U.S. Bank on Wednesday became the latest bank to announce new efforts to make homeownership more realistic in communities of color.
The banking subsidiary of Minneapolis-based U.S. Bancorp said it would offer certain borrowers a credit of up to $5,000 to cover closing costs, down-payment assistance of up to $12,500 and down payments as low as 3% of the purchase price.
To qualify, borrowers must live in majority-minority neighborhoods in 11 pilot cities and meet income requirements, and their income must match or be under the median income in the neighborhood in which they are buying. If their income level is too high, borrowers can still qualify by applying to buy a home in a low- to moderate-income area.
Several large banks in recent weeks have detailed new or expanded efforts to make homeownership more affordable for groups that have historically faced discrimination in the homebuying process.
The U.S. Bank effort is also a special-purpose credit program. Those programs have become more common over the past three years, since protests stemming from the death of George Floyd prompted financial institutions to consider new ways of extending credit to borrowers in communities of color.
The sharp rise in mortgage rates since the spring of 2022 have pushed homeownership farther out of reach for many Americans, especially for those groups that face obstacles even when market conditions are more favorable. The average mortgage rates reached 6.81% last week, the highest level this year, according to Freddie Mac.
"Borrowers can use the $5,000 lender credit to, obviously, get rid of additional closing costs, but where we really think it has the most benefit for the borrower is the ability to buy down the interest rate," said Lenny McNeill, vice president of national strategic markets at U.S. Bank.
The Access Home Loan is geared toward first-time homebuyers, but being new to the housing market isn't required. Borrowers must have a minimum credit score of 640, but U.S. Bank said it will also accept income statements, rent payments and utility payments to determine creditworthiness.
Six of the 11 cities are located in California, where U.S. Bank is expanding its presence after
"We're very much looking forward to the utilization of the program in California, but also to hopefully have a significant impact on our lending ability, especially to Hispanic and Latino borrowers," McNeill said.
