NEW $17,500 GRANT From Bank of America - Requirements and How To Apply

Certified Mortgage Advisor
NMLS 1701021
April 5, 2021

Bank of America's Grant

Bank of America now has two grants, a down payment grant and closing costs. Grant totaling $17,500 is the maximum amount you can get in help for your down payment or closing costs. Now, normally I'm a little bit hesitant to recommend down payment assistance programs. Most of the time, because they can be more costly. They can tend to have higher rates, they have extra fees and they can lock you into a property and require some form of repayment in the future. However, this is one of the only down payment programs and closing costs, help programs that have seen the. Really good. So we're going to cover the ins and outs of these two grants.

BoA's mission!

So first of all, Bank of America's kind of mission here is they basically set aside $15 billion through 2025 to help 60,000 families or more so that's their goal here. They put this together more as an altruistic view with home ownership. So it's difficult to say if there's any ulterior motive behind it but this is actually a really solid down payment assistance option. I've seen other ones and they are not good. That's why I normally don't talk about them. This is the only one that I've seen that is actually really good and could be really helpful for buyers who either don't have the funds or they want to spend those funds on other things like paying off debt or creating an emergency savings or investing in the retirement fund.

The two main grants

So there's two main grants that they have, they can be used separately or they can be used together. So number one, they have a $10,000 down-payment. So just it sounds, it goes straight to the down payment and then a $7,500 closing cost grant as well. So let's first talk about the down payment grant here basically allows for 3% of the purchase price up to $10,000.

So if we do a little bit of some reverse math this is anywhere from a purchase price of $50,000 to $333,333. So that's the purchase price range that you're going to be looking at with these two numbers here. Now, what they do is they're using these primarily with a conventional loan more specifically Freddie Mac's home possible loan.

This is a really good loan program. It's more affordable in terms of the rate and the monthly mortgage insurance than a regular conventional loan. So you're going to be seeing lower mortgage insurance and they might also pair you with one of Bank of America's other types of loans that doesn't have mortgage insurance.

Bank of America, wasn't entirely clear about when they're going to be looking at which conventional type of loan they're going to be putting you in if you are in this down payment grant and this is also only in selected markets.

Would there be repayment?

There's no repayment. This is the gold thing here about this down payment grant. A lot of down payment grants that I've seen. Normally what they'll do is they'll say you have to live in the home for five years. If you move, if you sell refinance within that period of time, you have to pay back all or a portion of that down payment grant.

And with this grant that I'm seeing here, that's just not the case. There's no tied repayment onto this, also, there's no cash back in excess of your earnest money deposit. You can't just receive extra cash at the closing table. They're not going to hand you over a check. They're going to cap it to what your actual down payment is, what your actual closing costs.

About Tax

Also, this could be considered taxable income as stated on their website. So you want to talk to an accountant about this, to see how that's going to fit. Most of the time down payment assistance programs tend to not be taxable. However, none of this in here is tax advice. Speak with somebody who can help you a little bit more figuring the tax side of that out.

Closing cost grant

Then we go to the closing cost grant. Now they call this America's home grant. Basically it's a lender credit at $7,500 towards nonrecurring closing costs. That takes away the idea of like, where is this money coming from? That's a lender credit, so it's coming directly from bank of America. It's not like there's this third-party organization. Most down payment assistance tends to be some home ownership organization, giving money into a specific loan or specific lender. And with this, it's just a lender credit from Bank of America themselves. Again, there's no repayment.

Why is it really a great grant?

And what's really great about these two types of grants is the down payment and closing cost grant is that they can be used together. We can get up to $17,500 total, or they can be used separately, which is really nice. Because let's say, we need to go with an FHA loan, maybe we don't qualify conventional, maybe our debts income ratio is high and maybe it's too high for conventional.

So what we need to do is we need to go FHA. We can't use the down payment assistance. Because it's only for conventional, but we can use the closing cost grant here. We'll still have to do 3.5% down FHA, but we can get some money up to $7,500 for our closing costs. Those nonrecurring closing costs.

Non-recurring closing costs, what it covers

So non-recurring closing costs can cover is title insurance, recording fees, and any points.

What non-recurring closing cost "can't" cover

What it cannot cover these non-recurring things would be a down payment. Again, this is a closing cost grant and not Prepaid items. So taxes, homeowners, insurance, those are recurring each year, and that's why this grant doesn't cover those. Also, they cannot cover cash back.

A nice hack

So what's nice about the points is, you have $7,500 in grant for nonrecurring closing costs. You're probably not going to be using all of that, because that would mean that would be a lot and nonrecurring closing costs. So you can take the remainder instead of just not using it, you can apply it towards points. So basically you'd be able to think of it like prepaying interest to lower your interest rate on your mortgage.

Total grant amount

So if we look at averages that Bank of America's max limit is $17,500 in total, that's the maximum that you can receive where they've said as the average, the grant amount is 14,000. A lot of people aren't maxing that out, but on average, they're using a lot up to $14,000 on average which is huge.

Average Down Payment Grant

So for people who are doing the down payment, They're seeing an average of $7,400.

Average Home Grant

People are using the home grant, the closing costs grant, they're seeing an average of $6,400. So those are both fantastic. Especially because you can see these big numbers of $17,500 available and you're thinking, yes, but how many people are actually using that? To see that these are actually being used and a large portion of that fund is being used by individuals and it's fantastic.

Main requirements

Main requirements here, 640 is the minimum credit score that you're going to need now. Bank of America online, they've been a little unclear about with the closing cost grant.

Let's say we need to go FHA. And we let's say we have a 580 credit score. We can qualify FHA, but can we get the closing costs grant with a 580 credit score? They haven't been clear about that, so that's a question that I haven't been able to get an answer from. Even when I've reached out to Bank of America.

About your income

As far as income, if you're looking in a low to moderate area and the way that you would find this, as there's a link in the description Bank of America gives a tool that you can use to search. If you're in a low to moderate area, there's no income cap. A lot of down payment assistance programs tend to have an income restriction.

So that's really great that there's no income limit. If you're looking at a low to moderate income area, if you're looking at a medium to upper income, or medium to upper income area. There's a cap of 80% of the area, median income and then I also have a tool that will help you look up areas and find what the 80% AMI area median income.

I'm not a BoA customer, can I qualify?

So you don't have to be a Bank of America customer which is really nice. Like we don't have to go set up a checking account or some other account with them, but we do have to get the mortgage through Bank of America. Most down payment assistance programs, again, tend to be like there's a third-party organization and lenders individually we'll fund the loan but there'll be able to get the grant or the money from this other organization. Now with this program, that's not the case. You have to get the loan through Bank of America. So basically what they're trying to do is get more people into their own loans. So that's most likely how they're justifying the cost with this program.

Do I need to occupy the home?

Just like with any other FHA loan or a primary residence, conventional loan, it doesn't have to be owner occupied for a minimum of one year. They haven't said any, anything online that I've been able to see about like repayment needed within that.

So if let's say we sell the house within six months, they haven't been clear about, does that money need to be repaid? Does it not, from what I've seen, it looks like as long as you live in the home for one year, then you should be fine not expecting any sort of repayment with that program, but that's something that you want to clarify with a Bank of America loan officer.

Not a first time home buyer, will I qualify?

Also, you don't have to be a first time home buyer, which is really nice. If you're selling your home and looking to move into something else and you need a little extra cash, this can be a really great program for you. Especially if you have a lot of equity tied up in your current home and you can't access it before you end up selling your current home.

What offer can impact

So here's how it impacts your offer. Down payment and closing costs can help you not have to ask for closing cost credit from the seller. So when we put in an offer to a seller, we often have to think of how is the seller receiving this offer? What kind of impression are they getting about us?

So if we put in an offer and we ask for 3% of the purchase price towards closing costs, then that's money, that's command of their pocket. And they most likely don't want to give it to us compared to somebody who's not asking for closing costs. So a program like this can help our offer actually be a little bit more competitive, especially with how competitive the market is right now.

We don't want to come in asking for closing costs because that's a less attractive offer to. However we can come in and say, we don't need closing costs and we don't have to save we're using this grant program, but we don't have to ask for the closing costs, which makes our offer more attractive.

Now do keep in mind, you still likely will need a few thousand dollars to actually close on your home because this is not designed to be a hundred percent down. Again, like we had those limits, that 3% up to $10,000, so maybe our down payment was more and we needed to cover that as well, because a lot of people are purchasing homes higher than $300,000. Also the $7,500 goes towards non-recurring closing costs. So things like taxes and homeowners, insurance, things like that still need to be covered by us.

I don't expect this to be showing up with zero out of pocket that does happen for some people where they might not have to pay anything. However, for a lot of people still expect to pay a few thousand dollars, even things like your home inspection is going to be somewhere around $500. That's a cost that you need to consider along.

Time frame

Also, this might be slower. So this is really going to depend on who you're working with the Bank of America. However, from a lot of what I've heard, even from people who have been texting with about their experience with this program, they said, it's great. However, it was a long time to get this closed.

So you just need to add that as a consideration of maybe instead of a 30-day, we need a 45 or a 60-day contract to make sure that we don't miss our contract deadline. We don't want to say we're going to close in 30 days and then the loan needs to be extended because the seller does not have to extend the contract. So we need to make sure that we're ready to hit that contract date and we need to give our lender enough time. If we're using somebody who may be a little bit slower.

Is this available in all 50 states?

This is only in 37 states and bank of America does have actually a pretty handy home search tool. It's not super fast and responsive as you might find with other ones, but they will give you a little icon next to the homes that qualify for one or both of these groups. So here's how you'd apply. If you're interested in this program, you want to learn more, and you wanna apply for it, you're gonna apply through Bank of America.

Yes, I am not sponsored

I think it's important to remember that this channel is in no way sponsored, I'm not an affiliate. No one asked me to make this video. Simply a lot of you asked about, "Hey, I hear about this Bank of America grant. Can you tell me a little bit more?". So I wanted to research that and give you some information on this. I am in no way, affiliated with Bank of America, you can get a loan through them, if you don't have to, I don't really care. Do what's going to be best for you.

Explore, you might get a better deal

I just want to get this as an option for you to explore. With that said, I think it's super, super important that you compare this loan with other types of loans as well. I don't think it's smart to just get one quote. I think you need to get multiple quotes. I always recommend getting at least three quotes. So you need to get a quote with a credit union, a broker and a bank. That's going to give you a good spread of different options. And you already got the bank covered, right?

You can already apply through Bank of America and see that as one of your quotes. Now you need to get another two other quotes, get one from a credit union, get one from a broker, and then you can explore more if you would like. So this should give you a really solid idea of what's going on with the Bank of America program.

And hope this helped you explore a little bit more.

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