Buying a home can be a daunting task for a first-time homebuyer in the current market, with its housing price increases and a shortage of inventory. Unlike homebuyers who are looking at upgrading or moving homes, the first-time buyer does not have the advantage of using the funds from selling a home to help with the down payment of a new one. Keeping these factors in mind, LendingTree ranked the best cities for those people looking at purchasing their first homes.
The study, which was released on Tuesday considered a number of factors to rank the cities. They included average down payment amount, the share of buyers using FHA mortgage, average down payment percentage, the percentage of buyers who have less than prime credit, the share of homes sold the median income family can afford, and average FHA down payments as a percentage of average down payments for all loans.
With a low average down payment of just 12 percent or $24,896 and its share of non-prime homebuyers at 50 percent, Little Rock, Arkansas gained the top spot as the best city for first-time homebuyers to lay down their roots. Birmingham, Alabama came a close second with down payment amount at just over $27,000 or 12 percent.
Though Grand Rapids, Michigan came in third in the overall rankings, it scored the top spot for being the best place to be an FHA borrower. The study found that non-prime credit share of FHA borrowers was the highest at 59 percent in Grand Rapids and FHA benefit with a down payment was at just 22 percent of the amount paid by other borrowers.
Youngstown, Ohio; Winston, North Carolina; Dayton, Ohio; Indianapolis, Indiana; Scranton, Pennsylvania; Pittsburgh, Pennsylvania; and Cincinnati, Ohio rounded up the Top 10 list of cities for first-time homebuyers.
The study also found that cities along the U.S. coast were not the best place for a first-time buyer to look for a home. With down payments as high as $66,806 and FHA down payments at $22,841, Denver, Colorado was one of the worst places for a buyer to look for their first home. Large metros like New York, San Francisco, Los Angeles, Boston, and Miami also found a place at the bottom of this list after scoring poorly on all metrics.
Where does your city stand in these rankings? To learn more, click here.