Top 5 Housing Markets for First-Time Buyers

July 24, 2015 | By

According to the National Association of Realtors (NAR), one out of three (32 percent) home purchases made in May 2015 were by first-time homebuyers.

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.”

The number of first-time buyers entering the market will continue to increase, according to Yun.

To see which states offer the best conditions for new homeowners, GOBankingRates.com ranked the states that had the most growth in the number of first-time homebuyers while maintaining lower levels of foreclosure rates over the past 10 years.

1. West Virginia
With a median sale price of $115,850 and monthly payments on a 30-year mortgage around $550 a month (more than 40 percent less than the $950 median rent price), West Virginia’s homebuying market is accessible for many first-time buyers, says GOBankingRates.com. In fact, from 2003 to 2013, the share of the state’s new first-time homebuyers increased 57.6 percent while foreclosures in 2015 have remained low, at 0.01 percent.

To help residents buy their first home, the West Virginia Housing Development Fund offers up to 100 percent financing to qualified buyers through its Homeownership Program. Homebuyers 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
The portion of homebuyers in New Hampshire 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 GOBankingRates.com’s list.

The median sales price of $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, says GOBankingRates.com.

New Hampshire also offers assistance programs such as Home Preferred loans, with down payments as low as 3 percent and 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
From 2003 to 2013, the number of first-time homebuyers in Rhode Island nearly doubled — up by 97.1 percent. 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, says GOBankingRates.com.

The state’s FirstHomes lending program offers no-money-down options and assistance with closing costs and qualifies homebuyers for a FirstHomes 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 homebuyers, with a 48.2 percent rise from 2003 to 2013. The state also has one of the lowest foreclosure rates at 0.02 percent, says GOBankingRates.com.

Vermont’s median home sale price is $224,900, which is slightly above the national median of $215,177, as reported by Zillow.

The Vermont Housing Finance Agency’s MOVE mortgage credit certificates 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.

5. Massachusetts
GOBankingRates.com notes that the Zillow median home sale price is $309,500, and 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 take advantage of MassHousing’s mortgage payment protection program 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 from Massachusetts Housing Partnership Fund that allows for down payments as low as 3 percent and publicly subsidized loans for up to 20 percent of the home’s value.

Good Choices Nationwide
While all of the top five were in the Eastern U.S., fans of the Western U.S. should not despair. Tropical Hawaii, mountainous Wyoming, and sunny Arizona all made the original top 10 list.

No matter which state you hope to buy in, it’s a good idea to find out what assistance may be available for first-time homebuyers. Check out your state’s housing finance agency (HFA), visit a HUD-approved housing counselor, or search sites such as Down Payment Resource to find out what resources may be available in your area.

 

Source: GOBankingRates.com’s “10 Best States for First-Time Homebuyers,” by Elyssa Kirkham, published July 6, 2015.

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