Sales may be slower than last year, but that hasn’t stopped first-time homebuyers from making the most of limited inventory. According to Zillow’s 2023 Consumer Housing Trends Report, first-time buyers now make up 50 percent of all purchases, up from 45 percent a year ago and up from 37 percent from 2021.
Hoping to encourage even more first-time homebuyers to move into the market, Zillow announced its new 1 Percent down payment option. Launching in Arizona with plans to expand to additional markets, borrowers who qualify can now put just 1 percent down on a home, and Zillow Home Loans will pay the other 2 percent.
An analysis by Zillow Home Loans finds that by reducing the down payment burden to 1 percent of the purchase price, a home buyer looking to purchase a $275,000 home in Phoenix who makes 80 percent of their area’s median income and saves 5 percent of their income, would need 11 months to save for the down payment. By comparison, the same buyer who needed to save 3 percent of the purchase price would require more than two and half years to save that amount.
“For those who can afford higher rent payments but have been held back by the upfront costs associated with homeownership, down payment assistance can help to lower the barrier to entry and make the dream of owning a home a reality,” says Zillow Home Loans economist Orphe Divounguy. “The rapid rise in rents and home values means many renters who are already paying high monthly housing costs may not have enough saved up for a large down payment, and these types of programs are welcome innovations in lowering the potential barriers to homeownership for those who qualify.”