Forgo the down payment with this rent-to-own fintech startup focused on the Bay Area.
Buying property in San Francisco can be prohibitively expensive — especially for first-time homeowners. ZeroDown claims it can help you access a home at a fraction of the cost. But even if you have the required $10,000, you could be better off on your own.
How does ZeroDown work?
ZeroDown doesn’t offer mortgages or other home loans. Instead, it’s a rent-to-own program for potential homebuyers in the San Francisco Bay Area.
You find a house you’re interested in, qualify with ZeroDown and then partner with the company to purchase your home. ZeroDown determines your monthly payments before submitting an offer on your behalf, and you pay a flat $10,000 fee if you like what you see. ZeroDown then makes a buyer’s offer on your behalf.
If the offer is accepted, ZeroDown effectively becomes the owner of your home. You move in and lease the property from the company for two to seven years — enough time to repay the cost of ZeroDown’s down payment.
As you lease the home, you gain access to a vetted team of handymen who can help with various issues and projects. You also earn ZeroDown “purchase-credits” that represent a percentage of the property’s value. After two years, you can use your credits toward buying the home from ZeroDown — or redeem them for cash and move out.
What types of fees does ZeroDown charge?
ZeroDown charges a flat one-time program fee of $10,000. This is much lower than the typical $200,000 required for closing on a home in the Bay Area, but still not cheap.
ZeroDown also charges a monthly fee for the convenience of leasing your home from the company. The fee is based on the value of the property and includes taxes and insurance that ZeroDown is paying on your behalf.
Other costs are monthly homeowners association dues, should your property require them. ZeroDown deducts any HOA fees from your account monthly to pay them on your behalf.
Do I qualify for ZeroDown?
You won’t find a list of eligibility requirements online. Instead, qualifying requires a soft pull on your credit and a review of your income, debt obligations, financial history and employment history.
You link your bank account, and ZeroDown authenticates it through Plaid — a third-party fintech company — to collect and analyze such risks as:
- Identifying personal and employment information
- Your credit score and history
- Up to 24 months of your banking history
- Details on previous mortgages, outstanding debts or collateral
- Public records that disclose bankruptcy, judgments, liens and payments
- Employment and education information in your LinkedIn profile
A ZeroDown rep through the site’s live chat suggested an annual household income of $200,000 or more and an excellent credit score make for the strongest applicants, though neither are required.
Prepare to enter personal, employment and financial details when applying that include:
- Full name and personal contact information
- Employment information, including two recent pay stubs
- W2s and 1099s from the past year
- Personal tax return from the past year
- List of assets, including savings, real estate, car titles and other investment records
- List of debts, including student loans, auto loans, personal loans and credit cards
ZeroDown reviews and complaints
Given its startup status, not much. San Francisco–based ZeroDown launched in early 2019 and doesn’t yet have any online reviews. News outlets that write about the company tout is as an innovative way to help aspiring homeowners in the Bay Area save for a home while living in it.
Still, an interesting post in the r/personalfinance subreddit breaks down the data to answer whether ZeroDown is a scam. Weighing the company’s services against renting and saving for a down payment on your own, redditor u/AccomplishedPear8 determines a more accurate tagline for the company is “Pay 50% more in rent so that you can buy for 20% more!”.
What are the benefits of ZeroDown?
This fintech startup has the financial backing to offer perks to those in the Bay Area who don’t have the hefty down payments required to buy a home, including:
- Agent preference. Get matched with a ZeroDown partner agent, use your own agent or browse homes on Zillow and Redfin.
- No down payment. The $10,000 upfront fee is nothing to sneeze at. But isn’t nearly as sizable as the typical $200,000 down payment required in San Francisco.
- Short-term commitment. Rather than lock yourself into a 30-year mortgage, you sign up for a two-year commitment as you decide whether to purchase the home or move on.
- Bonus purchase credits. If you decide to buy your home, ZeroDown offers up to 5% in additional credits toward the purchase of your home.
- Concierge service. Get help with handyman projects like plumbing clogs and furniture installations at no additional cost.
What to watch out for
ZeroDown says that it’s merely the “temporary custodian” of the home you intend to buy when signing up. But it’s the homeowner while you’re the renter, among other potential drawbacks:
- Bay Area only. ZeroDown extends its services to homes in the San Francisco metropolitan area only at this time.
- High income eligibility. While it doesn’t explicitly state eligibility criteria on its website, ZeroDown suggests you’re best positioned for approval with an annual household income of $200,000 or more.
- Two-year requirement. If you opt to move out of your ZeroDown home within two years, you forfeit all equity built in the home.
- You must buy in Year 7. You must purchase the home at the end of seven years — even if your salary isn’t at a point where you can easily afford it.
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How do I get started?
- Go to ZeroDown’s website and click See If You Qualify.
- Create an account with your full name, email address, phone number and desired account password. Click See If You Qualify.
- Enter your full name, phone number, employment information, date of birth and home address. Click Next.
- Upload a copy of your driver’s license, passport or state ID. Verify your income by uploading two recent paystubs, a W-2 and your tax return. Finally, securely connect your bank account or upload bank statements to help ZeroDown verify your finances. Click Next.
ZeroDown reviews your application’s details and returns an answer through a representative within 48 hours.
Frequently asked questions
Shannon Terrell is a writer for Finder who studied communications and English literature at the University of Toronto. On any given day, you can find her researching everything from equine financing and business loans to student debt refinancing and how to start a trust. She loves hot coffee, the smell of fresh books and discovering new ways to save her pennies.
ZeroDown is for aspiring homeowners in the San Francisco Bay Area who can’t afford a down payment, but have a household annual income of at least $200,000. The program costs $10,000 to participate, and that money won’t go towards owning your home. Be sure to crunch the numbers on the home you’re interested in — you might find you’re better off on your own.