Washington, DC CNN –
For buyers facing affordability challenges in owning their own home, Zillow Home Loans is offering a new option: a 1% advance payment.
Through the program, a qualified buyer pays as little as 1% as a down payment. Zillow Home Loans pays an additional 2%, bringing the total down payment to 3%, which is typically the minimum payment required for a conventional home loan. Alternatively, buyers can put down 3% with Zillow’s 2%, bringing the total down payment to 5%.
The 2% is paid through closing costs, not as payment to the borrower. According to Zillow, the program is currently only available to buyers in Arizona, and there are plans to expand.
Buying a home is the least affordable it has been in nearly 40 years. With mortgage rates hovering above 7% and home prices rising in recent weeks, home sales have declined over the past year. Prices remain high because inventory remains extremely low as rising mortgage rates discourage those who have extremely low interest rates from selling.
As a result, the mortgage industry has taken a hit. Mortgage applications were at a 28-year low last week, according to the Mortgage Bankers Association.
Zillow hasn’t been immune. The company reported that as of second-quarter earnings, revenue from its mortgage business was $24 million, down 17% year over year.
Visits to Zillow’s mobile apps and websites have also declined recently, with 2.7 billion visits in the second quarter, down 8% from a year earlier.
Offering a low down payment program is in line with Zillow’s return to its core business after a short-lived expansion into the ibuying business. The loans are part of an effort to grow revenue streams beyond the home listings for which it is best known and Rich Barton, co-founder and CEO, calls it an all-in-one “housing super app.” .
Many housing markets are in the midst of an affordability crisis.
The combination of record-breaking home price increases and rising interest rates means that the majority of first-time buyers, 64%, are putting less than 20% down on a home purchase, according to Zillow. Zillow indicated that a quarter of first-time buyers are putting down 5% or less.
Down payment assistance programs can help lower the barrier to entry to home ownership for those who can afford higher rent payments but haven’t been able to put down a typical down payment for a home, according to Zillow Home Loans Senior. Macroeconomist Orf DiVonguy said.
These programs aim to promote the financial stability and wealth building benefits of homeownership, but they also come with eligibility restrictions.
In addition to low down payment programs on loans from the U.S. Department of Agriculture or the Department of Veterans Affairs, many states, local governments and nonprofits offer special loan programs to make home ownership more affordable. While most focus on low- and moderate-income home buyers getting their first home, some target specific groups such as teachers, firefighters or other public service workers, or people interested in buying a home in a particular neighborhood. Are.
The Consumer Financial Protection Bureau provides links to a list of down payment assistance programs. Zillow also offers a down payment assistance tool to see if you’re eligible for other programs.
“The rapid increase in rents and home values means that many renters who are already paying high monthly housing costs may not have enough saved to pay for the large upfront payment, and these types of programs can help them. These are welcome innovations for people looking to reduce potential barriers to home ownership. Qualify,” DiVongue said.
Thanks to the Zillow program, by reducing the down payment burden to 1%, a home buyer who wants to buy a $275,000 home in Phoenix who earns 80% of their area median income and saves 5% of their income can Only 11 months would be needed to make the savings. According to Zillow’s analysis, the down payment. By comparison, the same buyer who needs to save 3% of the purchase price would need two and a half years, or 31 months, to save that amount.
To qualify for the Zillow low down payment option, borrowers must be a first-time home buyer, complete an education course on home ownership and maintain the property as their primary single-family residence, the company said. Must have the intention of
In addition, borrowers must have a minimum qualifying FICO credit score of 620, earn less than 80% of the median income where the property is located, and meet any additional underwriting requirements, if applicable.
