Gen Z Wants the American Dream: These 5 Financial Tips May Help Make It a Reality

A new survey from Freddie Mac shows that Generation Z — Americans between the ages of 14 and 23 — are serious about becoming homeowners. They’re also more optimistic about it than their millennial cohorts were at their age.

In fact, the majority believe they’ll own a home by the age of 30 — three years younger than the current median first-time homebuyer age.

Here are some other interesting stats about Gen Z that came from the study:

• 86% of Gen Z wants to own a home
• 93% see homeownership as something to be proud of
• 88% say it provides independence and control
• 86% see it as a sign of success

If anything were to stand in the way of their homeownership goals, Gen Zers largely agree it’d be money. According to the survey, Gen Z sees their biggest obstacles as home prices, down payments, and job instability.

Building the Foundation for Homeownership

Fortunately, Gen Zers’ futures aren’t set in stone — and there’s plenty of time to get those finances in check before year 30 rolls around. 

Are you one of the millions of Gen Zers with homeownership on the mind? Here’s how to set yourself up for success:

Speak with a financial professional.

This is going to sound a little premature, especially if you’re on the younger end of Gen Z right now, but it’s truly never too soon to meet with a financial advisor. If your parents have their own advisor, it could be as simple as asking them to bring you to an appointment with them.

Why so soon? Credit plays a big role in the mortgage process, and the better your credit score, the better your chances are of being approved for a mortgage and buying a home. Your history with credit (i.e., the length of your accounts/how long you’ve had them open) makes up approximately 15% of your total credit score — and building your credit takes time and effort. If you get a professional’s advice about smart ways to start building your credit now — and you follow through for the next decade or so — you stand to be in a great position when you’re ready to become a homeowner.

Don’t use more credit (or take on more debt) than you need.

Just because you have a credit card doesn’t mean you have to use it. Be smart about when you use a credit card or loan, and only do it when absolutely necessary.

That means: 

• Watch your debt-to-income ratio. Your debt-to-income ratio is the percentage of your income that goes to paying off all types of debt. When you apply for a mortgage, your lender will look at your debt-to-income ratio to determine how much house you’ll be able to afford.
• Keep your balances low. Pay off your bill month after month, and don’t let that balance creep up on you.
• Minimize your student loans. Student loans can make it harder to buy a home. Take out only what you need, and consider working through college to pay for rent, bills, and other expenses.

Pull your credit report annually.

You’re entitled to a free credit report once per year, so take advantage of it. Once you pull it, you should

• Alert the credit bureau of any errors you find. It can help your credit score.
• Watch for accounts you don’t recognize. It could mean you’re a victim of identity theft.
• Check your credit score. See how your score is progressing. If it’s still on the low end (below 700 or so), then work to pay down debts and boost it before buying a home.

You get one free report from all three credit bureaus annually, so you may want to spread them out. Head to AnnualCreditReport.com to get your first one now.

Use tech to your advantage.

There are tons of technologies that can help you save cash, build your credit, and more easily buy a home. Most of them are free, too. 

Here are some options:

• Crowdfunding platforms (GoFundMe, HomeFundIt)
• Savings and round-off apps (Acorns, Digit, Chime)
• Budgeting apps (Mvelopes, Mint)
• Investing apps (Robinhood, Stash)
• Rent reporting tools (Rent Reporters, Rental Kharma)

If you’re having trouble saving up for a down payment, these tools can help you set your goals, manage your money, and possibly stow away a manageable amount of cash over time.

Work to understand the mortgage process.

Finally, take time to learn about mortgage loans, as well as what qualifying standards you’ll be held to once you apply for one. If you need help, reach out to a mortgage specialist at Embrace Home Loans today. We’ll walk you through the process, as well as the credit score, down payment, and other requirements you’ll need to meet before you can buy a home.

Curious about how much home you can afford? We can help there, too. Just text QUALIFY to 22722 to see if you pre-qualify for a mortgage.

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