A missing down payment could be one less obstacle for buyers ready to take on a mortgage. On October 28, 2026, Zillow Home Loans launched a down payment assistance program offering eligible FHA borrowers up to 3.5% of a home's purchase price or appraised value, whichever is lower.
The assistance comes through a zero-interest second loan with no monthly payments. It's forgivable after five years, but buyers who sell, move out, or refinance earlier must repay the full amount. For agents with clients sidelined by upfront costs, the terms deserve a closer look.
How Zillow's FHA assistance works
On a $400,000 home appraised at that amount or higher, the program could provide $14,000 toward the down payment. Buyers can also contribute up to 6.5% of their own funds, bringing the total down payment to 10%.
In an October 28 analysis, Zillow estimated that combining 3.5% assistance with 6.5% in buyer funds could save roughly $90 monthly on a $366,157 home. The calculation assumes a 6.78% FHA mortgage rate and estimated ownership costs, not an individual loan offer.
The appraisal is another consideration. Because assistance is based on the lower of the purchase price or appraised value, a low appraisal could reduce the amount available.
The program doesn't cover closing costs, which Zillow estimates at 2% to 5% of the loan amount. Agents should request a complete cash-to-close estimate before buyers count on having their upfront expenses covered.
Who qualifies for the assistance
Buyers need a minimum 640 credit score, must purchase a primary residence, and must obtain their FHA mortgage through Zillow Home Loans. They must also qualify for the full monthly payment under standard underwriting requirements.
There's no program income cap or first-time-homebuyer requirement. Zillow says the assistance is available in 43 states and Washington, D.C., although its published exclusions conflict.
Zillow's product FAQ and original announcement exclude Arizona, Delaware, Florida, Massachusetts, New York, Vermont, and Virginia. Its separate corporate press release lists Rhode Island instead of Vermont. Agents working in either state should confirm availability directly with Zillow Home Loans.
Because borrowers must use Zillow's lending arm, comparing financing costs is essential. Interest rates, fees, and mortgage insurance can affect the total cost, even when down payment assistance is available.
When buyers must repay the loan
The second loan is forgiven after five years of owner occupancy and on-time primary mortgage payments. Selling, moving out, or refinancing sooner triggers repayment of the full assistance balance.
A buyer refinancing in year three, for example, would need to account for that payoff. FHA mortgage insurance still applies, and the primary mortgage carries its regular interest rate. Agents should discuss these conditions with clients who anticipate relocating or refinancing within five years.
What agents should verify
The program creates an opening to revisit buyers whose savings have delayed their search. However, assistance with upfront costs doesn't resolve monthly affordability. As recent reporting on buyer income requirements illustrates, a buyer's purchasing power still depends on income, debt, financing terms, and local housing expenses.
Zillow also advises allowing at least 21 days between rate lock and closing. Agents managing tight transaction schedules should confirm that timeline before setting contract deadlines.
Before recommending the program, agents should:
- Confirm state availability, credit eligibility, and cash-to-close requirements.
- Ask how a low appraisal could affect assistance.
- Compare written Loan Estimates with other FHA lenders and assistance programs.
- Have the lender explain the five-year forgiveness and repayment conditions in writing.
Agents can revisit stalled buyer conversations with another financing option in hand. A lender-confirmed budget, clear repayment terms, and a comparison of available loans will help clients decide whether the assistance makes sense for their purchase.