phone. And he wouldn't reply to my emails. They also won't do a pre-approval because it was too much work. Went with another lender. No grants".

And so this is another instance at which if you do run into a problem with a loan, with any lender, if that problem is not being addressed, that could put your closing in jeopardy, not only from a timeline perspective of can we hit the closing date but also if there's a problem, we need to get it fixed as quickly as possible and have time to find whatever the fix is. That way you can move forward with closing on that home.

3. Limited down payment for Conventional or similar program

The third drawback is the down payment grant is limited to conventional or conventional like programs. So if you remember, there's two different grants, the down payment closing costs grant.

Can't use both grants if you with to use government loan programs

So if down payment grant and closing cost grant work with kind of these conventional products that Bank of America has, but if you need flexibility with a program like FHA, VA, or USDA you can only use the closing cost grant independently. You can't use the down payment grant.

Not to mention FHA has a loan program offered by almost every lender that is compatible with hundreds of local down payment assistance options that are available nationally and likely are available in your area as well. And those need to be compared because they could be comparable or better than the Bank of America grant, so you really want to be able to see, okay if I need an option like FHA, how does that stack up against something like the Bank of America grants as well if I combine my FHA loan with another type of down payment assistance that is provided locally.

BoA is good, we just also need to know the cons

So it's not all drawbacks though. But I don't wanna just like pitch this as a golden ray of home loan, sunshine. So I felt like the negative should be covered first. Cause I see a lot of these videos on the Bank of America grant. That's like good news, free money. Get it while you can that kind of thing. That's a fair representation without all of the facets of this program and, the pros and cons.

Positive review

So now onto some positives, so someone else said, "I just got both Bank of America grants approved. The process has been straightforward. Our loan officer is very helpful and we're very happy. Scheduled closing is May 5th".

Some people love the process that they've had with Bank of America. Another person said, "my two homes have been through Bank of America. They're so smooth and easy to work with. Going through the next, maybe next year for a third purchase".

Someone else said, "I just closed using these two grants".

"I got an APR of, and put 5% down payment and paid no closing costs! I close on my scheduled closing date."

Another who said, "I went to Bank of America and spoke to a loan officer about this. They qualified me for a conventional loan and will be giving me 5,000 for the down payment and seven and a half thousand for closing costs and points to get the interest rate and he confirmed that the only down payment grant needs to be added to your income".

Again, don't take this comment as an advice, talk to an attorney.

So ultimately this program is an option

I want you to really keep that in mind that it's an option to consider. It's not just the only thing that I want you to consider. Shop with other lenders and see what programs are available for you because there are more options for you to choose from.

You just have to do a little bit of looking around and be creative with trying to figure out what exists and who you can connect with. Ask questions that will help understand where you are and the solutions you need for your credit and your money situation.

Talk with a loan officer
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