The lending arm of real estate marketplace Zillow is offering qualifying home buyers 1 percent down payment loans when buying property in Arizona, and will contribute an additional 2 percent at closing, the company announced Thursday.

The goal is to open the housing market to people who previously couldn’t afford the down payment to buy a home.

The average down payment on a house in the U.S. is about 6 percent of the borrower’s loan value. However, buying a home with as little as 3 percent down is possible, depending on your loan type and credit score, according to Rocket Mortgage.

Zillow Home Loans plans to expand its loan program to other states in an environment where mortgage applications are down to a 28-year-low and many would-be homeowners have been priced out of the market.

Mortgage rates are at their highest in about 23 years. The average rate on a conventional 30-year fixed-rate mortgage spiked from 7.23 percent on July 28 to 7.58 percent on Aug. 18, according to Bankrate.com.

Zillow says its 1 percent down home loans with an additional 2 percent down at closing will allow eligible home buyers to pay as little as 1 percent down on their next home purchase, reducing the time eligible home buyers need to save. 

“The key language is ‘as little as.’ Let’s see how many people actually qualify for 1% down,” CrosbyR5
tweeted.

The key language is "as little as." Let's see how many people actually qualify for 1% down.

— CrosbyR5 (@R5Crosby) August 24, 2023

Saving for a down payment is one of the biggest barriers for many potential home buyers, Zillow Home Loans said in a press release. “This is especially true for first-time buyers, who are often paying high rents.”

Without providing too many more details, Zillow said, “Through the 1% Down Payment program, Zillow Home Loans will pay 2% of the down payment for eligible borrowers. The 2% is paid through closing and not as a payment to the borrower.”

Zillow encouraged those interested in applying to call 1-833-372-1449 and take the following steps to prepare for getting a mortgage:

1. “Understand your credit profile: Credit scores are key to getting approved for a mortgage, but for many home buyers, understanding credit is complex.
2. Improve your credit score: Once buyers familiarize themselves with what’s in their credit report, they can take steps to pay down existing debts, pay bills on time, and review their credit report and dispute possible errors. 
3. Avoid closing accounts: Don’t close an account to remove it from your report. Those accounts aren’t automatically removed and will continue to show up on your report.
4. Hold off on financing large new purchases: Wait to make purchases that need to be financed, such as a car, until after you close on a home. This type of purchase will impact your debt-to-income ratio, which will negatively affect the amount of home loan you qualify for.
5. Determine what affordability looks like: Once buyers have a good understanding of their credit report and their credit score is at least 620 (generally the lowest score accepted by mortgage lenders) it’s time to understand how much home they can afford. Use Zillow’s mortgage affordability calculator to customize payment details.”

Photo: House in the desert, Ajo, Arizona. Photo by Gerry Lauzon, https://www.flickr.com/photos/bikeman04/
https://creativecommons.org/licenses/by/2.0/

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— Joe Consorti ⚡ (@JoeConsorti) August 24, 2023

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