Zillow Overcharges For Home Loans, Poor Borrowers Hardest Hit: Report

With the median home price hovering north of $433,000 and no signs of mortgage rates dropping anytime soon, many Americans may have to put off their dream of buying a house.

Many of those who do buy homes may have begun their search on Zillow, a popular real estate website. Some might even take advantage of a Zillow Home Loan, conveniently available on the same site as the listings.

Zillow says its home loans are “competitive.” And while they were slightly cheaper than competitors in 2022, they’ve grown steadily more expensive in subsequent years — and a new study funded by CoStar suggests that Zillow is overcharging borrowers.

Steven C. Salop of the Georgetown University Law Center reports that borrowers who used Zillow Home Loans paid higher mortgage costs than those who borrowed from other lenders. On average, consumers who chose Zillow paid 10 to 15% more in annual percentage rate.

In 2024, Zillow’s mortgages carried an average cost of about $4,600 more than competitors on a typical loan size of $337,000. That difference amounts to roughly $21 more per month over a 30-year mortgage — assuming the loan is held full-term.

The study concludes that lower-income borrowers were hardest hit. For borrowers making $60,000 or less in 2024, Zillow loans cost an added 3% of the loan’s value over time, according to the analysis. The study also found racial disparities in pricing, alleging in 2024 that white non-Hispanic and Asian borrowers saw a 1.5% surcharge while black borrowers faced a 2.9% surcharge, compared with similar borrowers at other lenders.

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Salop analyzed federal mortgage data from 2022 through 2024, comparing Zillow Home Loans with all other lenders. The sample focused on 30-year fixed-rate purchase mortgages and sought to compare nearly identical loans by controlling for borrower characteristics, loan type, geography, and market conditions.

Zillow has pushed back on the report, saying it draws on inaccurate information and that the study was funded by a competitor.

“Zillow Home Loans is committed to both fair lending and pro-consumer practices,” the company said in a statement. “We have a robust fair lending compliance program.”

Zillow is currently facing two class-action lawsuits alleging the company “operates programs in which its affiliate real estate agents receive high-value sales leads only if they meet internal quotas for securing pre-approved mortgages from Zillow Home Loans.”