Yahoo Finance More Gen Zers Are Buying Homes — Here’s What They’re Doing Right
Homeownership hovers beyond reach for millions of Americans. Buying a house simply isn’t manageable for many, thanks largely to steep mortgage rates, low inventory and the rising cost of living. But some folks are actually achieving their dreams of owning a home. And plenty of them are remarkably young to be pulling off such a feat.
In 2022, 30% of 25-year-olds owned a home, according to Redfin. That’s pretty impressive considering the high expenses of homeownership and the fact that Gen Zers are being slammed by rapidly rising costs, with wages not always keeping up.
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So, what are Gen Zers doing right in their successful quests to buy homes? What can we learn from those who are going about it smartly?
They’re Open To Smaller Cities
Living in the heart of a big city may sound great, but it equates to extra-high costs of living and, often, even more limited inventory, which fuels a fire of competition. Gen Zers are wisely opening up to living in smaller cities, where homes are generally more affordable.
“Smaller cities are becoming increasingly popular among Gen Z homebuyers [who are] attracted by lower living expenses, engaging community atmospheres and the opportunity for a more balanced life,” said Matt Dunbar, senior vice president of the southeast region at Churchill Mortgage.
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They’re Exploring Government-Backed Loans
One great move Gen Z buyers are making is exploring government-backed loans, such as FHA loans and VA loans.
“VA loans, specifically, help buyers purchase without a down payment or the need for great credit, which are two major hurdles for many younger buyers,” said Chris Birk, vice president of mortgage insight and director of education at Veterans United Home Loans.
“The key benefits of no down payment, no PMI and competitive interest rates are creating a path to homeownership for Gen Z buyers sooner,” Birk said. “According to a recent report, VA purchase loans among Gen Z veterans and service members increased 15.5% in fiscal year 2023 compared to the prior year. In fact, this demographic was the only group to see a year-over-year increase.”
They’re Building High Credit Scores
Gen Zers who are buying homes may be laser-focused on their credit scores and are putting in the work to get them high.
“A strong credit score is your golden ticket to many important stops on your financial journey, and homebuying is no exception,” said Brandon Snow, executive director of mortgage strategy at Ally. “Credit (or FICO) scores are one of the most important factors in buying a house, as lenders use them to gauge how likely you are to repay a home loan. Your credit score tells lenders how likely you are to repay them. The higher your credit score, the easier it can be to get approved for a mortgage, as well as help unlock lower interest rates on the loan.”
They’re Embracing Technology
Gen Zers are digital natives, and they’re using this to their advantage when embarking on homeownership.
“Gen Zers have grown up with technology, and their familiarity with digital channels has revolutionized homebuying,” said Nyx Sherwin, CEO and owner of We Buy 502. “From virtual home tours to online title processing and digital negotiations, Gen Zers are utilizing all available online resources making their homebuying process faster and more efficient.”
They’re Not Buying Homes Priced at More Than 5x Their Income
Another key way Gen Zers are positioning themselves for successful homeownership is not buying “more house” than they can afford.
“Here’s a quick rule of thumb to help you take out a mortgage you can reasonably pay back,” said Seth Wunder, CFA, chief investment officer and chief financial officer at Acorns. “Look for houses priced between 3 to 5 times your household income.”
They’re Driven To Make Long-Lasting Investments
Gen Zers who are buying homes are thinking long term about the impact of their investments — something that many of their elders didn’t do when they were that young.
“A lot of Gen Zers buying homes are doing so from an investment perspective — a smart money move the older generations didn’t do at such a young age,” said Seamus Nally, CEO of TurboTenant. “Gen Zers are very aware of the housing market and how difficult homebuying is for many people these days. They are also aware of the major wealth-building benefits of real estate investing.”
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This article originally appeared on GOBankingRates.com: More Gen Zers Are Buying Homes — Here’s What They’re Doing Right
