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As Gen Z ages into adulthood, this generation born between 1997 and 2012 faces unique challenges regarding their financial future. However, the future is not all doom and gloom.
Only 26.3% of Gen Z adults are homeowners (compared to 54.8% and 72% for Millennials and Gen It has also been revealed that many Gen Z adults own a home. year.
It is widely assumed that Gen Z cannot afford to buy a home, and according to a 2024 Bank of America report, 54% of Gen Z adults surveyed said they could not afford to buy a home. They said they usually need financial support from their parents for things like rent and living expenses. Phone plans and health insurance.
But while it may be difficult to make ends meet, NeilsonIQ reports that Gen Z will be the wealthiest generation in history, with the average 25-year-old American currently earning It is $40,000. When taxes, government transfers, and inflation are taken into account, Gen Z is wealthier than their Millennial and Baby Boomer peers.
As more Gen Z aspires to buy a home, it's important to understand the homebuying process, understand your financial situation, consider lifestyle factors, and think about the future as you navigate the homebuying process. It will be beneficial. GOBankingRates spoke to real estate experts to gather first-time home buying tips for Gen Z.
Learn the process and options
“One of the mistakes we see with Gen Z homebuyers is that they don't do proper research on the homebuying process,” says Sean, a licensed associate real estate broker at Coldwell Banker Warburg. Adu Gyamfi says: He said social media “real estate gurus” preach homeownership and make it look like it's easy, but in reality, “they rarely talk about long-term effects or costs. ” he said.
To help Gen Z homebuyers fully understand the process, Adgyamfi encouraged them to speak with professionals such as licensed real estate agents, attorneys, lenders, and contractors to become as familiar with the process as possible.
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Know your financial situation and mortgage options
To decide whether you're ready to start the homebuying process, take stock of your financial situation and find out how much you've saved, how much you can allocate for a down payment, and how much you can afford on your mortgage. That is important. Monthly mortgage and insurance payments. When you start thinking about buying a home, John Glück, owner of the Glück Group, always recommends “consulting a financial advisor or using clever online tools to plan your finances in detail.”
Conventional wisdom says you need a 20% down payment before you're ready to buy a home. This reduces the principal you owe, lowers your monthly mortgage payment, and helps you avoid paying mortgage insurance. But Dan Natkowski, housing expert and co-founder and CEO of NewHomesMate, says, “While you need some cushion for closing costs and home repairs, that number is holding you back.” He pointed out that it should not be done.
Other mortgage options, such as Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) loans, typically require a small down payment. “I cannot stress enough how important it is to understand these options and get pre-approval,” Grich said. He also recommended shopping around for the best rate, as “even small differences can add up to bundle savings in the long run.”
Make a budget for more than your mortgage
It can be easy to look at your monthly mortgage payment and think that's all you pay each month. But the reality is very different. “Gen Z should budget for closing costs, maintenance, property taxes and insurance,” says Karen Kostiw, a licensed real estate salesperson with Coldwell Banker Warburg.
Making large purchases on credit while qualifying for a mortgage can affect your ability to get approved, so Gen Z buyers should be prepared for these costs. Kostiu says prospective buyers should “budget for post-closing purchases such as cars, furniture, home improvements, lawn maintenance, etc., and prepare for at least two years for unexpected capital improvements.” It must be done,” he said.
Consider lifestyle factors
Kostiw encouraged Gen Z to consider their lifestyle needs when making long-term purchases. That way, she says, they can “ensure they shop in places that align with their happiness quotient.”
When making your final home purchase decision, you should consider certain factors, including proximity to work and social activities, and the availability of amenities such as parks, grocery stores, and gyms.
First-time Gen Z buyers should also consider how their lives may change over the next few years. “Needs can change, such as career changes, family plans or lifestyle changes, so choosing a property with flexible space can be beneficial in the long run,” she says. Ta.
think about sales
“It seems silly to talk about selling when a buyer is just getting ready to buy, but when a home is a major financial investment,” says Gerald Splendore, a licensed associate real estate broker at Caldwell. It is extremely important to research and predict future resale value before doing so.” Banker Warburg. Young Gen Zers may not be thinking so long-term, but this is an important step.
When looking for a home, the first step is to see if the home meets your current needs, but the second step is to find out how the home is valued and how much it could sell for in the future. need to think.
But Mr Splendor understands that while “the future is uncertain and there are no guarantees”, “how home values are maintained and ideally increased is part of the equation”. This was immediately pointed out.
think outside the box
Hnatkowski believes that the myth that only wealthy people can afford to buy homes is being spread on social media. But he says that's not the case. “Yes, prices are high, but there are plenty of options that don't require millionaire status,” he said.
Rather than jumping immediately to expensive areas or considering do-it-yourself repair materials, he recommended looking for up-and-coming areas.
Another surprising option is to buy a home with a non-romantic partner. According to a study by Risk Strategies, nearly 15% of Americans have already co-purchased a home with someone outside of their romantic relationship. 70% of Gen Zers surveyed said they were open to the idea. This idea has cost benefits because the costs are split, but you need to make sure all parties understand their responsibilities.
