CRA Home Loans
A CRA home loan is originated by a federally regulated bank or mortgage lender that is obligated to meet the requirements of the Community Reinvestment Act (CRA) of 1977. Some banks refer to these loan products as "portfolio loans." Typically the largest of the federally regulated banks have created special CRA home loan programs that are designed to meet the needs of low and moderate income households in their service area.
Benefits of a CRA Home Loan
CRA home loan programs are not the same from one bank to the other and so the benefits of the various programs vary considerably as well. In general, however, they are usually great home loan options for for first-time homebuyers to know about and to research when considering their home loan options.
Here are just some of the typical benefits you will find with a CRA home loan:
- Lower down payment requirements
- Lower or no mortgage insurance premiums
- Don't need to be a first-time homebuyer
- No income limits if you buy in a low to moderate income area
- Seller can pay your closing costs
- Lower minimum credit score
- Flexible underwriting
- Compatible with down payment assistance programs
- Compatible with a gift from a family member or friend
- Available in all 50 states
Eligibility for a CRA Home Loan Program
To be eligible for a CRA home loan program the following are some examples of typical requirements across the various programs:
- You must be low or moderate income (earning 80% or less than the area median) or that the property is located in a low to moderate income census tract.
- You must own and occupy the home you are financing.
- The borrower and co-borrower must complete homebuyer education provided by a HUD certified housing counseling agency.
Meeting a CRA loan programs underwriting or credit standards is often easier than qualifying for other types of loans. Depending on the program, you may still qualify for an CRA home loan with a lower credit score and some lenders still allow you to build an alternate credit history if needed.
Since the lending standards are different for each lender you will need to check with each specific lender to better understand their specific requirements for the area where you want to finance and purchase your first home.
CRA and State Bond
It is not possible to combine a CRA home loan from a lender with a State Bond loan funded by a state housing finance agency. For this reason you will have to carefully compare and select between these two great first-time homebuyer home loan options.
CRA Loan Fees
In general, the loan fees charged on a CRA home loan will be very similar to and competetive with other options. Of course you always want to compare rates and fees of your various loan options to make sure you are paying nothing more than a reasonable fee.
Obtaining a CRA Loan
CRA home loan programs are not well marketed by the various lenders and they are not always available from all loan officers at a particular bank. For this reason you may need seek specific CRA loan officer at the bank who you are inquiring with in order to access a CRA home loan product.