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Due to mortgage rate fluctuations, Zillow has introduced a new feature that lets users search by monthly payment.
Traditionally, Zillow users would enter a maximum purchase price to view homes in their price range.
But over the past year, monthly mortgage costs have increased by more than $431, and have even seen fluctuations of $100+ per month.
This meant that a certain price range could be way out of affordability, complicating a user’s search for a home.
Instead of entering a static list price filter, the company’s new filter lets buyers search for homes by a range of all monthly mortgage costs.
Buy house based on total housing cost instead of purchase price
Zillow’s new filter will show you a list of homes all within a range of monthly costs.
For example, between $2,500 and $3,000.
This includes principal and interest linked to the mortgage interest rate, along with estimates for homeowners insurance, property taxes and HOA fees (if applicable).
Often, these costs are either overlooked or completely ignored. And as I mentioned earlier, these expenses can quickly change the picture of affordability.
If you neglect some of these items, you may be surprised to find that your maximum purchase price is actually much lower.
And you don’t want to waste yours or the seller’s time. This is further compounded by the ever-changing mortgage rates, which can change daily.
Zillow notes that the doubling in mortgage rates last year (from about 3% to 6%+) increased monthly costs for home buyers by about $700, assuming a 5% down payment.
And now they’re about $431 higher than they were in March 2022, meaning any old filters should probably be updated, depending on the purchase price.
How to Use the New Zillow Monthly Cost Filter
The new monthly payment filter is now live on the Zillow smartphone app. So if you have the app, you can rotate it.
Simply launch the app and click on the “Filters” tab in the top right corner of the app. You should see a new “Price Range” option that allows you to search by list price or monthly payment.
If you select Monthly Payments, you’ll see a slider that allows you to set the monthly composite payment.
Simply slide left or right in $100 increments to dial in your desired monthly housing payment. You can also set the maximum and minimum cost.
This amount includes principal, interest, taxes and insurance, which is known as PITI. and HOA dues if applicable.
Note that utilities, which can also be expensive, are not included here.
There’s also a link to Zillow’s affordability calculator to determine your budget based on annual gross income, monthly debt and expected down payment.
And you can also adjust the down payment at the bottom of the Monthly Payment slider, which will change your loan amount and thus your mortgage payment.
Once you do, you will see number of results in your search field. The amount of the results may change when you make changes to the down payment or monthly payment.
And only properties over/under your maximum monthly cost will appear.
If you select a list, scroll down to the Monthly Cost section and you’ll see a breakdown of the estimated monthly cost.
Zillow used an actual mortgage rate of 6.326% in the example. Just note that mortgage rates can vary greatly by borrower profile.
For example, those with marginal credit scores may see significantly higher rates and may have to adjust their maximum monthly payments.
Why it might be better to search by monthly cost
Because mortgage rates have been so volatile lately, searching by purchase price can be deceiving.
Imagine if you added a list price filter of $500,000 in early 2022, when the 30-year fixed rate was around 3.25%.
This would result in a monthly principal and interest payment of $1,740.83 with a 20% down payment.
That same purchase price today with a 6.25% mortgage rate would be $2,462.87.
For many potential home buyers, the cost difference of approximately $725 per month could be a deal breaker.
And if you didn’t adjust for those costs, you can assume that your maximum purchase price is still within range.
This can be frustrating and waste everyone’s time. Or maybe create a situation where you are poor in the house.
If your filters were set up a year ago, you might want to revisit them and try the monthly payment filter instead.
Doing so can help your home search better align with your mortgage eligibility because lenders also look at the monthly cost as opposed to the purchase price.
The good news is that mortgage rates have cooled off and may even go down from here, if we’re lucky.
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