Zillow offers 1% down payment to attract more homebuyers
INDIANAPOLIS (WISH) — Real estate company Zillow has launched a new program offering mortgages with a 1% down payment option for eligible homebuyers, while contributing an additional 2% at closing. The 2% is paid through closing costs and not as a payment to the borrower. Currently the program is only available to buyers in Arizona with plans to expand.
“For those who can afford higher rent payments but have been held back by the upfront costs associated with homeownership, down payment assistance can help to lower the barrier to entry and make the dream of owning a home a reality,” said Orphe Divounguy, senior macroeconomist for Zillow Home Loans.
The program will reduce the time it would ordinarily take to save for a down payment, according to Zillow. The loans are part of an effort to grow revenue streams beyond the home listings it is best known for and become what Co-Founder and CEO Rich Barton has called an all-in-one “housing super app.”
“The rapid rise in rents and home values means many renters who are already paying high monthly housing costs may not have enough saved up for a large down payment, and these types of programs are welcome innovations in lowering the potential barriers to homeownership for those who qualify,” said Divounguy.
To qualify for the Zillow low down payment option, borrowers must be first-time home buyers, complete an education course on homeownership, and intend to occupy the property as their primary single-family residence. In addition, the borrowers must have a minimum qualifying FICO credit score of 620, earn income below 80% of the median income where the property is located, and meet any additional underwriting requirements as applicable.
The news comes after mortgage rates surged to their highest level since 2000. The average rate on a conventional 30-year fixed-rate mortgage jumped to 7.31% last week, up from 7.16% the previous week, according to The Mortgage Bankers Association.