Zillow Down Payment Assistance: Too Good to Be True?

Zillow Will Cover Your Down Payment. So What's the Catch?

If you've been scrolling home listings lately, you've probably seen the news. Zillow Home Loans now offers down payment assistance that covers up to 3.5% of the purchase price on an FHA loan. No interest. No monthly payment. And if you stay put for five years, it's forgiven.

On a $400,000 home, that's $14,000 you don't have to save.

I'll be honest: my first reaction was "that sounds great." My second reaction, as a broker who prices loans every day, was "okay, but what's the rate?"

Because here's the thing. Zillow's program page doesn't quote one. And in the mortgage world, when the headline is all about what's free, the cost usually lives somewhere else.

So let's ask the question every smart buyer should ask: is Zillow's down payment assistance too good to be true? Let's walk through what's actually being offered, what isn't being said, and how to tell whether this is a great deal or an expensive convenience.

What Zillow Is Actually Offering

Credit where it's due: on paper, this program is simpler than most. Here's what Zillow's FHA down payment assistance page and its October 2026 launch coverage say:

That's a genuinely broad program. Many state and local programs cap income, require first-time buyer status, or limit where you can buy. Zillow's doesn't. Inman's coverage notes that's the main selling point.

But look at that second-to-last row. The assistance only exists if Zillow Home Loans is your lender. That's not a knock. It's just business. It also means the real question isn't "how good is the assistance?" It's "how good is the whole package?"

The Missing Number: What Rate Comes With It?

Zillow's program page explains the assistance in detail. It says nothing about the interest rate on the first mortgage that comes with it. Launch coverage only describes the primary loan as carrying a "standard rate."

So let's look at what Zillow does publish. Here's its California rate page as of October 21, 2026:

Read that FHA line again. A 7.25% rate sounds reasonable next to today's national FHA averages (the Optimal Blue FHA index sat near 7.13% in early October). But that rate assumes you're paying almost 2 points. On a typical FHA loan, that's thousands of dollars at closing. It's also why the APR jumps past 8%.

Now here's my concern as a broker. That's Zillow's advertised FHA pricing without the assistance. We don't know whether a loan that includes the forgivable second is priced the same, or a bit higher to cover the cost of the program.

I'm not saying it is higher. I'm saying nobody outside Zillow can tell you yet, because it isn't published. And in my experience, lender-funded assistance is rarely free. The money usually comes back through rate, points, or both.

That's why this program works beautifully as a reason to call Zillow. Whether it works as a reason to close with Zillow depends on the quote you get.

Let's Do the Math: When "Free" Money Costs More

Let's use a $400,000 home. Zillow covers the $14,000 down payment. Your FHA loan is $386,000, plus the 1.75% upfront mortgage insurance premium rolled in, for $392,755.

At Zillow's published 1.948 points, you'd pay about $7,650 in points at closing. That's more than half the assistance amount, before any other closing costs.

Now, what if the rate on a loan with assistance ran a little higher than the advertised 7.25%? Here's what that would do to principal and interest:

Principal and interest only. Excludes monthly FHA mortgage insurance, taxes and homeowners insurance. The higher rates are hypothetical examples, not Zillow quotes.

See the pattern? Just half a point higher costs about $8,000 in the five years it takes to earn forgiveness. And it keeps costing you after the $14,000 is forgiven, for as long as you keep the loan.

That doesn't make the program bad. If your rate and points come in competitive, $14,000 of forgiven money is a fantastic deal. The point is simple: you can't judge this offer without the rate, the points and the APR in writing.

The Fine Print Worth Reading Twice

Zillow's FAQ is upfront about the basics. The assistance isn't paid back if you meet the program requirements for five years. Here's what that means in real life:

• The 5-year clock is real. According to launch coverage, forgiveness requires living in the home and making on-time payments for five years. Sell, move out or refinance before then, and the full balance comes due.

• The refinance trap. Rates are above 7% right now. If they drop in year two or three, you'd want to refinance. But you'd have to pay back the $14,000 first, or roll it into the new loan. That could wipe out much of your savings, or keep you stuck at today's rate.

• FHA mortgage insurance still applies. You'll pay the 1.75% upfront premium and monthly MIP, just like any FHA loan.

• Closing costs aren't covered. Zillow's page estimates them at 2–5% of the loan amount. On our example, that's roughly $7,900 to $19,600 you still need, points included.

• You can't take it to another lender. The assistance is tied to Zillow Home Loans. So you can't shop the first mortgage elsewhere and keep the assistance.

• You must qualify for the full payment. The assistance helps with cash to close, not affordability. You still need to qualify for the whole monthly payment.

So, Is It Too Good to Be True?

Not necessarily. It's a real program with real benefits. But it's only a good deal if the whole package is good. Here's how I'd sort it out.

It may be a strong fit if you:

• Earn too much for income-capped state or local programs

• Aren't a first-time buyer, so many other programs are off the table

• Plan to stay in the home at least five years

• Get a written quote that holds up against other lenders

Shop carefully if you:

• Might move, sell or refinance within five years

• Qualify for a state, county or city program (in California, start with CalHFA and your local housing agency)

• Have some savings and could cover part of the down payment yourself

• Are being quoted close to 2 points just to hit the advertised rate

Five questions to ask before you say yes

1. What is my exact rate, points and APR with the assistance, and without it?

2. Is the pricing on the first mortgage different because I'm using the assistance?

3. What exactly do I have to do for five years to earn forgiveness?

4. What happens if I refinance in year two or three?

5. What will my total cash to close be, including points and closing costs?

Then take that Loan Estimate to an independent broker and compare it. Ironically, Zillow's own listings still show the state and local assistance programs a buyer might qualify for. Use that tool. Then put the offers side by side, apples to apples.

Frequently Asked Questions

Is Zillow's down payment assistance a grant?

No. It's a forgivable second mortgage at 0% interest with no monthly payments. If you meet the program requirements for five years, it's forgiven. If not, you repay it.

How much does Zillow's down payment assistance cover?

Up to 3.5% of the purchase price or appraised value, whichever is lower. That's the FHA minimum down payment. It doesn't cover closing costs.

Do I have to repay it if I refinance?

Yes. If you sell, move out or refinance before five years, the full amount comes due.

Does Zillow publish the rate for loans with assistance?

Not on the program page. Zillow publishes general FHA rates, which in California were 7.25% with about 1.95 points (8.002% APR) as of October 21, 2026. Ask for a written Loan Estimate showing your exact pricing.

Who qualifies for Zillow down payment assistance?

Buyers using an FHA loan through Zillow Home Loans, with at least a 640 credit score, in 43 states plus D.C. There's no income limit and no first-time buyer requirement.

Is California eligible?

Yes. California isn't on the excluded list. California buyers should also compare CalHFA and local programs, which may offer different terms.

Is it better than other down payment assistance programs?

It depends on your rate, points and how long you'll keep the home. A program with slightly stricter rules but better pricing can save you more. Compare Loan Estimates side by side.

What if I'm buying outside California?

You still have options. Most states have down payment assistance programs, and many counties and cities offer their own. Contact me and I'll point you to the programs that fit your state and situation.

The Bottom Line

Zillow's forgivable down payment assistance isn't a scam. It's a smart way to get buyers to pick up the phone. And for the right buyer, it could be a great deal.

But "free" money only stays free if the loan it's attached to is priced fairly. Until you see the rate, points and APR in writing, you don't know what you're really getting.

Already have a Zillow quote? Send it my way. I'll compare it against FHA options and down payment assistance programs from multiple lenders. No pressure, no cost. You'll know in black and white whether it's a deal or just a good headline.

Book a call with me at www.loansbyamberjones.com/book-a-call.

Program details and rates are from Zillow Home Loans' public pages as of October 2026 and may change. Payment examples are for illustration only and are not a loan offer or commitment to lend. All loans subject to credit approval.