Zillow believes it has an answer to the affordability crisis gripping the housing market.
The company offers prospective homebuyers the option to pay a 1% down payment on the home.
The housing market affordability shock was caused by rising interest rates and persistently high house prices.
Zillow is offered to prospective homebuyers Option to pay only 1% down payment when buying a home middle The ongoing affordability crisis Because of the high mortgage rates.
The 1% Down Payment Program from Zillow Home Loans is designed to reduce the time consumers need to save money for a down payment. For now, it’s only offered to eligible borrowers in Arizona, though the company plans to expand the program to other states.
An analysis by Zillow Home Loans shows that by reducing the burden of a down payment to 1% of the purchase price, a homebuyer looking to purchase a $275,000 home in Phoenix, AZ, makes 80% of the median income in their area and saves 5 % of income “It will only take 11 months for their income to provide for the down payment,” Zillow said.
By comparison, a similar homebuyer saving for a 3% down payment would require 31 months to reach his savings goal.
Homebuyers typically aim for a 20% down payment on a home to avoid having to pay for private mortgage insurance, but many consumers also choose a 5% to 20% down payment. Zillow’s low 1% down payment target beats out Freddie Mac’s mortgage option with just a 3% down payment.
Zillow said it will contribute an additional 2% toward the down payment at closing for eligible borrowers. It is not a down payment to the borrower.
But 1% down payment option. It does not solve the housing affordability crisiswhere smaller down payments lead to larger monthly mortgage payments because borrowers have to take on more debt.
As long as interest rates remain high while house prices are still high, The picture of affordability will not improve.
Now the average 30-year fixed interest rate is above 7%, adding an extra $1,000 in monthly mortgage payments for the average home in the US selling for $416,000, compared to standard mortgage rates. last year, which amounted to about 4%.
Zillow’s new down payment option comes as the company expands to become more than just a platform for browsing homes for sale.
It strives to become a one-stop shop for potential homebuyers, providing direct access to real estate agents and home loans they guarantee. This step comes after Zillow has ended its house-flipping business after huge losses.
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