Buying a home can feel overwhelming—especially if you’re part of Gen Z navigating rising housing costs, student loans, and interest rate uncertainty. The good news? You’re not alone. Many first-time buyers are Googling the same questions about affordability, down payments, and hidden costs. Let’s break down the answers to the most common concerns Gen Z has about buying a home.

If you'd like to chat in-depth about these topics, contact us for a no obligation consultation.

1. How Much Down Payment Do I Really Need?

The traditional 20% down payment is a myth for most first-time buyers. Many loan programs allow you to buy a home with as little as:

  • 3% down with a conventional loan
  • 3.5% down with an FHA loan
  • 0% down with VA or USDA loans

That means on a $250,000 home, you could potentially get started with under $10,000 in down payment savings.

Pro Tip: Explore local down payment assistance programs—many states and cities offer grants or forgivable loans to help first-time buyers.

2. What Hidden Costs Should I Expect When Buying a Home?

Beyond your down payment, there are several extra expenses that can catch buyers off guard:

  • Closing costs (2–5% of the purchase price)
  • Home inspection 
  • Appraisal Fees
  • Moving Expenses
  • Property taxes and homeowners insurance
  • HOA dues (if applicable)

Budgeting an extra 3–6% of your home’s purchase price will give you a cushion for these costs.

3. Can I Buy a Home With Student Loan Debt?

Yes—you can absolutely buy a home while carrying student loans. Lenders look at your debt-to-income ratio (DTI) to see if you can handle a mortgage on top of existing debt. If your monthly debt payments are less than 43% of your gross income, you’re likely still eligible for financing.

Tips for Success:

  • Consider income-driven repayment for student loans
  • Pay off high-interest debt like credit cards first
  • Get pre-approved to see how much home you can afford with your current financial picture

Pro Tip:

Loan officers have tools to help you decide which debt to pay off first in order to be most successful when preparing for homeownership.

4. What Credit Score Do I Need to Qualify for a Mortgage?

While the “perfect” 750+ score will get you the best rates, you don’t need it to buy a home.

  • FHA loans accept credit scores as low as 580 (sometimes even 500 with larger down payments)
  • Conventional loans typically require a 620 minimum
  • Higher scores = lower interest rates, so it's worth improving your credit before applying if possible

5. How Do Interest Rates Affect My Monthly Payment?

Even a small change in interest rates can significantly impact affordability. For example: That’s a difference of nearly $2,000 per year.

  • A $250,000 mortgage at 6% = about $1,500/month (principal & interest)
  • The same loan at 7% = about $1,660/month

Action Step: Ask your lender about rate locks and whether buying down your rate with seller credits makes sense for you.

Final Thoughts

For Gen Z buyers, affordability questions are top of mind—and for good reason. Between rising home prices and student loans, the path to homeownership can feel complicated. But with the right strategies—like exploring low down payment options, budgeting for hidden costs, and improving your credit—you can make the process less intimidating and more achievable. If you’re considering buying your first home, start with a trusted realtor. It’s the best way to see what’s possible and get clear answers based on your unique situation.

Let us know if you have any questions about buying a home in the Twin Cities or surrounding areas. One of our experienced realtors will be in touch as soon as possible.