Zillow is offering a new way to shop that helps buyers find homes that fit their monthly budget.
Shoppers can use a new monthly payment filter now available on the Zillow app. The filter shows homes within a range of all-in monthly costs, instead of list prices. The monthly cost includes principal and interest, as well as estimates for insurance costs, taxes and HOA fees (if any), clarifying a chief source of confusion for buyers.
Last year's drastic increase in mortgage rates sent monthly costs for homebuyers skyrocketing — nearly $700 more than the year before in recent months. That is based on the monthly mortgage cost for a home priced at the Zillow Home Value Index for the United States, with a 5% down payment, at the average mortgage rate for that month and not including insurance and taxes. Based on that criteria, monthly costs are now $431 higher than in March 2022, Zillow said.
Although typical home values peaked in June before tapering off, mortgage rates that reached 20-year highs later in the year caused monthly mortgage payments to peak in October, Zillow data shows.
High rates combined with record-breaking home appreciation have nearly doubled monthly mortgage costs since 2020, Zillow said. Rates are also extraordinarily volatile. Home prices nationwide started falling in June and flatlined this year, but shifting mortgage rates often swung costs by more than $100 month to month, it said.
"Shoppers looking at list prices struggle to figure out what they can really afford, because the mortgage rate is what makes or breaks a monthly payment. Adding in costs like taxes, insurance and HOA fees can quickly bust a shopper's budget," said Amanda Pendleton, consumer finance expert at Zillow Home Loans. "This new search tool does the math, so shoppers can confidently jump into finding a home they love and can afford."
Shoppers using the app filter can start with Zillow's linked affordability calculator, entering their down payment amount, income, and debts to estimate the monthly mortgage cost they can afford. They then can enter their monthly budget range into the filter to start shopping. Updated mortgage rates feed into the filter, showing homes and hiding others to keep shoppers on budget as rates and price cuts change the monthly payment math, Zillow said.
A new survey from Zillow Home Loans found that the most difficult financing activity among prospective home buyers is understanding all costs associated with a mortgage payment, followed by figuring out how much home they can afford, and researching mortgages and rates.
"Fast-rising mortgage rates last year pushed monthly costs up with unprecedented speed, dragging affordability to its lowest point in more than 20 years," said Orphe Divounguy, senior macroeconomist at Zillow Home Loans. "Beyond the high costs, volatile mortgage rates have made it extremely difficult to plan and budget to buy a house."
The new filter — coming soon to Zillow.com — is the latest Zillow technology helping buyers navigate a challenging affordability landscape. Down payment assistance that's built into listings — letting shoppers see what's available for them where they are looking — as well as mortgage and affordability calculators, can all help buyers make sense of the fast-moving market.
