According to the 2025 NextGen Homebuyer Report, while a striking 95% of Gen Z and Millennial respondents still aspire to own a home, less than half feel confident in their ability to do so within the next five years, and only 42% are satisfied with their homebuying knowledge. Nearly 69% cite the high cost of living as their top barrier, and 68% say rising prices may delay their purchase plans.
Nearly 60% of Americans say that saving for a home makes them feel “in over their heads.” The average first-time buyer now puts down just 8%, often struggling to meet minimum credit and income requirements.
Yet, despite these daunting odds, young buyers are not giving up. Instead, they are rewriting the rules.
Leveraging Family Support and Blended Mortgages
“Receiving help from the bank of Mom and Dad can speed up that process. Saving for a down payment can take years — but receiving help from family can be a major turning point for many consumers,” reports LendingTree. Nearly 78% of Gen Z homeowners report receiving some form of down payment support from parents, with family gifts often making the difference between buying now and waiting years to save enough.
More than one-third (36%) of Gen Z and Millennial homebuyers plan to use family money for their down payment, a figure that has doubled since before the pandemic.
Lenders are increasingly offering joint mortgages that allow parents and children to co-apply. They combine their incomes and credit histories to boost borrowing power and increase the likelihood of approval.
Co-buying with Friends or Family
With affordability a top concern, 21% of NextGen buyers are now considering co-buying—pooling resources with friends, siblings, or partners to make homeownership possible. This collaborative approach is gaining traction as traditional solo buying becomes less feasible in today’s expensive housing market.
Notably, Gen Z is 78% more likely to consider co-buying than Millennials, with 32% of Gen Z open to the idea compared to just 18% of Millennials. Sharing the down payment burden means buyers are more likely to reach the 20% threshold, helping avoid private mortgage insurance (PMI).
As CBS News highlights, “co-ownership and multi-generational living are becoming more popular solutions for people looking to own homes” as property prices outpace wage growth. However, if one party has a poor credit score, it can affect everyone’s mortgage terms.
Moving to More Affordable Areas
According to the 2025 NextGen Homebuyer Report, 41% of Gen Z and 38% of Millennials have already relocated or are planning to move to more affordable areas, up from just 27% of all buyers in 2020. Cities such as Tulsa, Oklahoma; Toledo, Ohio; Des Moines, Iowa; and Chattanooga, Tennessee, are emerging as popular destinations due to their lower home prices (often under $200,000–$300,000) and affordable rents.
Some young buyers are even looking abroad, with countries such as Thailand, Mexico, Portugal, and Malaysia topping the list for affordable real estate and lower living costs. “Affordability is the new status symbol for young buyers. The ability to work remotely has unlocked opportunities for them to pursue homeownership in places where their money goes further,” says Daryl Fairweather, Chief Economist at Redfin.
House Hacking and Renting Out Space
Nearly 19% of young buyers are engaging in “house hacking”—purchasing properties with rentable units or creating secondary suites to generate income and offset mortgage costs. Over half of Millennial (55%) and Gen Z (51%) buyers say it’s “very” or “extremely” important to have the opportunity to rent out part of their property for extra income while living in it.
The trend is a pragmatic response to high home prices and mortgage rates, with rental income helping young buyers qualify for mortgages and manage monthly payments. Many buyers use residential loans (like FHA loans) that allow for low down payments if they intend to live in one unit.
Utilizing First-Time Buyer Programs and Down Payment Assistance
There are now more than 2,500 homebuyer assistance programs nationwide, with 43 new programs added in just the first quarter of 2025. These programs can lower a buyer’s loan-to-value ratio by an average of 6%, making it easier to qualify for a mortgage. Assistance comes in the form of grants, forgivable loans, and matched savings, often targeting low- and moderate-income buyers or first-time homeowners.
Conventional loans requiring as little as 3% down—such as Fannie Mae’s HomeReady and Freddie Mac’s Home Possible—are increasingly popular among first-time buyers with limited savings. These programs often come with additional benefits, such as reduced mortgage insurance premiums and flexible credit requirements.
Major banks such as Chase, Bank of America, and Wells Fargo offer targeted grants for down payments and closing costs, sometimes providing up to $10,000 or more in assistance to eligible buyers. FHA loans accept lower credit scores and allow down payments as low as 3.5%, making them more accessible than many conventional loans.
Tapping Into Retirement Accounts
Tapping into retirement accounts—especially 401(k)s or IRAs—to fund a home purchase is a strategy some young buyers use when other options aren’t available. Still, it comes with essential rules, risks, and long-term consequences. Withdrawing money from a 401(k) before age 59½ typically triggers a 10% penalty plus income tax on the amount withdrawn, making it an expensive way to access funds.
Instead of a withdrawal, you can take a loan from your 401(k) for up to $50,000 or 50% of your vested balance, whichever is less. A 401(k) loan does not incur penalties or immediate taxes, but you must repay it (with interest) within five years. If you leave your job before repaying the outstanding balance, it will be due quickly, or it will be treated as a withdrawal, with taxes and penalties applied.
First-time homebuyers can withdraw up to $10,000 penalty-free from an IRA for a home purchase. However, income taxes still apply to traditional IRAs. You can withdraw Roth IRA contributions anytime (and they are tax and penalty-free), but earnings are subject to rules and may be taxed if the account is less than five years old.
Opting for Smaller or Fixer-Upper Homes
Notably, 42% of young buyers are opting to purchase older or smaller homes that require renovation. They view this as a practical way to enter the housing market despite high prices and limited inventory of move-in-ready homes. This trend is driven primarily by affordability: fixer-uppers typically cost significantly less than new or turnkey properties, sometimes by as much as 45%, with average prices around $225,000, compared to much higher costs for new builds.
Customization is another major draw. Many are leveraging renovation loans, such as the FHA 203(k) or Fannie Mae HomeStyle, which allow them to finance both the purchase and renovation costs in a single mortgage.
However, approximately 27% of Gen Z homeowners who purchased fixer-uppers report regretting their decision. Most underestimated renovation costs or encountered unexpected issues, such as outdated systems or health hazards.
Saving Aggressively and Automating Savings
47% of young buyers are proactively saving for a down payment, often using automated transfers to dedicated accounts to build their savings over time, even if it takes years. Financial experts and lenders recommend this approach: setting up a separate savings account exclusively for your down payment and scheduling automatic monthly contributions helps keep these funds untouched and steadily growing.
This disciplined method is critical as high living costs and low incomes remain the top barriers to saving for a down payment among NextGen buyers (69% cite affordability as a challenge). Despite these hurdles, young buyers are showing determination. Gen Z, in particular, is saving earlier and more intentionally than previous generations.
Exploring Alternative Financing Models
Young buyers are turning to shared equity, part-rent/part-buy schemes, and other innovative financing options to lower upfront costs and risk. In shared equity homeownership, a public or private partner (such as a nonprofit or government entity) invests alongside the buyer, covering a significant portion of the purchase price or down payment.
The buyer typically contributes a small percentage (sometimes as little as 1%) of the price. The partner, on the other hand, provides a larger share (often 20–30% or more). When the home is sold, any increase in property value is shared between the homeowner and the partner.
For example, the Housing Fund’s program shares appreciation equally, helping buyers build wealth while keeping the home affordable for the next owner. These programs are designed for first-time, income-eligible buyers (often those earning less than 80–120% of the area median income).
Leveraging Digital Tools and Social Media
40% of Gen Z use social media platforms—such as TikTok, Instagram, and Facebook—for homebuying research, compared to 30% of Millennials. They’re actively researching neighborhoods, market trends, and even lender reputations through social feeds and influencer content.
Thirty-five percent of all respondents use AI tools like ChatGPT for financial and homebuying information, with Gen Z leading at 43%, significantly higher than Millennials at 34%. This digital shift is fueled by a dramatic drop in trust: confidence in banks fell from 61.5% in 2024 to just 40% in 2025, while trust in loan officers plummeted to 19.5%.
As a result, young buyers increasingly rely on peer networks, digital content, and AI-powered tools rather than traditional financial advisors or real estate agents. 57% of NextGen buyers also rely on friends and family for economic and homebuying education, and 28% turn to Reddit and online forums for advice and shared experiences.
Disclaimer – The Finance Key does not provide and does not intend to provide financial, investment, tax, or legal advice. Information contained in this article is for informational and educational purposes only. This list is solely the author’s opinion based on research and publicly available information. The inclusion of links to third-party content is not an endorsement by The Finance Key of such content or services. Please do your due diligence and use your discretion.
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