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Best & worst states for first-time homebuyers in 2023 [ranked]
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Updated: October 02, 2024
Home: for some people it’s the house they grew up in; for others it is the state or country they move to.
For still others, “home” is wherever their families or loved ones are.
If you’ve ever dreamed of owning your own home, the skyrocketing cost of living and inflation can make it seem like that dream is permanently out of reach.
But there is hope, in the form of government loans, grants, and closing cost help.
Whether you want a studio in the city, a backyard and picket fence in the suburbs, a farm or a treehouse, we did research on each state’s cost of living and found the best and worst to find a new home in.
Buying your first home
You’ve decided that you’d like to pay a mortgage rather than pay rent. You’ve done some initial research into what you’ll need to do in order to buy a home.
You know the difference between a fixed-rate and an adjustable-rate mortgage, and which one would be right for you; you’ve chosen your dream realtor; you have a downpayment saved.
But depending on where in the U.S. you live, your first home could cost you many years of your working life.
While we’re not suggesting you move to the most affordable state on our list — unless you want to — it’s always a good idea to know the average selling price of the homes where you live, so you can make the best choices with your money.
Who qualifies as a first-time homebuyer?
A first-time home buyer is generally defined as someone who is buying their primary residence (as opposed to a rental property) for the first time.
There are several first-time home buying grants or loans that you may be unaware of. Beyond that, you may be able to get the mortgage itself at a more affordable interest rate. It’s also relatively easy to negotiate a lower PMI (private mortgage insurance) rate.
Moneywise ranked all 50 states based on each state’s median home prices and the average down payment required.
Then we narrowed our focus to the 10 best states to buy your first home, and the 10 worst states.
See which 10 states are the best — and which 10 are the worst — for first-time homebuyers.
Best states for first-time homebuyers
| State (excluding the District of Columbia) | Median Zillow price | Average down payment |
|---|---|---|
| 1. West Virginia | $129,103 | $16,783 |
| 2. Mississippi | $157,828 | $20,517 |
| 3. Arkansas | $169,867 | $22,082 |
| 4. Oklahoma | $171,057 | $22,237 |
| 5. Iowa | $183,418 | $23,844 |
| 6. Kentucky | $188,439 | $24,497 |
| 7. Alabama | $194,695 | $25,310 |
| 8. Kansas | $198,199 | $25,765 |
| 9. Ohio | $199,959 | $25,994 |
| 10. Louisiana | $205,972 | $26,776 |
The best state for buying your first home
West Virginia
It is the “Mountain State” for a reason, being the only state in the nation that lies completely within the region of the Appalachian Mountains.
It has an average combined state and sales tax rate of 6.55%.
In a report published by USAWage, the average annual salary across all occupations is $36,860, with mining being their biggest industry, and their second-highest source of revenue.
But here is a reality check.
West Virginia’s economy is weaker than some of its competitors: a full quarter of its revenue comes from the federal government (the largest share of any state).
According to its 2022 census, 16.8% of its residents live under the poverty line, and only 21.8% of West Virginians have a bachelor’s degree.
W.Va scores an overall D in a report on its infrastructure put together by the American Society of Engineers in 2020, which means “poor or at risk.”
It scored a D+ in bridges and roads, and also got Ds in dams, drinking water, and wastewater.
Grants to buy a home in West Virginia
The West Virginia Housing Development Fund offers the HOMEownership loan program, specifically geared towards the first-time buyer. This program offers a 30-year, fixed rate mortgage (although up to 100% of the purchase price can be financed).
They also offer loans through their Movin’ Up program (although that isn’t necessarily for first-time buyers). There’s also the Low Down Home Loan program, which is a 15-year, low interest home loan that is meant to reduce your overall costs.
Worst states for first-time homebuyers
| State (excluding the District of Columbia) | Median Zillow price | Average down payment |
|---|---|---|
| 1. Hawaii | $848,926 | $110,360 |
| 2. California | $760,800 | $98,904 |
| 3. Washington | $575,392 | $77,457 |
| 4. Colorado | $559.838 | $72,778 |
| 5. Massachusetts | $559,312 | $72,710 |
| 6. Utah | $544,868 | $70,832 |
| 7. Oregon | $502,215 | $65,287 |
| 8. Idaho | $466,435 | $25,765 |
| 9. New Jersey | $441,762 | $57,429 |
| 10. Nevada | $434,832 | $56,528 |
The worst state for buying your first home
Hawaii
Perhaps unsurprisingly, Hawaii tops the list of “the hardest state in which to buy a home”.
It has been a tourist favorite since becoming the 50th U.S. state in 1959, with the yearly visitors outnumbering the residents in 2022.
While tourism is perhaps the biggest contributor to Hawaii’s economy, it comes at a literal price: according to CNN, in 2021, residents were asked to ration their water or face fines, while vacationers went about their business as usual.
On top of water rationing, the impact of tourists on Hawaii’s environment has been marked.
In the past decade, it was dubbed “the extinction capital of the world ” by the Washington Post, given how overuse of its trails and beaches made several of its native species go extinct.
It has the highest cost of living of all the other states because it has to import about 90% of its goods. When you add the high demand for land and the limited amount of it, you have a recipe for a disastrous housing market.
According to Redfin, the median sale price for a home on the Big Island in 2022 was $730,200, which is a 2.1% increase year over year.
If you consider that ZipRecruiter cites the average salary in Hawaii as being $52,228, then you have to wonder what kind of magical math people are doing in order to buy any houses at all.
Grants to buy a home in Hawaii
But Hawaii’s high cost of living isn’t a surprise to the state government, and they have many options for residents wanting to buy their first home.
The Hawaii Housing Finance and Development Corporation hosts the Hula Mae loan program, which offers 30-year mortgage loans, along with down payment assistance (up to 3% of the contract sales price) to qualified applicants.
The Hawaii HomeOwnership Center offers a down payment assistance loan (DPAL) that can help you pay 5% of the down payment and avoid mortgage insurance costs.
The maximum loan amount is $75,000 with a 20-year amortization.
In order to qualify for the DPAL, you need to meet certain requirements, such as attending a nine-hour home ownership course, a minimum credit score of 700, and you can’t have owned another house within the last three years.
If you’re a resident of the city of Honolulu, you could qualify for their down payment loan program, which potentially awards you with $40,000 in assistance funds with no interest or fees, over a 20-year amortization term.
Tips on buying your first home
The key to actually buying your first home rather than dreaming about it is planning.
Maintain your credit. If you know you have collections lying in wait for you, address them as soon as possible. Talk to a professional about removing bad marks from your credit history, or building up good credit as fast as possible. Set calendar alarms in your phone so you always pay your bills on time.
Remember the “hidden costs” of buying a home: the closing costs, hiring a house inspector, and potentially a real estate agent. Stick to your budget. Know what your must-haves, maybes, and could-live-withouts are.
How much should you put down on a home?
The suggestion of having a 20% down payment persists in real estate circles. If that amount of money would leave you “house poor,” — with all of your money sunk in the house and little in your bank account — don’t do it.
Instead, our study found that the average amount for a down payment on a house is 13%.
While a 20% down payment gives you the benefit of no private mortgage insurance (PMI), down payments for conventional loans usually range between 3% and 20%.
Is now a good time to buy your first home?
Yes, according to Freddie Mac, (the Federal Home Loan Mortgage Corporation).
Their latest statistics show the federal mortgage rate had a slight hike in May, but is resting around 6%, a bit of a reprieve after the volatility of the last few years.
Check out our mortgage calculator if you’re curious how much mortgage you’d pay on that home you’ve been dreaming of.
Bronwyn is currently part of the email content team for Moneywise. Before starting here, they freelanced for several years, focusing on B2B content and technical copy. Pre-pandemic, you could find them planning their next trip, but lately, if they're not at work, you can find them hanging out with their cat and dog.
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