New markets require new approaches and tactics. Experts and industry leaders take the stage at Inman Connect New York in January to help navigate the market shift — and prepare for the next one. Meet the moment and join us. Register here.
A service that connects would-be homebuyers with down payment assistance programs has been a hit with Zillow users, with more than 1 million home shoppers querying a database maintained by technology provider Down Payment Resource.
When Zillow announced a partnership to integrate information from Down Payment Resource into listings a year ago, the company said skyrocketing home prices had made it harder for potential buyers to save for a down payment, and that many were unaware of programs that could help them.
The metrics released by Zillow Thursday show that homebuyers are more than willing to enter some basic information to find out about programs they may be eligible for, and how much assistance they could qualify for.
“Saving for a down payment is one of the biggest barriers for people looking to buy their first home, putting financial security and generational wealth building out of reach for far too many,” Zillow’s vice president of corporate social responsibility, Aldona Clottey, said in a statement. “Zillow is dedicated to empowering people to overcome barriers like this.”
Down payment assistance programs available through federal, state, county or local government agencies include grants that don’t have to be repaid, and low- or zero-interest second mortgages. Many state housing finance agencies also offer affordable first mortgages in conjunction with down payment assistance.
According to Down Payment Resource, all 3,143 U.S. counties have at least one down payment assistance program, and more than 2,000 counties have 10 or more available programs. Program requirements including income and borrowing limits vary by market, making Down Payment Resource a handy tool for homebuyers.
“By partnering with Down Payment Resource, Zillow is doing the important work of raising awareness about these programs while providing its users with a tool that could make the difference between continuing to rent and owning a home,” Down Payment Resource founder and CEO Rob Chrane said in a statement.
Down Payment Resource, which entered a similar partnership with Redfin in October, also integrates data about assistance program benefits and eligibility criteria with multiple listing services (MLSs), lenders and agents.
Since Chrane founded the company in 2008, Down Payment Resource has seen demand for its services pick up, as rising home prices make coming up with a down payment a bigger challenge — even for loans that require down payments of no more than 3 percent to 5 percent of the purchase price.
Rising home prices drive up down payments
As home prices surged during the pandemic, down payments increased by 57 percent, on average, to $80,500, according to data compiled by Black Knight.
While homebuyers purchasing homes with FHA mortgages put down smaller down payments averaging $18,900 in July 2022, that was a 64 percent increase from $11,500 in February 2020, Black Knight’s data showed.
The average downpayment for homebuyers taking out conforming loans backed by Fannie Mae and Freddie Mac increased by 36 percent over the same period, to $95,300.
Homebuyers taking out jumbo mortgages and other nonconforming loans not eligible for purchase by Fannie and Freddie came up with down payments average $294,600 in July, up 3 percent from pre-pandemic levels.
Zillow says down payment assistance could be helpful in closing the racial homeownership gap, and that its partnership with Down Payment Resource is part of a Social Impact program aimed at advancing housing security and economic opportunity for underserved communities.
With only 45 percent of Black households owning their home, “expanding down payment assistance, improving access to credit, and implementing policies to reduce bias in real estate have been identified as potential tools to help close this gap,” the company said.