In an ever-evolving landscape of real estate finance, Zillow’s latest announcement has captured the industry’s attention, but I’m viewing this one with some skepticism to say the least. Zillow is rolling out a new mortgage option for qualified buyers: a 1% down payment. Great idea right? I mean, what could possibly go wrong with offering new buyers mortgages with almost nothing down?!?! (see the Great Recession of 2008).
Right now the program is currently only offered in Arizona, but Zillow is looking to roll the program out nationwide over the next few years as they obtain regulatory approval in each new state they debut the program. To qualify for the Zillow low 1% down payment option borrowers must:
1) be first-time home buyers
2) complete an education course on homeownership
3) intend to occupy the property as their primary single-family residence
4) have a minimum qualifying FICO credit score of 620
5) earn income below 80% of the median income where the property is located
6) meet any additional underwriting requirements as applicable
Like I said, what could possibly go wrong with offering such a low down payment for 1st time buyers?!?!