I’m a member of Generation Z, a cohort new to adulting with no exposure to a world before social media.
As a personal finance writer covering the housing market, I’ve spent nearly two years watching mortgage rates and home prices climb to record highs. No wonder the idea of owning a home feels entirely out of reach for me and other zoomers in their 20s.
A recent survey from Credit Karma found that 73% of Gen Z respondents believe it was easier for older generations to purchase a house, and 59% feel pessimistic about their finances because of how unaffordable the housing market is.
In 2023, the average age of a first-time homebuyer was 35 (the millennial generation). While older zoomers are just starting to break into the housing market, they accounted for just 3% of buyers last year.
Lucky for me, I speak with housing market experts regularly to get advice for homebuyers. And even though I have no plans to buy a home in the immediate future, I’ve learned a few tips that make me more hopeful about being able to in 10 years.
Homebuying challenges for Gen Z
Here are some of the main obstacles for first-time homebuyers my age.
Affordability issues
Our first hurdle is affordability. In today’s market, high home prices and elevated mortgage rates make buying a home largely out of reach. Those issues are compounded for our generation since we haven’t had as much time in the job market to accumulate savings.
Read more: How an Unaffordable Housing Market Leaves the Next Generation Out in the Cold
Inflation
Though everyone is feeling the strain of inflation, Gen Zers often have entry-level salaries that make it hard to cover the rising cost of daily necessities, let alone save for a down payment. As prices surged in 2022 and the Federal Reserve started hiking interest rates to slow down growth, mortgage rates roughly doubled and are still high in 2024.
Student loan debt
Around 34% of those between 18 and 29 years old have student debt, with an average balance of $14,830. Many zoomers graduated college during the federal pause on student loan payments, but now that the moratorium is over, managing those monthly payments is going to be an even bigger challenge when we want to also save money.
Tips to buy a home in 10 years
The housing market isn’t the same as it was for our parents or grandparents. But with some careful planning and due diligence, homeownership can still be in the picture for us. Here are six tips I’ve learned to prepare me to eventually own the roof over my head.
1. Plot out how much you need to save
While I’m currently renting an apartment with my sister and working, I’m also using this time to save for costs associated with purchasing a home, like a down payment and closing costs. I also need to factor in things like homeowner’s insurance, property taxes and other ongoing maintenance costs.
Experts recommend making a budget to have a clear sense of these expenses and to make sure you’re not reaching beyond your means.
“Once you know your target savings goal, break that down into smaller pieces based on the number of months until the goal date,” said Erin Hybart, real estate agent at Clients First Realty.
Here’s what Gen Zers should factor into a homebuying budget:
Down payment
A down payment is the initial cash payment you make to buy a home, represented as a percentage of the total purchase price of the home. The average home price in the US was $411,887 in February, according to Redfin. A 20% down payment for that home would be $82,377.
Keep in mind that home prices vary depending on location, which will affect how much you need to save and how long it takes to do so. In New York, for instance, the average price is closer to $775,000, but in Ohio, it’s $227,600.
| Home price | Minimum down payment (3.5%) | 10% down payment | 20% down payment |
| $250,000 | $8,750 | $25,000 | $50,000 |
| $500,000 | $17,500 | $50,000 | $100,000 |
| $750,000 | $26,250 | $75,000 | $150,000 |
Personally, my goal is to save for a 20% down payment, or close to it. A 20% down payment would allow me to take out a smaller loan and avoid having to pay private mortgage insurance. You can always put less down upfront -- as low as 3% in some cases -- to become a homeowner. But making a larger down payment reduces your monthly mortgage payments (and debt) and saves you money on interest down the road.
Closing costs
In addition to a down payment, I’m going to have to save for closing costs, which are paid upfront and can average 3% to 6% of the purchase price.
Other expenses
Saving for a down payment and closing costs is a huge part of the homebuying battle. But, as my parents like to point out, there’s “no end” to the recurring costs of homeownership.
When I borrow from the bank, I’ll have to repay that home loan in regular monthly installments. So, I’ll have to factor in a monthly mortgage payment, which might end up being more than I currently pay for rent. I can’t predict my monthly payment right now, since it will be based on my loan principal, loan interest, taxes and insurance.
Property taxes, which vary depending on the location and home’s value, can add up to several thousand dollars per year. Mortgage insurance -- a requirement for an FHA loan or a conventional loan with a down payment of less than 20% -- can also add a couple hundred to a monthly mortgage payment. Plus, there might be homeowners association fees (if they apply to the property).
Read more: The Cost of Buying a House in 2024
2. Decide where to put your savings
Once you know how much you have to save, think about where to stow that cash. I’ve opted to follow the advice of my personal finance colleagues at CNET and put my money in a high-yield savings account. Some of the best HYSAs can offer an annual percentage yield of between 4.00% and 5.00%, helping you earn a notable return on your savings.
Another option is a certificate of deposit, or CD, which can offer a fixed high rate for a set term. CDs are a good option if you already have a chunk of money saved that you want to lock away for a while to accrue interest.
Read more: Don’t Miss Out on Compound Interest. Here’s How to Double Your Savings Without Lifting a Finger
3. Build your credit
You might think that mortgage rates are set in stone, but there’s a way to improve your chances of getting approved for a home loan and snag a better mortgage rate while you’re at it. It’s all about the credit score.
The average FICO credit score for Gen Zers is 679. To qualify for the most competitive interest rates, experts recommend closer to 740. Though building your credit score can take some time, it can make homeownership much more affordable in the long run.
Here’s how much your monthly payments and interest change based on your credit score range (using current national averages for a 30-year fixed mortgage loan of $400,000).
| FICO score | APR* | Monthly mortgage payment | Total interest paid |
| 760-850 | 6.753% | $2,595 | $534,268 |
| 700-759 | 6.975% | $2,654 | $555,619 |
| 680-699 | 7.152% | $2,702 | $570,780 |
| 660-679 | 7.366% | $2,760 | $593,689 |
| 640-659 | 7.796% | $2,878 | $636,214 |
| 629-639 | 8.342% | $3,031 | $691,151 |
To help boost my score, I’m aiming to pay my bills on time and stay below my credit limit. Experts recommend tackling debt, which we’ll talk about below. You might want to review your credit reports regularly to make sure everything is accurate and resolve any outstanding issues. (Visit AnnualCreditReport.com to access a free credit report from each of the three major credit reporting agencies).
Read more: How Does Your Credit Score Affect Your Mortgage Rate?
4. Aim to be debt-free
I’m personally fortunate not to have a lot of debt, but many zoomers I know have quite a bit. Carrying debt could limit the amount that’s available for you to borrow for a home loan, and can even affect the interest rate you qualify for. Paying off debt relieves a major financial burden and gives you some breathing room to save for long-term goals.
Though you might still be eligible for a mortgage if you owe money, experts say clearing debt before buying a home is a good move.
First and foremost, tackle high-interest credit card debt since it is expensive, according to Richard Barrington, financial analyst for Credit Sesame. Barrington says to focus on paying more than just the minimum monthly payment when possible. “Low minimum credit card payments only prolong your debt and cause you to pay more interest in the long run,” he said.
Not all debt is bad, however. Debt used to help build wealth or improve your quality of life, such as student loan debt, is often considered positive debt.
“You don’t need to wipe out every trace of debt, but you do need to plan strategically,” said Joseph Camberato, chief executive officer at National Business Capital. If you have student loans, Camberato still recommends trying to pay them down as much as possible, especially if they carry a higher-than-average interest rate.
Read more: Should You Save Money or Pay off Debt First? Expert Tips to Help You Do Both
5. Decide what matters
Buying a house is as much a lifestyle decision as a financial one. Take some time to narrow down the type of house and location you want to live in, as well as any other “must haves” in your future home.
Figuring out those details can also help guide your savings goals and timeline, says Maureen McDermut, a real estate agent at Sotheby’s International-Montecito.
Many Gen Z homebuyers opt for more affordable locations, where breaking into the market is easier.
Here’s a look at the metro areas most popular among Gen Z in 2022:
| US metro area | Under 25 years old: Share of home purchases | Median sale price for buyers under 25 |
| Virginia Beach, Virginia | 8.9% | $255,000 |
| Cincinnati | 8.5% | $195,000 |
| Detroit | 7.9% | $165,000 |
| St. Louis | 7.5% | $175,000 |
| Indianapolis | 7.1% | $215,000 |
6. Look into types of loans and assistance
A limited understanding of housing market fundamentals can be an obstacle for many first-time homebuyers, according to Michael Sarracini, real estate investor and co-founder of Keyspire. If you haven’t done something like buying a house before, it can be very scary, said Sarracini.
None of us have to become real estate experts to get the best deal on a future home. But the more we learn ahead of time about the homebuying process and how mortgages work, the better off we’ll be.
For example, you can see if you qualify for government-sponsored loans, such as FHA loans, USDA loans or VA loans, which have more flexible borrowing requirements than conventional loans.
Read more: These 9 First-Time Homebuyer Programs Can Save You Money on Your Mortgage
You can also research government-sponsored and private programs to help first-time homebuyers. States offer different types of housing assistance, in the form of a grant or interest-free loan. You can also contact your state or local housing authority or speak with a real estate agent or lender to learn about local down payment assistance programs.
My final take on Gen Z and homebuying
Gen Zers aren’t living the same way our parents or grandparents did, but that doesn’t mean we can’t have similar goals. With so many factors out of our control, it might take us longer to become homeowners, but that doesn’t mean it’s impossible. Before I buy my first house, I’m comfortable taking a calculated, long-term approach. And maybe by the time I’m ready, mortgage rates will actually be low again.
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