Zillow launched a new search feature allowing users to filter results by monthly payment due to the ongoing volatility of mortgage rates.Zillow users used to enter their maximum price for a home in order to see homes within that price range.Over the last year, mortgage costs have increased by over $431 per month, with some months seeing swings as high as $100.It could be that a price range has become unaffordable, which complicates the home search.The new filter allows shoppers to search for homes based on a range in monthly mortgage costs, instead of using a list of prices.
Shopping for homes by total housing costs instead of purchase price
Zillow’s new filter allows you to find homes that fall within a certain range of monthly all-in costs.As an example, you can spend between $2,500 to $3,000.The estimated homeowners insurance, property tax, and HOA fee (if applicable) are included in the principal and the interest based on the Mortgage Interest Rate.These costs are often overlooked or ignored completely. As I have mentioned before, these costs can drastically alter your affordability.You might be surprised that the maximum price you can pay is lower if you don’t consider these factors.You won’t waste time, nor will the seller. This is made worse by the ever-changing mortgage rate , which can even change every day.Zillow reported that the doubled mortgage rates last year (from around 3 to 6+%) increased home buyer’s monthly costs by almost $700, assumin a 5% deposit.They’re now about $431 more expensive than they were back in March 2022. So, any filters that are based on the purchase price need to be updated.
How to use the new Zillow Monthly Price Filter
Zillow’s smartphone app now features a new monthly payment filter. If you already have the app installed, give it a try.Launch the app, then click the “filters” tab in the upper right corner. The “price ranges” option should allow you to search based on the list price or by monthly payment.You can set the monthly total payment by selecting monthly payment.Slide left or right in $100 increments to set your desired housing payment. You can set a maximum and minimum cost.This includes principal, tax, insurance and interest. Also known as PITI. HOA fees if applicable.Please note that utility costs, which are also expensive, are not included.You can also use Zillow’s affordability tool to calculate your budget using your annual gross income, debts monthly, and down payment.You can also change the amount of your mortgage by adjusting the monthly payment slider.You’ll be able to see the results of your search once you’ve finished. The number of results may change as you adjust the monthly or down payment.Only properties that are at or below your maximum monthly budget will be displayed.Scroll down to the section on monthly costs and you will see the breakdown of the estimated cost.Zillow used a mortgage rate that I found to be realistic, 6.326%. Note that mortgage rates vary greatly depending on the borrower’s profile.For example, those who have marginal credit scores may see their rates increase significantly and be required to adjust the maximum monthly payment.
Searching by Monthly Cost Could Be a Better Option
Searching by price may be misleading because mortgage rates are so volatile.Imagine adding a price filter for $500,000 in early 2022, when the 30-year fixed rate was around 3.25%.This would translate into a monthly payment of $1740.83 for principal and interest with a down payment.With a mortgage rate of 6.25%, the same purchase price would be $2.462.87.A difference of almost $725 per month in the cost could be a deal-breaker for many potential home buyers.If you haven’t adjusted for these costs, then you may assume that your maximum purchase price still falls within the range.This can lead to disappointment, and everyone’s wasted time. You could end up house-poor.You may want to try the monthly payment option instead if your filters were created a year or more ago.This will also help you to better match your mortgage qualification as lenders look at the monthly cost rather than just the purchase price.Mortgage rates have slowed down, and with luck they may even drop.