Download 10 Best States for First-Time Homebuyers

10 Best States for First-Time Homebuyers
July 6, 2015
By Elyssa Kirkham, Editor
Buying a home is a financial goal that has been delayed for many Americans thanks to the recent
recession. With the economy continuing to strengthen in 2015, however, many wannabe
homeowners have decided it's time to buy their first homes.
One-third (32 percent) of home purchases made in May 2015 were by first-time home buyers,
according to the National Association of Realtors (NAR). Lawrence Yun, chief economist for NAR,
called this "an encouraging sign" stemming from "strong job gains among young adults, less
expensive mortgage insurance and lenders offering low down payment programs." According to
Yun, first-time buyers entering the market will continue to increase.
To see which states offer the best conditions for new homeowners, GOBankingRates ranked the 10
states with the most growth in the number of first-time home buyers, while maintaining lower levels
of foreclosure rates, over the past 10 years. Read on for top 10 best states for first-time home
buyers, as well as insights into local housing market conditions and public assistance programs.
1. West Virginia
West Virginia saw some of the biggest growth in first-time home buyers in the past 10 years. From
2003 to 2013, the share of new first-time home buyers increased 57.6 percent while foreclosures in
2015 have remained low in the state at 0.01 percent.
The low costs of buying a home in this state also make this housing market accessible for first-time
buyers. The median sale price in West Virginia is $115,850, reports Zillow, with a monthly payment
on a 30-year mortgage costing around $550 a month -- more than 40 percent less than the $950
median rent price.
West Virginia also offers some public programs to help its residents buy their first homes. The
Homeownership Program offered through the West Virginia Housing Development Fund can
provide up to 100 percent financing for first-time home buyers who meet income requirements.
Home buyers can also take advantage of the Down-Payment/Closing Cost Assistance program to
secure a low rate on a loan of up to $15,000 to help cover down payments and closing costs.
2. New Hampshire
New Hampshire saw an even greater increase in the number of first-time home buyers than West
Virginia. The portion of home buyers in the state looking to purchase a house for the first time
increased by 89.3 percent from 2003 to 2013. The state's foreclosure rate is not quite as low,
however, at 0.05 percent, which put it at No. 2 on this list.
The median sales price in New Hampshire, $224,700, is also nearly double that of West Virginia. But
buying at that price is still cheaper than renting; a monthly mortgage payment is around $1,060 on a
30-year loan compared with the median rent price of $1,250 in New Hampshire.
New Hampshire state programs can be a big help to first-time homeowners, such as the Home
Preferred loans that let borrowers get a mortgage with a down payment as small as 3 percent and
provide low mortgage insurance coverage for smaller monthly payments. New Hampshire also
offers a tax credit of up to $2,000 each year for first-time home buyers.
3. Rhode Island
Rhode Island had the largest amount of growth in first-time home buyers; its rate of this type of
borrower nearly doubled -- up by 97.1 percent -- from 2003 to 2013. Foreclosures are also fairly low
at 0.06 percent, only slightly higher than New Hampshire's 0.05 percent.
Rhode Island also has a wider gap between typical mortgage payments and rent prices, as reported
by Zillow. The median rent is reported at $1,400 while the monthly 30-year mortgage payment is just
around $1,030, based on a median sale price of $217,625.
The state's FirstHome lending program makes borrowing more accessible for first-time buyers. It
offers no-money-down options and assistance with closing costs. Rhode Island's FirstHome loans
also qualify the home buyers for a FirstHome tax credit of up to $2,000 throughout the life of the
loan.
4. Vermont
Vermont is yet another Northeast state that has seen strong growth among first-time home buyers,
with a 48.2 percent rise from 2003 to 2013. The state also has one of the lowest foreclosure rates at
0.02 percent.
The MOVE mortgage credit certificates offered through the Vermont Housing Finance Agency
offer low-interest mortgages, lowered monthly mortgage insurance payments and savings on the
Vermont Property Transfer Tax. The agency also offers down payment grants that can cover as
much as 2.5 percent of the purchase price or loan amount, whichever is lower.
Lastly, there is the local housing market. Vermont's median home sale price is $224,900, which is
slightly above the national median of $215,177, as reported by Zillow. This difference doesn't push
homeownership too far out of reach, but it could mean that hopeful homeowners might need to
save a little longer to afford a house.
5. Massachusetts
The ratio of first-time home buyers in Massachusetts saw a big jump from 2003 to 2013 -- 74.3
percent -- showing more residents in the state are ready to take the leap. The state also has a
foreclosure rate on the lower end, showing that its residents have a good chance at retaining
homeownership once they've made the commitment.
Zillow reports that the median home value in Massachusetts is $323,800 and the median sale price is
$309,500, indicating that Massachusetts residents shopping for a home can currently get a deal and
pay below market value. Monthly 30-year mortgage payments based on the median price would also
be significantly cheaper than the median rent in the state, at $1,460 versus $2,300, respectively.
First-time buyers in this state can also take advantage of mortgage insurance programs like
MassHousing, which offers mortgage payment protection that covers up to $2,000 a month in
mortgage and interest payments for up to six months should the borrower suffer a job loss. Another
option is the ONE Mortgage Program, which is offered through the Massachusetts Housing
Partnership Fund and allows for down payments as low as 3 percent and publicly subsidized loans
for up to 20 percent of the home's value.
6. Hawaii
Hawaii had a 52.8 percent increase in first-time home buyers from 2003 to 2013 and has a lower
foreclosure rate at 0.03 percent. In terms of state programs to get help buying a first home,
Hawaiians have limited options. But, the state does offer a mortgage credit certificate that can
reduce the federal income tax homeowners owe.
Like in Massachusetts, listing prices in Hawaii fall below home values, making it more likely that a
home purchase will be a good deal. But the $84,200 difference between the median sale price
($453,100) and median home value ($537,300) is more pronounced in Hawaii. On the other hand,
this median sale price is still high and would result in payments around $2,140 a month with a 30year mortgage, which is on par with the $2,300 median rent price listed by Zillow.
7. Washington, D.C.
When it comes to housing, Washington, D.C., has the highest prices of all the places on this list,
with a median sale price of more than half a million dollars -- $511,885. The lower $487,600 median
home value also doesn't bode well for home buyers, indicating they'll be trying to purchase in a
market that favors sellers. Plus, the median rent price of $2,285 actually beats mortgage payments of
$2,420 based on the median sale price. Of course, D.C. is a smaller area than the states surveyed and
is a major metropolitan area, so buyers should expect a competitive housing market.
In terms of first-time home buyers, D.C. saw fair growth of 41.7 percent from 2003 to 2013. It has
also maintained one of the lowest foreclosure rates at 0.01 percent. D.C. offers several local
programs that can help first-time home buyers, such as the Home Purchase Assistance Program.
The program provides up to $50,000 in gap financing and up to $4,000 in assistance with closing
costs.
8. Wyoming
With plenty of wide-open spaces to offer its residents, Wyoming's real estate comes cheaper than
real estate in many other states. Its median home value is estimated to be $179,000 by Zillow as of
May 2015, which is right on par with the national median of $179,200. Wyoming's growth in the
portion of first-time home buyers was fairly average at 48.5 percent, but the state has a lower
foreclosure rate of 0.03 percent.
Wyoming also provides state-level assistance through the Home Again Program, which offers
reduced mortgage rates for first-time home buyers. The state's Down Payment Loan Program can
also be a big help to new homeowners; it provides loans up to $10,000 to help cover home down
payments.
9. Maine
The median value of homes in Maine, estimated by Zillow to be $118,000, is relatively low -- not
only when compared with the national median but especially next to the median home values of
neighboring states, such as Massachusetts ($323,800) and New Jersey ($273,700). Even with a
reasonable median rent at $1,225, homeownership is still attractive. A 30-year mortgage for a
property equal to the state's median home value would cost around $560 a month.
The portion of first-time home buyers in Maine has increased significantly, climbing 51.6 percent
from 2003 to 2013. The state's 0.04 percent foreclosure rate is also less than most states. Maine
provides a few programs to help home buyers, including the First Home Program. The program
provides low-rate home lending, which requires little or no down payment.
10. Arizona
Arizona saw above-average growth in first-time home buyers (63.6 percent), but this increase is also
paired with a middling 0.06 percent foreclosure rate that pushed the state down to No. 10 on this
list. First-time home buyers in the state also lack many public assistance options; however, the
Home Plus Home Loan Program can help first-time buyers secure down payment assistance up to 4
percent of the home loan amount.
Arizona is another state that has low home values compared with slightly inflated sale prices.
According to Zillow, the median home value is $191,300, and the median sale price is $204,500. The
good news is that mortgage payments are still cheaper than renting; a 30-year mortgage on the
median sale price would cost around $970 a month, whereas the state's median rent is more than
$200 higher each month at $1,195.