Gen Z is growing up and preparing to make big-adult decisions like buying their first home. A purchase this significant is daunting for any age group and can feel extra intimidating for members of young generations. Buying a house as a young person in today’s market can feel like arriving at a party too late. It can seem like the older generations had advantages and resources that just aren’t as widely available today.
Luckily, there are ways young people can prepare for homeownership and find their home sweet home. While a real estate agent will walk you through the home-buying process, you’ll want to know what matters to you. Here are four tips for Gen Z homebuyers to keep in mind.
1. Watch Your Credit Score and Other Financials
Banks will evaluate several financial factors to determine if you will be a reliable borrower for a home loan. Your credit score is one of the most crucial numbers when it comes to getting approved. The score will impact the interest rate you receive, which largely determines your monthly mortgage payment. Luckily, you can improve your score by regularly checking your credit report, paying bills on time, and limiting hard credit inquiries.
The size of your down payment also plays a role in your rate and if you have to pay private mortgage insurance. In addition to your credit score, banks will need to see verification of income and details on any debt you may have. These numbers help paint a complete picture of your finances. Assets like your savings account, stocks, and bonds can also make you appear as a trustworthy borrower.
2. Save Responsibly and Intentionally
Saving a sizable chunk of money is a no-brainer when making a big purchase. But where you put your money is also crucial, and Gen Z has had less time to save than older generations. Therefore, finding the best ways to make your money work for you is even more important. A high-yield savings account is a popular option that allows you to earn extra money from your savings. Research which banks offer the most competitive annual percentage yield (APY) before choosing where to open an account.
A certificate of deposit or a CD is another option for earning more interest on your money. These accounts offer higher interest rates but less flexibility, so you might go a different route if you’re purchasing a home soon. Setting an overall savings goal will also be necessary when you’re looking to buy a house. Be sure you’re accounting for your down payment, closing costs, and moving expenses.
3. Take Advantage of First-Time Homebuyer Programs
As a first-time homebuyer, various assistance programs are offered to make your dreams of homeownership more attainable. Different government loans are available to lend a hand to first-time buyers. For example, FHA loans can be a helpful resource and are partially insured by the Federal Housing Administration. These loans are more flexible regarding credit history and income limits while offering lower down payment minimums.
USDA loans are another option for first-time buyers, particularly those looking to live in rural areas. The U.S. Department of Agriculture insures these loans and offers little to no-cost down payment options if you meet the requirements. Homebuyer grants are also helpful resources for those new to the real estate game. Down payment assistance grants are typically offered at the local level and can help borrowers with fewer resources for a down payment. Your real estate agent should provide you with information about qualifying for grants or loan programs, but make sure to ask if they don’t.
4. Make a Wish List
Making a wish list of features for your ideal first home is one of the most enjoyable parts of the process. Your list could include the architectural style of the home, neighborhood characteristics, and the amount of space you want. You should include other specifics, like if you want the place to have a garage, fireplace, porch, or a sizable yard. Remember that your first home won’t always be your dream home, but that doesn’t mean you shouldn’t find a place you’ll love.
In addition to wants, you could divide your list into your nonnegotiables and what you’re willing to give up. For example, purchasing a home with at least two bathrooms might be nonnegotiable, but you’re flexible on the number of bedrooms. If you’re a pet owner, a house with a big backyard could make or break a place for you. Be sure to pass along your wishlist to your real estate agent. They will use the information to find properties that best check your boxes while staying within budget.
The Future of Homeownership
Buying a home is one of the biggest and most important purchases you can make at any age. This monumental decision shouldn’t be taken lightly, especially considering the struggles younger generations face. High interest rates, fewer resources, increased home prices, and lack of inventory can make it harder for Gen Z to break into the real estate market. Fortunately, smart financial decisions, taking advantage of resources, and realistic expectations can make homeownership more attainable for any generation.
As time goes on, Gen Z will continue to make a more significant mark in all parts of society, including homeownership. If you’re not ready to make the leap into real estate just yet, take the appropriate steps now to prepare yourself for the future. Every person in any generation deserves a place they are proud to call home.