Zillow tool helps buyers find affordable mortgage
The portal's new search filter lets buyers search by total monthly payment — which takes interest rates and other costs into account — not just the list price.
Key points:
- The tool is intended to address the difficulty buyers face when trying to understand what goes into a monthly mortgage payment.
- Fluctuating interest rates can shift a buyer's all-in monthly cost by hundreds of dollars.
- The filter is available on the Zillow app and will roll out to the website later this month.
With volatile mortgage rates changing the homebuying calculus every week, Zillow has unveiled a new tool that allows buyers to search for homes by payment, not just price.
"Mortgage rates' fast rise and volatility have made planning difficult — fluctuations in rates mean monthly mortgage costs can rise or fall by hundreds of dollars in mere weeks," said Orphe Divounguy, senior economist with Zillow Home Loans. "But while rates change, shoppers' budgets are typically constant."
The tool comes online as a new survey from Zillow Home Loans finds that the most difficult part of financing for homebuyers is understanding what goes into a mortgage payment.
"The leading challenges for prospective homebuyers are understanding the costs associated with a mortgage and home payment, and understanding what they can afford," Divounguy said. "The new payment filter is another tool in an agent's toolbelt … to help their clients navigate affordability challenges."
All-in price helps buyers gauge affordability
Today's buyers are focusing on their monthly all-in payment more than just the list price, said Amanda Pendleton, consumer finance expert at Zillow Home Loans, because the price they can afford today may be out of reach next week thanks to rising interest rates. Alternately, when rates drop, they may be able to afford more house than they thought.
The new filter allows shoppers to search for homes by a range of all-in monthly mortgage costs. Updated mortgage rates feed into the filter, so the payment estimates will change in real time.
"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," Pendleton said. "Adding in costs like taxes, insurance and HOA fees can quickly bust a shopper's budget."
The new filter estimates monthly cost including principal and interest, as well as estimates for insurance costs, taxes and HOA fees.
Interest rate fluctuations causing big swings in mortgage costs
Monthly mortgage costs rose by $431 over the past year, often swinging by more than $100 per month, according to Zillow. Higher rates on top of record-breaking home appreciation have nearly doubled monthly mortgage costs since 2020.
"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 Divounguy. "Beyond the high costs, volatile mortgage rates have made it extremely difficult to plan and budget to buy a house."
Shoppers 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.
The monthly payment filter is currently available in the Zillow app and will roll out to the website by the end of April, spokesperson Anna Tilden said.