Bank Of America Mortgage Review

    Bank Of America Mortgage Review: Online Applications And Low Down Payment Options

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    In 2020, we saw mortgage rates hitting historic lows as the coronavirus pandemic swept the globe. But with vaccines on the horizon and our economy slowly recovering, experts believe that mortgage rates are in for a slight upturn in 2021. For those on the hunt for a new home or a loan refinance, this means it’s as important as ever to find the best-value lender. 

    Bank of America is a global company that serves approximately millions of people across the US and over 35 countries. It offers a range of products, from savings and checking accounts to credit cards and loans. When it comes to home loans, Bank of America is a major player, featuring in numerous “best of” lists online. It also ranks second in JD Power’s 2020 Primary Mortgage Origination Satisfaction Survey.

    So what makes Bank of America a great option for a home loan? In this Bank of America mortgage review, we take a closer look at what the company has to offer.

    What To Look For In A Mortgage Lender

    There is a myriad of factors you should consider when shopping for a mortgage lender, from the loan types they offer to their customer satisfaction ratings online. For this review, we assessed Bank of America on the following factors: 

    Home Mortgage Products

    Not all lenders will offer the same loan types. Here are five of the most common kinds:

    Conventional Mortgage

    These are loans that are not insured by the federal government. Instead, conventional mortgages are backed by private lenders. 

    There are two types of conventional mortgages – conforming and non-conforming loans. Essentially, conforming loans are those with amounts falling within the maximum borrowing limits set by the Federal Housing Finance Agency. 

    Borrowers with conventional mortgages are encouraged to pay a 20 percent down payment, but depending on your chosen lender, it’s possible to pay as little as 3 percent. There is a trade-off, however – if you pay lower than 20 percent down, you’re likely to be required to pay for Private Mortgage Insurance or PMI. 

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    Jumbo Mortgage

    “Jumbo mortgage” is another term for non-conforming loans. Simply put, jumbo loans are mortgages that go beyond the maximum limits. For 2021, it’s $548,250 for single-family homes across most US states. In Hawaii, Alaska, and other high-cost markets, the limit is $822,375.

    Because they’re much higher than the average loan, they’re also harder to qualify for. Usually, you’ll need to put at least 10 percent down and have a credit score no lower than 700. 

    Fixed-Rate Loan

    With a fixed-rate mortgage, your interest rate will never change throughout your loan’s lifetime. As such, this type of loan offers more stability and predictability. 

    However, there is a trade-off – with fixed-rate loan options, not only do you have a bigger monthly payment, but you could also end up paying more interest, especially if you go for longer terms. You’re also more likely to find a higher interest rate on fixed mortgages. 

    Adjustable-Rate Mortgage

    In contrast to fixed-rate mortgages, adjustable-rate mortgages (ARMs) come with changing interest rates that can be influenced by market conditions. Most ARMs give borrowers the option to pay a fixed rate in the first few years of their loan. After the agreed-upon fixed-term period, the loan changes to a variable rate, meaning that the interest can fluctuate per year. 

    ARMs may be unpredictable, but they do allow borrowers to make a lower monthly payment in the first few years of their loans. This is great if you need more time to save or if you plan to move out/sell your home before the adjustable period.

    Government-Issued Mortgage

    There are three kinds of government-issued mortgages – FHA, VA, and USDA loans.

    • Federal Housing Association Loans - FHA loans are meant for people who may not have the funds to shell out a lot of money for their down payment or those who have a poor credit rating. As such, it is aimed towards low-income and first-time borrowers. One would only need a FICO score of 580 to qualify for up to 96.5 percent financing, and you can pay as little as 3.5 percent down for FHA loans. 
    • Veteran Affairs Loans - VA loans are loans reserved for active duty US military, veterans, and their families. VA loans are usually flexible, with low interest rate options, no down payments, and no Private Mortgage Insurance requirements. 
    • United States Department of Agriculture Loans - These are loans offered to low-income borrowers looking to buy homes in rural, USDA-eligible areas. Typically, low-income borrowers can get USDA loans without paying any down. 
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    Affordability: Mortgage Rates And Fees, Requirements, Etc.

    Buying a house amid a pandemic can be a big risk. As such, it’s never been more important to find a mortgage lender who can offer low monthly payment requirements and interest as well as fewer additional fees and lower closing costs. It's also good to look for a lender who can offer loans to borrowers with average-to-low credit scores or debt-to-income ratios. 

    Here’s a more detailed look at what to look for in a mortgage lender in terms of affordability:

    • Minimum FICO credit score: Your credit score is a record of how financially responsible you are. If you pay your bills and debts on time, you’ll have a high credit score. If you incur too many debts or take too long to pay, you’ll see your credit score dip. 

    Credit scores range from 300 to 850, with 620 as the benchmark for a good rating. Some companies require higher scores, however, especially for bigger loans. 

    • Minimum debt-to-income ratio: This measures how much money you owe relative to how much you make monthly. As with credit scores, lenders are keener to offer loans to those with balanced ratios. You’ll want your ratio to be at around 40 percent; however, some lenders allow up to 50.
    • Minimum down payment: The rule-of-thumb used to be that borrowers had to pay 20 percent down upon purchasing a home. While it’s still ideal and most lenders will still require a PMI for anyone paying less, some mortgage lenders are more flexible – allowing as low as 3 percent. 
    • Additional fees and closing cost: When you get a home loan, you won’t just have to pay the principal amount. You’ll be faced with various fees, like an origination fee, application fee, underwriting costs, and closing cost – the latter of which can be up to 5 percent of your mortgage’s value, depending on your lender.

    Application Process

    With social distancing rules still in force, it’s important to find mortgage lenders who can let you do most – if not all – of the application process online. Additionally, we also put a premium on mortgage lenders who show mortgage rates online as it makes it easier for buyers to compare mortgage rates and make a decision. 

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    Customer Service And Satisfaction

    While you can look up review after review online to assess customer service, we put most of our faith into two agencies: JD Power and the Better Business Bureau. 

    JD Power is a marketing research firm that specializes in data analytics and consumer insights. Each year, they produce reports and rankings across different industries. In 2020, JD Power released a U.S. Primary Mortgage Origination Satisfaction Study, which rates mortgage lenders on “overall customer satisfaction based on performance in the application/approval process; communication; loan closing; and loan offerings.” 

    The BBB, on the other hand, gives us insight into a company’s trustworthiness. Their ratings, which go from A+ to F, represent “the BBB’s opinion of how the business is likely to interact with its customers”. They factor in things like a company’s complaint history, their transparency in business practicing, any advertising issues they’ve had, licensing, and government actions. 

    Aside from these ratings, you can also look out for mortgage lenders’ hotlines and online portals, paying attention to whether they’re actually useful for customer complaints and concerns. 

    Availability

    You can’t borrow from lenders that don’t operate in your state – it’s as simple as that. Make sure that your mortgage lender will be able to accommodate you, wherever you are.

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    Bank Of America Mortgage Review

    Bank of America has been around for 240 years and can trace its roots to the Massachusetts Bank, the company’s oldest heritage bank. Today, Bank of America offers financial services to over 66 million consumers and small businesses in all states. The second-biggest bank in the United States when measured by assets, Bank of America is considered a global leader in investment banking and trading. 

    Bank of America offers savings and checking accounts, credit cards, a range of loan products from home loans to auto loans, and investment products. It has over 4,000 branches in the US.

    Bank Of America's Mortgage Products

    Bank of America offers the following mortgage products:

    Fixed-Rate Loan

    The purchase price for fixed mortgages at Bank of America ranges from $60,000 to $2.5 million (jumbo loans), with a minimum down payment of 5 percent. Fixed mortgages come in 30-year fixed terms, 20-year fixed terms, and 15-year fixed terms.

    Adjustable-rate Mortgage

    Bank of America has adjustable-rate mortgages in 10/1, 7/1, and 5/1 variables. This means that the initial fixed period ranges from five to 10 years, with a once-per-year adjustment thereafter. Your monthly payment may decrease or increase based on market changes.

    Affordable Loan Solution Mortgage

    This is an offering unique to Bank of America. With this mortgage, you can pay as low as 3 percent down – no PMI required! 

    Freddie Mac Home Possible Mortgage

    This home loan is similar to Bank of America's Affordable Loan Solution option, but it does require PMI from borrowers paying less than 20 percent. However, you can expect to pay a lower PMI than what is usually required for most conventional loans. With this option, you may need two months’ principal, taxes, interest, insurance, and assessment reserves as well.

    For both the Affordable Loan Solution and the Freddie Mac Home Possible mortgage, first-time buyers are required to take homebuyer education from a HUD-approved counseling agency. 

    FHA, VA Loans

    Bank of America offers FHA and VA mortgage loans. For FHA loans, you can expect to pay a low down payment for fixed-rate loans. For VA loans, you can get up to 100 percent financing with as little as a $0 down payment. 

    Bank of America's biggest let-down in this category is that it does not offer USDA loans. 

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    Aside from the aforementioned mortgage products, Bank of America also offers refinancing and home equity line of credit loans. With refinancing, you can take out another loan with better interest to pay your mortgage. With a home equity line of credit loan (HELOC), you can borrow against your home equity. 

    Affordability

    When it comes to affordability of rates and fees, a Bank of America mortgage ranks pretty averagely. They require at least a 620 credit score for conventional loans and a 720 credit score for jumbo loans, as well as a 55 percent debt-to-income ratio for conventional mortgages. As mentioned, you can expect to pay as little as 3 percent down for certain loans at Bank of America. 

    Unfortunately, Bank of America does not disclose its mortgage fees. As for the origination fee, these can be reduced by up to $600 for qualifying Preferred Rewards clients. 

    Application Process

    Applying for a Bank of America mortgage is quick and easy, as they offer a completely online mortgage application process. In fact, borrowers can get estimates, prequalify for a loan, lock in rates, apply, and submit their documents – all from their mobile phones or computers. 

    Bank of America also shows their rates online, making it easier for you to compare loans with other lenders and compute for your monthly payment. 

    Customer Service And Satisfaction

    Bank of America has a customer service hotline that’s open from 8 am to 10 pm Mondays through Fridays and 8 am to 6:30 pm on Saturdays. If you want to have a consultation about your loan options with a loan officer or financial specialist, you can schedule an appointment online. 

    Bank of America also has a great online portal for applying and staying on top of your existing loans. You can check your loan status, sign documents digitally, and refinance an existing loan online. 

    When it comes to JD Power rankings, Bank of America boasts the number two spot on the 2020 U.S. Primary Mortgage Origination Satisfaction Study with a score of 860. Bank of America is preceded by Rocket Mortgage by Quicken Loans, which scores 883. 

    Bank of America also boasts an excellent A+ rating from the Better Business Bureau.

    Availability

    Bank of America's home loan products are available in all 50 states of the United States of America. 

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    Bank Of America Mortgage: Pros And Cons

    Pros

    • Provides interest rates online
    • Offers a variety of mortgage options, plus refinancing and home equity line of credit loan products
    • Offers options for low down payment 
    • Allows you to prequalify for a loan, lock rates, and apply online
    • Boasts excellent ratings from JD Power and the Better Business Bureau
    • Available in all 50 states

    Cons

    • Does not disclose mortgage fees
    • Does not offer US Department of Agriculture loans
    • Requires a down payment for all mortgages except their VA loan offerings

    The Bottom Line

    With a range of mortgage loan types, a mostly online application process, and excellent ratings from trusted agencies, Bank of America proves to be one of the best places to get a home loan. 

    Whether you want to learn more about getting a mortgage with Bank of America, review Bank of America's competitors, or are looking for resources on mortgages, life insurance, and other personal finance matters, we’ve got you covered. Visit Wesley Mortgage's website to see how we can help you reach your financial goals today.

    Written By Ed Wallace
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