The U.S. real estate marketplace and mortgage company Zillow is offering home loans that require only a 1% down payment.
The company announced last week that it would begin offering qualified home-hunters in Arizona mortgages with a 1% down payment with the company contributing an additional 2% of the cost at closing.
Zillow's move comes amidst a property affordability crisis in most regional U.S. markets with the portal company saying that most first-time buyers are currently paying very high rents. According to Zillow's statistics, the typical asking rent is up 3.6% from last year at $2,036 and up 31% since the beginning of the COVID-19 pandemic.
"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," said Zillow Home Loans' senior macroeconomist 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."
While the program is currently only available in Arizona, Zillow plans to roll it out in other regional markets as it looks to revitalise its unprofitable mortgage business.
In its latest quarterly filings, Zillow said that its Mortgages segment saw 73% growth year-on-year in loan origination volume as it continues to experiment with integrating mortgages into user journeys in several so-called 'enhanced markets' around the country.