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  • Writer's pictureSarah Ruivivar

Zillow's 1% Down Payment: Revolutionising Home Ownership

Updated: Oct 31, 2023

Zillow Home Loans is shaking things up in the property market with a new 1% down payment option, a potential game-changer for buyers struggling with affordability.

This initiative comes at a time when home buying is at its least affordable in nearly four decades, making it a beacon of hope for many.

The programme works by allowing an eligible buyer to contribute as little as 1% towards a down payment. Zillow Home Loans then adds an additional 2%, bringing the total down payment to the conventional home loan minimum of 3%. Alternatively, buyers can put down 3% with Zillow’s 2% bringing the total down payment to 5%. The 2% is covered through closing costs and is not a payment to the borrower.

Currently, this programme is only available to buyers in Arizona, but Zillow has plans to expand. The introduction of this low down payment programme aligns with Zillow's return to its core business after a brief foray into the ibuying business. The loans are part of an effort to grow revenue streams beyond the home listings it is known best for and become an all-in-one “housing super app.”

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. Additionally, 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.

This initiative is a welcome innovation, lowering potential barriers to homeownership for those who qualify. By reducing the down payment burden to 1%, a home buyer looking to purchase a $275,000 home in Phoenix who makes 80% of their area’s median income and saves 5% of their income would need only 11 months to save for the down payment, according to Zillow’s analysis. It's a step in the right direction, making the dream of owning a home a reality for many.

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