With the mortgage business recently suffering its worst three-month stretch in more than four years, competition for borrowers appears to be heating up.
Bank of America, for example, recently announced that it will give “eligible borrowers” as much as $10,000 that they can use toward their down payment or closing costs when they get a Freddie Mac Home Possible mortgage, which require as little as 3% down from the borrower.
But that’s not all the bank is now offering to try to earn borrowers’ mortgage business.
Bank of America is also now offering a $0 lender origination fee on certain mortgages.
Origination fees are typically between 0.5% and 1% of total loan amount, meaning on a $250,000 loan, borrowers likely pay somewhere between $1,250 and $2,500 in origination fees.
But for the next five months, Bank of America is not charging borrowers an origination fee.
But the $0 origination fee does not apply to all loans.
According to the bank, the discounted origination fee is applicable on loans backed by the Federal Housing Administration, Department of Veterans Affairs, as well as Freddie Mac Home Possible mortgages.
So, the $0 origination fee is available on FHA loans, VA loans, and certain Freddie Mac loans as well.
But those aren’t the only low down payment mortgages that qualify for the discounted origination fee.
According to the bank, borrowers may also received the $0 origination fee on the bank’s “Affordable Loan Solution mortgage,” which is a fixed-rate loan for low- and moderate-income borrowers that features a “competitive rate” with a down payment as low as 3% and no mortgage insurance.
According to the bank, currently, 90% of these loans are for first-time homebuyers.
So, given the nature of the eligible loans, which all require low down payments, this program is likely targeted at first-time homebuyers or borrowers with lower incomes.
But for those borrowers, they can now receive an origination fee-free loan from Bank of America.
According to the bank, the program applies to loans closed between now and Oct. 31, 2019.