Weekly Real Estate News
SEATTLE, Oct. 28, 2026 — Zillow Home Loans has introduced a down payment assistance program that can cover the Federal Housing Administration’s 3.5% minimum down payment for eligible homebuyers, using a second mortgage that charges no interest and requires no monthly payment.
The assistance is not an unconditional grant. According to the lender’s October 28 announcement, the second loan is forgiven only after five years of on-time payments on the primary mortgage and continued owner occupancy. A borrower who sells, refinances or moves out before that point must repay the second loan in full.
How the financing works
The program offers up to 3.5% of the lower of the purchase price or appraised value. The assistance is structured as a 0%-interest second loan rather than a reduction in the first mortgage’s balance. Qualified borrowers can contribute additional funds of their own, up to 6.5%, for a combined down payment of 10%.
Eligibility requires a credit score of at least 640, an FHA-insured first mortgage originated by Zillow Home Loans, purchase of a primary residence and qualification for the full monthly payment under standard underwriting. The company says it imposes no separate income cap and does not restrict the program to first-time homebuyers.
FHA mortgage insurance still applies. So do the interest rate, payment and other costs associated with the first mortgage. Buyers therefore need to compare the complete financing package — including interest rate, mortgage insurance, closing costs and the second loan’s repayment triggers — rather than evaluating only the upfront cash requirement.
Available across most, but not all, of the country
Zillow says the program is available in 43 states and Washington, D.C. It is not offered in Arizona, Delaware, Florida, Massachusetts, New York, Rhode Island or Virginia. The lender did not provide a state-by-state breakdown of any additional property, underwriting or program restrictions in the announcement.
On a $400,000 purchase with an appraised value of at least that amount, 3.5% would equal $14,000. That illustration is arithmetic, not a quote or commitment to lend. An individual buyer’s eligibility and financing terms will depend on the lender’s underwriting and the property’s circumstances.
Competition for purchase borrowers
The launch comes as mortgage originators compete for purchase business in a market where higher rates have pushed many prospective buyers to the sidelines. Zillow is targeting a specific obstacle: households that may qualify for the monthly payment but have not accumulated enough cash for the initial down payment.
That distinction matters because down payment assistance does not by itself make an unaffordable monthly mortgage affordable. A household still must qualify for the FHA first loan, pay applicable mortgage insurance and meet other closing expenses. In some cases, conventional financing with a low down payment, VA financing for eligible borrowers or local housing-agency programs may be a better fit.
The company said buyers can compare those alternatives through Zillow Home Loans loan officers. It also continues to display state and local assistance options on property listings. Zillow cited a survey of more than 57,000 buyers and prospective buyers showing that many use family help, investments or retirement savings to assemble their down payment; those survey results describe the respondents, not necessarily all U.S. buyers.
What borrowers should check before accepting assistance
Consumers should ask for written terms showing exactly when the second lien is forgiven, whether a refinance or change in occupancy triggers repayment, and how the first mortgage’s rate and fees compare with competing offers. A five-year forgiveness feature can be valuable for someone planning to stay in the home, but it also reduces flexibility for a buyer who expects to move or refinance sooner.
For competing lenders and brokers, the launch adds another national-scale assistance option, but one tied to the originating lender’s own FHA product. The impact on market share will depend on how its all-in costs compare with existing assistance programs and conventional low-down-payment products.
Source: Zillow Home Loans’ original Oct. 28, 2026 announcement, distributed at 6:00 a.m. Eastern (4:00 a.m. Mountain). Program terms are attributed to the lender and should be confirmed in borrower disclosures.
