Zillow launches 1% down payment program in Arizona

Zillow Home Loans has launched a pilot program that will allow some Arizonans to purchase a home with just a 1% down payment.

Why it matters: Traditionally, lenders require at least 3% down. On a $300,000 home, that's $9,000.

• High rental prices have made it difficult for many renters who want to own a home to save up enough for a down payment.

How it works: The new program requires buyers to pay 1% up front, while Zillow Home Loans contributes 2% down at closing.

Between the lines: Eligible borrowers must be first-time homebuyers who make no more than 80% of the area median income — about $70,000 for a family of four in Phoenix.

The intrigue: A new Zillow survey found that 39% of U.S. homebuyers this year used a gift from family or friends to afford their down payment.

• For those without access to that type of assistance, this program could be a game changer.

What they're saying: "For those who can afford higher rent payments but have been held back by the upfront costs associated with homeownership, down payment assistance can help to lower the barrier to entry and make the dream of owning a home a reality," Zillow Home Loans' senior macroeconomist Orphe Divounguy said.

Reality check: A smaller down payment means a larger loan, which when coupled with mortgage rates nearing 8% means a hike in monthly payment of hundreds of dollars.

• There are other government-backed programs for first-time buyers worth considering as well.

What's next: The company is only offering the program in Arizona for now, but hopes to expand to other states.

• Interested applicants should call 1-833-372-1449.