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I’m Gen Z: How I Saved Enough Money to Buy My First Home

gorodenkoff / Getty Images
gorodenkoff / Getty Images

Times are tough financially for everyone, but even more so for Gen Zers who are coming of age in the workforce in their early twenties.

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Those who want to buy a home are finding themselves in a quandary with high home prices and mortgage interest rates. While it seems unlikely for the average Gen Zer to be able to afford a home, James, a sales representative from New Jersey, took strategic action and purchased his first home at the age of 25 in 2023.

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Here are the steps he took to afford his home, and his recommendations for others who wish to do so.

Save the Down Payment

The toughest part of buying a home for James was saving up the down payment. While loans through the Federal Housing Association (FHA) and Department of Veterans Affairs (VA) make it possible to put down a significantly smaller down payment than the recommended 20%, those scenarios ultimately did not work for James.

One of the challenges in qualifying for loans is that his job in sales is commission based.

“It’s tough to show a lot of income, which means you lean a lot heavier on putting down a bigger down payment like I did,” said James. He was able to save up and put down $75,000 on a $500,000 home.

Savings has come naturally to James since his first job at the age of 15. He remembers getting his first paycheck of about $121, earning a $7.25 minimum wage, reserving $21 for himself and putting $100 into savings.

“I just started saving really, really young. Even after graduating college, I was sitting on a healthy amount of money and knew kind of where I wanted to be in a few years,” he added.

James earns a baseline salary of $75,000 per year with variable commission that gets him closer to roughly $135,000 per year, though that number can fluctuate.

Financial Literacy

James’ financial savvy from such a young age is due to a number of different things.

“It definitely started in my household first. I watched my dad get into real estate as early as I can remember, and have a few rental properties of his own, and just create different passive income streams,” he said. “He always [taught] me you have to plan ahead and you have to be prepared for anything.”

James also had a couple of “pretty influential professors” who recommended reading books like “A Simple Path to Wealth” by J. L. Collins, “Rich Dad, Poor Dad” by Robert T. Kiyosaki and Sharon Lechter, and others that helped set him up.

Seller Financing

Although James was approved for FHA loans on two places where he entered escrow, he said, “The deals just ended up not going through for other reasons. The one that I ended up closing on, it was seller financed.”

Seller financing allows the buyer to bypass using a bank, and get loan repayment interest rates that the seller is willing to offer.

“Of the three different places that I got close to closing on, two of the three were going to be seller financed scenarios or for sale by owner at the very least,” said James.

Shop Around

James used a real estate agent and together they looked at around five or six houses a week for an entire year before he ended up closing on a house.

“It’s a tough market,” he said. “I mean, rates at the time that I started were very low, around 3% period and we just got outbid. They didn’t work out.”

When interest rates began to increase, he had more success and bought his home in September 2023.

House Hacking

Part of what made this purchase possible for him was buying a two-family home, so that he can live in one and rent out the other.

“My mindset has always been that this is an investment property. So part of the reason I was able to get even approved for stuff like FHA or a regular conventional loan was because I was always looking at two family [homes] that had rental income coming in to supplement my income,” said James.

Based on his experience, James recommended the following tips for other Gen Zers who want to purchase a first home.

Start Saving

“If you have cash stacked up, it makes things a little bit easier with your financing options. There were plenty of houses that I wanted to jump on that would’ve been a disaster if I tried to jump on them, and I’m glad that the cards didn’t fold my way in a lot of those scenarios,” he said.

Diversify Your Savings

James didn’t only put his money in a traditional savings account — he also invested a lot in exchange-traded funds (ETFs). While he does have to pay capital gains taxes on the profits, he can offset a lot of those through expenses related to investing in his property.

“I was able to cross swords that way a little bit and not see as much of the downside, but then I also had a lot of stuff just set aside for a base down payment that was in high yield savings accounts,” he explained.

James prefers a “gamified” savings company called Yotta, which offers higher-yield accounts.

Find An Appreciating Market

James grew up in New Jersey, but he has also lived in both Florida and Texas. He considered each market when purchasing a home, but ultimately it didn’t look like homes there would appreciate in value as quickly as in New Jersey.

Don’t Settle For a Mortgage

James strongly urges shopping around for a mortgage. He recalls a home he almost closed on that he later realized would’ve been a disaster.

“I think the biggest thing [is] just because you can get approved for a mortgage doesn’t mean that you should take that mortgage,” he said. “I got approved for a mortgage that probably would’ve completely put me underwater.”

He added that if you think you can afford, then, “double and triple check it. Ask: how much cash do I have in reserves? How long can I keep my head afloat if all goes to hell?”

Choose Partners Wisely

Lastly, as you choose the key players who will help you buy a home, James said, “Make sure your agent, lawyer and brokerage all have your best interests at heart.”

He felt fortunate to have people in all corners who never pushed him into buying something that didn’t make sense and were always honest with him.

“They’d tell me when a property was a bad idea and when one was a slam dunk. Their expertise got me miles ahead of other buyers,” said James.

Buying a home depends on many factors. Having a strategic savings strategy and finding the right people to partner with can be effective.

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This article originally appeared on GOBankingRates.com: I’m Gen Z: How I Saved Enough Money to Buy My First Home