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Buying a home can be challenging for low- and moderate-income mortgage applicants for a number of reasons. First, those who don't earn a lot of money often struggle to come up with funds for a down payment. Also, mortgage applicants with less-than-stellar credit might struggle to get approved for a home loan.
But one lender is looking to make homeownership more attainable for those who may have struggled to purchase property in the past. And that's a very positive thing, especially at a time when mortgage rates have gotten higher and home prices remain inflated on a national level.
A much-needed expansion
Citi already has a program called HomeRun in place that seeks to help disadvantaged buyers purchase a home. Now, it's expanding that program in the hopes of reaching more people. The goal in doing so, Citi says, is to promote racial equity and financial inclusion.
Citi’s HomeRun program is designed to target low- and moderate-earners based on census data. Right now, it applies to borrowers earning less than 80% of the family median income in their area. But that percentage is increasing to 120% to open the program up to more applicants.
The program is also expanding geographically. Right now, HomeRun is available in cities that include Los Angeles, San Francisco, New York, Miami, Washington, D.C., and Chicago. But Citi plans to make it available in new markets, including Austin, Dallas, Atlanta, Denver, Houston, Philadelphia and Cambridge, Massachusetts. And, Citi plans to specifically target minority borrowers within those markets.
Removing barriers to homeownership
One major benefit of the HomeRun program is its low down payment requirement. Borrowers can get approved with as little as 3% down on a home.
Granted, FHA loans offer comparable leeway on the down payment front, but they also charge upfront and ongoing mortgage insurance that can be a burden for borrowers. HomeRun doesn't have a mortgage insurance requirement. And, it comes with a credit designed to offset or cover closing costs.
Just as importantly, Citi wants to make this program accessible to borrowers with an absent credit history. For those without a credit score, Citi is pledging to look at other ways of assessing borrowing risk, such as a history of timely rent payments and utility payments.
A positive development
Recently, Bank of America announced plans to move forward with a $0 down payment mortgage program. This news from Citi lends to the movement of making homeownership more attainable for borrowers who don't make a lot of money or have a lot of resources at their disposal.
Homeownership has long been said to lend to financial stability. Those who own property don't have to worry about being forced to move when a lease comes to an end, and they also don't have to worry about rising rent. Plus, those who own property have the option to tap the equity they've built in their homes as needed. So the fact that lenders are pushing to open that door to underserved borrowers is a step in a very positive direction.
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We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Citigroup is an advertising partner of The Ascent, a Motley Fool company. Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
