What You Should Know About Zillow's Down-Payment Assistance Tool
With all of the focus on rising mortgage rates and the housing market continuing to hit record-high prices, it can be easy to forget about one of the most significant components of the home buying process: coming up with the money for the down payment. Historically, mortgage lenders have expected homebuyers to come up with 20% of the purchase price for a down payment, yet this amount is often financially impossible with today's skyrocketing home values. These days, some lenders require only a 5% down payment (and for some buyers and loan types that percentage could dip as low as 3%). However, the more money you're able to put into a down payment, the more you'll eventually save when it comes to paying off your mortgage.
Even a down payment of 3% or 5% can be too expensive for some, though, potentially locking them out of the housing market. To combat this aspect of the housing affordability crisis, listing company Zillow has partnered with Down Payment Resource to build a down payment assistance tool directly into Zillow's website. Because many homebuyers don't even know about down payment assistance, Zillow is hoping to connect more prospective homeowners with financing options in tandem with the organization that compiles information on the many down payment assistance programs that exist.
Fast facts about down payment assistance
According to Down Payment Resource, the number one financial obstacle for most prospective homebuyers is coming up with the money for the mortgage's down payment. Zillow provides a helpful breakdown of the average finances behind buying a home, noting that the average home value in the U.S. is $358,000 (as of December 2022). If you're hoping to pay a down payment of 5% on a $358,000 house, and you earn the median U.S. yearly income amount, it would take you over nine years to save up enough money just for that down payment. With down payment assistance, you could significantly reduce the time needed to build up your savings for a home purchase. The typical amount awarded through a down payment assistance program is $17,000, which, in the above hypothetical scenario, would reduce the time you need to save down to around five years, which is more doable.
Down payment assistance programs are considered to be one of the most effective ways to close the disparity between the number of Black homeowners and white homeowners in the U.S. In part because of less access to generational wealth, fewer Black prospective homebuyers have the resources to pay a down payment, and assistance programs can make a significant difference.
How Zillow's down payment assistance tool works
Recognizing the need for more prospective homeowners to be connected to options for down payment assistance, Zillow took steps to raise awareness of such programs. In December 2021, through the company's partnership with Down Payment Resource, Zillow embedded a down payment assistance tool into its real estate listings for homes across the country. People browsing the website can enter basic financial and employment information into the tool, which will then provide them with a list of the types of down payment assistance programs and benefit amounts for which they will likely be eligible.
There are 3,143 counties in the U.S., all of which offer down payment assistance programs for their residents, so connecting with those options via an online tool can be a game changer for prospective homeowners who might not be able to afford a home otherwise. Zillow reports that more than one million visitors to the company's website have used the tool in the past year.