As lenders struggle with the impact of reduced home sales on the mortgage business, some banks are coming up with new ways to make their offerings more attractive to borrowers.
The Bank of America for example, recently said it would give “eligible borrowers” up to $10,000 to be used towards their down payment or closing costs when they secure a Freddie Mac Home Possible mortgage, with as little as just 3% down required.
But that’s not enough for Bank of America, which is now trying to further entice borrowers by canceling origination fees on certain types of mortgage, HousingWire reported.
Typically, origination fees can cost from anywhere between 0.5% and 1% of the total loan amount. That might not sound like too much, but on a loan worth $250,000 it can amount to around $1,250 to $2,500 in extra costs.
But for the next five months, Bank of America says it won’t charge origination fees on many of its home loans.
The bank said the $0 origination fee will be applicable for loans backed by the Federal Housing Administration, Department of Veterans Affairs, as well as Freddie Mac Home Possible mortgages. That means it also applies to FHA loans, VA loans and some kinds of Freddie Mac loans too.
In addition, some borrowers who apply for Bank of America’s Affordable Loan Solution Mortgage will also be eligible for the $0 origination fee. The Affordable Loan Solution Mortgage is a fixed-rate loan designed especially for low and moderate-income borrowers and comes with a “competitive rate” and down payment requirement of just 3%. No mortgage insurance is required, either.
The bank says around 90% of those loans go to first-time home buyers, which suggests its $0 origination fee is also targeted at the same kind of borrower.
Bank of America said the $0 origination fee program will run from now until the end of October.