A new poll from Newsweek suggests that Generation Z (born between 1997 and 2012) is burdened with more personal debt than any other age group.

On average, adult Gen Zers carry $94,101 in personal debt—far surpassing Millennials ($59,181) and significantly exceeding Gen Xers ($53,255). 

Credit card debt is the most common liability among Gen Z, with 56% carrying some form of it. 

Yet, despite their high overall debt, only 16% of Gen Z respondents have a mortgage.

As this generation moves into prime homebuying age, what does their debt burden mean for their homebuying futures?

It’s not just debt, it’s delinquency

Even more concerning than the sheer amount of debt Gen Z carries is their high delinquency rate. Credit card delinquency rates are also highest among this generation compared to others, according to a 2024 study from the New York Fed. 

While having a large debt burden is a barrier to homebuying, a history of serious delinquency (such as accounts in collections or charge offs) can be an outright deal breaker. Late payments lower credit scores and can linger on credit reports for years—even after the balance is paid—making mortgage approval much harder for prospective buyers.

How much debt is too much debt to buy a house?

There’s no dollar limit for how much debt is too much to buy a house, but there is a ratio.

Your debt-to-income (DTI) ratio measures how much of your monthly income goes toward debt payments, helping lenders assess whether you can afford a mortgage. It’s calculated by dividing your total monthly debt payments by your gross monthly income and multiplying by 100.

Generally, lenders prefer a DTI of 36% or lower, with 28% to 35% allocated to housing costs. Some lenders may approve borrowers with a DTI as high as 43%, but this is less common.

With Gen Z likely dedicating a significant portion of their monthly income to debt repayment, qualifying for a favorable DTI will remain a challenge compounded by high home prices and mortgage rates.

How to buy a house with debt

Buying a house with debt is possible. Borrowers in this position should focus on improving their financial health to increase their odds of approval and secure better rates and terms. 

Bring down your DTI

There are three ways to lower your DTI:

• Focus on paying off existing debt: Reduce credit card balances, student loans, or other outstanding debts to lower your monthly obligations and drop your DTI.
• Increase income: Another way to lower your DTI is to increase your earnings through a raise, side job, or freelance work.
• Borrow less: Opting for a more affordable home or making a larger down payment can reduce the amount you need to borrow, lowering the portion of your monthly debts that go toward your mortgage.

Aim for an excellent credit score

Lenders don’t like to take risks. They want to see that you’re a reliable borrower with a solid history of on-time payments.

Your credit score is one of the best indicators of this. A higher score not only increases your chances of mortgage approval but can also secure you a lower interest rate, saving you thousands over the life of your loan (and lowering your DTI).

Aim for a minimum credit score of 660 for a conventional mortgage, but the higher, the better. Borrowers with scores above 740 typically qualify for the best interest rates. 

To improve your credit score, focus on paying bills on time, reducing outstanding debt, and avoiding new credit inquiries in the months leading up to your application. This is actually a time when a Gen Z buyer’s credit card debt can come in handy—reliably paying down a debt burden can be a pathway to building a strong credit history, if handled responsibly.

If your score is lower than lenders’ preferred thresholds, you may still have options in government-backed loans.

Explore government-backed mortgages

Lenders are more willing to go outside their comfort zone with government-backed loans because the federal government guarantees paying back a certain amount of these loans if the borrower defaults. As such, lenders are a little more flexible with their requirements for these types of mortgages.

• FHA Loans: Ideal for first-time homebuyers, these loans allow credit scores as low as 580 with a 3.5% down payment (or 500 with a 10% down payment).
• VA Loans: Available to eligible veterans, active-duty service members, and some military spouses, VA loans require no down payment and no private mortgage insurance (PMI).
• USDA Loans: Designed for low-to-moderate-income buyers in eligible rural areas, USDA loans offer zero down payment options with competitive interest rates.

Have killer savings

Your savings are another indicator of your financial health. Lenders will look to see if you have enough cash reserves to cover your down payment and closing costs, with some left over to cover your debts in case of unexpected financial setbacks (like a job loss). The more you have saved, the safer lenders will feel underwriting your loan.

Get pre-approved for a mortgage

If you have a lot of debt, your pre-approval proves that a lender is willing to work with you. This step not only clarifies how much you can borrow, but also strengthens your position when making an offer on a home.

Be a realist

A high debt load can make homeownership more challenging. As Gen Z enters homebuying age with large amounts of personal debt, they’ll need to be realistic about whether now is the right time to buy, or if they’d be better off delaying homebuying to focus on improving their financial health.