Zillow Home Loans Launches 1% Down Mortgages In An Attempt To Compete With Rocket And UWM
Zillow Home Loans announces it is launching a 1% Down Payment program. The new Zillow program would allow eligible first-time home buyers to pay as little as 1% down on their next home purchase. Right now, Zillow is only offering the program to first time Arizona home buyers. However, the company plans to expand to the program to additional markets.
Borrowers must have credit scores 620 and higher. They must also have income equal to or less than 80% of the area median income. Zillow also joins Rocket Mortgage and United Wholesale Mortgage offering similar programs.
Zillow said they launched the program due to the combination of record-breaking home price appreciation and rising interest rates. The company says that its data shows that 64% of first-time buyers are putting down less than 20%. The company also says one-quarter of first-time buyers are also putting down 5% or less.
An analysis by Zillow Home Loans shows that by reducing the down payment burden to 1% of the purchase price, a home buyer looking to purchase a $275,000 home in Phoenix, Arizona, 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. By comparison, the same buyer who needed to save 3% of the purchase price would require 31 months to save that amount.
According to Redfin, which analyzes real estate data, the median sales price in July 2023 for an Arizona home was $434,500. In July 2023, there were 28,311 homes for sale in Arizona, down 29.0% year over year. The number of newly listed homes was 8,564 and down 38.4% year over year. The average months of supply is two months, down one year over year.
Zillow Home Loans Program Mirrors Rocket Mortgage And UWM
Rocket Mortgage launched a similar program called ONE+ in May. The Rocket program is available to all qualifying conventional borrowers and Rocket Pro TPO broker partners. Additionally, the program eliminates monthly mortgage insurance fees. Lenders usually require homeowners to pay PMI put down less than 20%. More importantly, ONE+ is available to homebuyers purchasing single-family homes. This in includes manufactured homes.
UWM launched their 1% down mortgage program in April. However, it was met with skepticism because it was only available to homebuyers with an income at or below 50% AMI and a 97% loan-to-value (LTV) ratio.
Mortgage industry insiders say UWM’s numbers were considered unrealistic. Insiders said the amount available for mortgages would not typically cover available homes.
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