SAN DIEGO (KGTV) — Evan Lourenco owns the Coffee Drop, a successful coffee shop in Golden Hill. He is ready to buy a house and tired of paying rent.
"It's always going to keep going up, more and more. You are always chasing your own tail," Lourenco says. "You are never going to be able to take ownership of your situation."
Zillow launched a new program in Augustto help potential buyers like Lourenco.
Here's how it works: The buyer pays a down payment of 1%, then Zillow makes an additional contribution of 2% at closing.
This is a grant and does not need to be paid back.
"The 1% sounds nice. But there is probably a catch behind it," added Lourenco.
A real estate expert told ABC 10News the catch could be mortgage insurance.
"1% down payment is beautiful. It is going to open the door for people who do not have the down payment. It is going to mean mortgage insurance," said Nathan Abbo, a real estate agent in San Diego. "Mortgage insurance goes away when you put down 20%, so you are still going to have that cost."
RELATED: Zillow offering to help with down payments, but there's a catch
But a Zillow spokesperson tells us the payments are affordable.
"Rents have increased 31% since the start of the pandemic. You have a lot of people who have lower income but are well qualified who have high credit scores. They might even be paying more in rent than this monthly program," said Orphe Divounguy, a senior economist at Zillow.
Some critics online are concerned these types of programs could lead to a repeat of the housing market crash of 2008; however, Orphe says many of the loans given out back then would be considered illegal today.
"We don’t have that situation today. Lending standards are much tighter. Their requirements are much higher," Orphe added.
Zillow’s program is only in Arizona right now, but Orphe says he expects it to expand to other states.
For more information on Zillow's programs follow this link.
