Updated
Feb 18, 2021 Key Points:
- ZeroDown helps you buy a home without making a down payment.
- You can lease the home from ZeroDown, and part of your monthly payment goes toward earning purchase credits that help you buy the home.
- You can use ZeroDown to buy any home in the San Francisco Bay Area.
- You have flexibility to buy your home any time from two to five years after you began leasing it by using your purchase credits toward the down payment.
- You have to pay a $10,000 fee to use the ZeroDown program.
Housing prices in the San Francisco Bay Area are so high that buying a home can feel impossible. The down payment alone poses a big savings hurdle.
Unless you applying for a mortgage loan backed by the government—such as an FHA loan—most mortgage lenders want to see a down payment of at least a 10% of the home’s purchase price. And a 20% down payment is ideal to avoid private mortgage insurance and a high interest rate.
In high-priced areas, these down payment requirements can lock many borrowers out of the housing market. But ZeroDown wants to change that. This ZeroDown review will tell you everything you need to know to decide if using ZeroDown to buy a home is a good option for you.
In this review:
- ZeroDown: by the numbers
- How ZeroDown works
- Pros & cons of ZeroDown
- Eligibility & application information
- Alternatives to ZeroDown
ZeroDown: by the numbers
| ZeroDown | |
| Minimum down payment | None |
| Terms | 2 – 5 years |
| Closing cost fee | $0 |
| Program fee | $10,000 |
How ZeroDown works
ZeroDown allows you to buy a home over time without coming up with a large down payment. You pay an upfront program fee of $10,000 and then make monthly rent payments that build up your purchasing power over time.
When you find a house, ZeroDown makes an offer on your behalf. If the offer is accepted, ZeroDown buys the house for you. You live in it for 2 -5 years, making monthly payments that cover your lease, and earn you “purchase credits.”
You’ll earn 0.25% purchase credits with each monthly payment, up to 15% of the home’s value after five years. Any time after two years, you can use your purchase credits toward a down payment.
ZeroDown then sells you the home at fair market value or at a fixed rate of growth you can agree to when you sign up.
Pros & cons of ZeroDown
Before using ZeroDown, consider the advantages and disadvantages of the program.
Pros
- You can get into the home of your dreams without making a large down payment.
- You aren’t taking out a traditional mortgage loan because ZeroDown isn’t a lender—it buys a house on your behalf and lets you lease it while earning credits that ultimately allow you to buy the house on your own.
- You have flexibility. You can buy the house from ZeroDown after as little as 2-5 years. This gives you time to earn credits and to prepare to officially become a homeowner.
Cons
- You have to pay a $10,000 fee to use the program. That’s a lot of money to come up with, although it’s less than you’d need for a down payment in the Bay Area.
- Currently, ZeroDown is only available in the Bay Area—you cannot take advantage of this service to buy a home elsewhere in the United States.
- You have to lease your home for at least 24 months before you can begin the process of buying from ZeroDown.
- You lose out on real estate appreciation while leasing your home. If you opted for a government-backed loan with no or low down payment requirements, you’d be able to actually become the legal owner right away and benefit from rising property values immediately.
Eligibility & application information
ZeroDown will need to review your credit history (without hurting your score), your bank account, and proof of assets and income to make sure you are qualified. Borrowers who have solid financials are much more likely to qualify.
The goal is to make sure that:
- You can afford to make monthly payments to lease the home and earn purchase credits.
- You will be able to buy the home from ZeroDown for fair market value within the end of your purchase term.
You can complete the qualification process by visiting the ZeroDown website and selecting “Complete Qualification.”
How to apply
To complete your ZeroDown application, you will need to provide these basic details:
- Your annual income before taxes
- The amount of cash savings you have available
- The amount of money you spend on recurring loan payments, including student loans, personal loans, and car loans
- An estimate of your FICO score range
- Your full name
- Your email address
- A password
- Your employer
- When you plan to buy a home in the Bay Area
The initial qualification application about 30 seconds and your credit score won’t be affected. Once you have completed the qualification form, ZeroDown will estimate how much house you can afford and the monthly payment you’d owe.
>> Read more: Mortgage Calculator: Estimate Your Monthly Payments
If you’re happy with the details, you can schedule an introductory call or complete the application online by connecting your bank account and providing proof of your income and assets.
Alternatives to ZeroDown
Before buying a home through ZeroDown, consider your alternatives.
You could take out an FHA loan or a VA loan to get a mortgage without a large down payment or, in some cases, without any down payment at all.
You can research these options and more in our guide to first-time homebuyer programs in California. These programs could help you become a homeowner more quickly and more affordably than ZeroDown would.
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