Zillow Introduces 1% Down Payment Program to Expand Homeownership Opportunities

In a bid to address the growing challenges posed by high borrowing rates, surging rents, and elevated home prices, Zillow has launched a groundbreaking initiative aimed at making homeownership more accessible. The company’s innovative 1% down payment program has been rolled out in Arizona, with plans to extend its reach to additional markets in the near future.

The program, which significantly reduces the down payment requirement, offers a lifeline to prospective homebuyers who have found themselves priced out of the housing market. Zillow’s approach not only aims to make the dream of owning a home more attainable but also endeavors to expedite the process for eligible buyers. As part of the program, Zillow will contribute an additional 2% at closing, further enhancing the affordability of the initiative.

For those struggling to amass a substantial down payment, this program provides a promising solution. Zillow cited an example wherein a homebuyer earning 80% of the median income in their area, and saving 5% of their income, would need just 11 months to accumulate the necessary funds to purchase a $275,000 property in Phoenix. In contrast, a 3% down payment would demand an arduous two and a half years of savings.

“Our mission is to make housing more accessible for everyone, and this program is a significant step towards achieving that goal,” Zillow stated. The company emphasized that the 1% down payment program seeks to bridge the affordability gap that has been exacerbated by the relentless rise in rents and home prices. Recent data from Zillow indicates that national asking rents have surged by 3.6% year-on-year and a staggering 31% since the onset of the pandemic.

According to Zillow, over 60% of first-time homebuyers have been compelled to put down less than 20%, while a quarter of them are contending with down payments of 5% or less. The current real estate landscape, characterized by record-breaking price appreciation and mounting interest rates, has intensified the challenges faced by potential buyers. Zillow’s initiative aims to alleviate some of these burdens, especially for those already grappling with exorbitant rent payments.

Orphe Divounguy, Zillow Home Loans’ Senior Macroeconomist, noted, “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.”

Zillow has also offered essential advice for aspiring homeowners to consider before embarking on their purchasing journey:

1. Understand your credit profile and strive to enhance your credit score.
2. Avoid closing accounts, as they continue to impact your credit report.
3. Refrain from financing significant purchases, like cars, until after home closing, as this affects your debt-to-income ratio and loan eligibility.
4. Ascertain your affordability range after comprehending your credit report, to gauge how much you can comfortably afford.

As Zillow pioneers efforts to revolutionize the home buying process, their 1% down payment program stands as a beacon of hope for those previously sidelined by financial constraints, ushering them closer to the realization of their homeownership dreams.