The housing market in the United States has been on a wild ride since the onset of the pandemic in 2020. Across the country, housing markets got hot with activity, high demand and rising prices. Then came the Fed rate hikes in 2022, which contributed to a cooling of the housing market. For first-time homebuyers, navigating the housing market lately has been dizzying.
Credit Karma studied metrics including home prices, property tax rates, state-level homebuyer programs, homeowners insurance premiums, foreclosure rates and other factors to compile a list of the best states for first-time homebuyers. (Check our full methodology.)
The best states in the nation for first-time homebuyers are a mix in the South, the Mountain states and the Northeast.
The five best states for first-time homebuyers in 2023 (No. 1 being best) are …
- North Carolina
And here are the bottom five states for first-time homebuyers (No. 1 being worst).
- New Jersey
- Rhode Island
Read on for a deeper dive into the factors that figured into our rankings, and how states stack up on individual metrics.
Best states for first-time homebuyers
In determining the overall ranking of the best states for first-time homebuyers, we analyzed and scored 12 different factors to arrive at a combined score. This table shows the 10 best states for first-time homebuyers, along with factors in their ranking like availability of programs, sale prices, property taxes and foreclosure rates. Keep in mind that as with any program of this type, there are likely eligibility requirements you’ll have to meet to qualify.
10 best states for first-time homebuyers plus key factors
|Rank||State||Number of state programs for first-time homebuyers||12-month average median sale price||1-year home price change: 2021–2022||Effective property tax rate||Foreclosure Rate (%)|
The No. 1 state, Pennsylvania, is in the Northeast Region and Middle Atlantic Division, as mapped by the U.S. Census Bureau.
Pennsylvania ranked highly due to a combination of factors. The state has several homebuying programs — some tailored specifically to first-time homebuyers and others that are open to them along with others. These offer benefits such as competitive mortgage rates, lower fees, and down payment and closing costs assistance. Home prices in Pennsylvania are comparatively affordable, with a 12-month average median sale price of $267,200. Home prices only rose by 4.1% over the past year. Pennsylvania’s average homeowners insurance premium of $955 ranks as the 13th cheapest rate of all 50 states.
The other 10 best states for first-time homebuyers ranked highly due to a similar combination of factors. For example, North Carolina has five state-level homebuyer programs available to first-time homebuyers, a comparatively low effective property tax rate, and a high number of building permits for new privately owned housing units. Kentucky has affordable home prices, a relatively low effective property tax rate, and a low foreclosure rate.
Worst states for first-time homebuyers
On the other end of the spectrum, some states have affordable home prices but still rank poorly in our analysis due to the impact of all 12 of the factors we considered.
This table shows the 10 worst states for first-time homebuyers and how different factors impacted their rankings.
10 worst states for first-time homebuyers plus key factors
|Rank||State||Number of state programs for first-time homebuyers||12-month average median sale price||1-year home price change: 2021–2022||Effective property tax rate||Foreclosure rate (%)|
Diving deeper into our 10 worst states for first-time homebuyers, we see some of the reasons these states didn’t rank well. Massachusetts, for instance, has a 12-month average median sale price of $560,933, which could be a lot for first-time buyers. The state’s overall cost of living is the second highest of all 50 states (behind only Hawaii), and its average homeowners insurance premium cost is the eighth highest of all 50 states. Also, despite high home prices, the one-year home value appreciation is weak compared to most states.
Thought it has multiple homebuyer programs open to first-time homebuyers, New Jersey suffers from the highest effective property tax rate in the study. New Jersey also has high foreclosure rates, with one foreclosure for every 855 housing units — equal to a foreclosure rate of 0.117%.
Meanwhile, Kansas, which has affordable home prices, has only one state-level first-time homebuyer program. The state’s average cost of homeowners insurance premium is the 11th highest of all 50 states, and its home value appreciation is mediocre.
Hawaii, on the other hand, has very high home prices, with a 12-month average median sale price of $712,350. At the same time, Hawaii has only one state-level first-time homebuyer program. And though Hawaii benefits from the lowest effective property tax rate, the state’s overall cost of living is the highest in the U.S.
Overall ranking of best states for first-time homebuyers
The following interactive map of the U.S. shows all 50 states in the study and provides ranking details for each.
Interactive U.S. map: Best states for first-time homebuyers
States with the best first-time homebuyer programs
State-level programs specific to first-time homebuyers — or other homebuying programs that are available to eligible first-time homebuyers — were a key factor in our study. But since these programs were considered along with 11 other factors, it was not an end-all-be-all in deciding whether a state is one of the best for first-time homebuyers.
For example, California has seven different homebuying programs, but other factors — like expensive home prices, high cost of living and higher-than-average costs of homeowners insurance — kept the Golden State out of the top-ranked best states for first-time homebuyers.
The table below details the states that offer more than five first-time homebuyer programs (or programs open to first-time homebuyers).
States with more than five programs for first-time homebuyers
|State||State agency||Number of homebuyer programs open to first-time buyers|
|New York||State of New York Mortgage Agency||12|
|Connecticut||Connecticut Housing Finance Authority||9|
|Pennsylvania||Pennsylvania Housing Finance Agency||8|
|Louisiana||Louisiana Housing Corporation||7|
|California||California Housing Finance Agency||7|
|Wyoming||Wyoming Community Development Authority||6|
|New Hampshire||New Hampshire Housing Finance Authority||6|
|Rhode Island||Rhode Island Housing||6|
Most of the homebuying programs offered by these and other states are similar. They tend to offer lower down payment requirements combined with competitive interest rates and mortgage insurance assistance. These programs also tend to offer down payment and closing cost assistance, usually in the form of a loan with favorable terms and conditions.
Best states for first-time homebuyers by cost of living
Perhaps not surprisingly, states that have a lower overall cost of living also tend to have lower home prices. Several of these states have multiple homebuyer programs open to first-time buyers, but others do not.
The following table ranks the 10 states with the lowest cost of living and also notes the number of first-time buyer programs, median home sale prices and the 2021–2022 price change (in percent) for each. Keep in mind that eligibility requirements will apply.
Best states for first-time homebuyers by cost of living
|State||Number of state programs for first-time homebuyers||State COL index (U.S. = 100)||12-month average median sale price||1-year home price change: 2021–2022|
Mississippi has the lowest overall cost of living, with a cost of living index of 84.5 versus 100 for the U.S. as a whole. This means that the cost of living in Mississippi overall is 15.5% lower than the cost of living for the national average.
Cheapest states to buy a house for the first time
If we’re looking strictly at the cheapest states to buy a home for the first time, the list is different from the overall list of the best states for first-time homebuyers.
This table ranks the 10 cheapest states to buy a house for the first time, ranked by 12-month average median sale price. It also notes the number of programs available to first-time homebuyers, the 2021–2022 percent price change and the cost of living for each.
Cheapest states to buy a house for the first time, by average median sale price
|State||Number of state programs for first-time homebuyers||12-month average median sale price||1-year home price change: 2021–2022||State COL index (U.S. = 100)|
Ohio has the lowest home prices, with a 12-month average median sale price of $218,350. Bonus: Ohio has an overall cost of living that’s well below the average for the U.S. overall.
Foreclosure rates by state
Foreclosure rates can be represented as the number of foreclosures per number of housing units or as a percentage. Since the percentage rates of foreclosure are all less than 1%, it can be difficult to understand what these values mean. That’s why foreclosure rates are often represented as the number of foreclosed homes per all housing units.
The following table details foreclosure rates by state as a number per all housing units and as a percentage. States are listed in alphabetical order, with the foreclosure rate rank for each in the far left column (the lower the rank, the worse the foreclosure rate).
Foreclosure rates for all states
|Rate Rank||State||Total properties with filings||Foreclosure rate (1 foreclosure in every X number of homes)||Foreclosure rate (%)|
Vermont has the lowest foreclosure rate of 0.004%, with only one foreclosure for every 22,288 housing units. Illinois, on the other hand, has the highest foreclosure rate of 0.144%, with one foreclosure for every 694 housing units.
FAQs about the best states for first-time homebuyers
Here are answers to commonly asked questions about the best states for first-time homebuyers.
Based on our study’s analysis and rankings, Ohio is the cheapest state for first-time homebuyers, based on its 12-month average median home sales price.
If you’re shopping for your first home, there are several factors to consider, such as your current financial situation, the type of home you want, and any first-time homebuyer programs you may qualify for. Our first-time homebuyers guide provides a robust overview of how to go about this process.
Credit Karma member data pulled in August 2022 showed that the 29 million Credit Karma members with mortgages had an average VantageScore 3.0 credit score of 705. But the credit score you need to buy a home depends on a range of factors, and different lenders have different standards. In general, though, higher credit scores could help you qualify for a mortgage as well as more favorable loan terms, such as a lower interest rate.
If you have lower credit scores or can’t afford a sizeable down payment, an FHA loan may be your least expensive option. But if you have good credit and can afford a 10% to 15% down payment, you may find that FHA loans are more costly than conventional mortgages because they require an upfront mortgage insurance premium and an annual premium. Be sure to shop around and compare your options to find the best loan for you.
To determine the best states for first-time homebuyers, we analyzed the 50 U.S. states using the following criteria:
- 12-month average median sale price, October 2021 to September 2022, sourced from Redfin
- 1-year median sale price change, calculated based on data sourced from Redfin
- 2-year median sale price change, calculated based on data sourced from Redfin
- State overall cost of living, third quarter 2022, sourced from the Missouri Economic Research and Information Center
- Effective property tax rates, based on dividing the median property taxes paid by median home value, both sourced from Census Bureau’s 2020 ACS 5-Year Estimates
- Building permits for new privately owned housing units authorized annually, 2021, sourced from the Census Bureau’s Building Permits Survey
- Average homeowner’s insurance premium, sourced from the National Association of Insurance Commissioners
- Foreclosure rates, third quarter 2022, sourced from ATTOM
- Percentage of occupied homes built in 2010 or later, sourced from the Census Bureau’s 2020 American Community Survey 5-Year Estimates
- 1-year home value appreciation, calculated based on Zillow Home Value Index (ZHVI)
- 2-year home value appreciation, calculated based on Zillow Home Value Index (ZHVI)
- Number of state homebuyer programs available to first-time homebuyers, sourced from individual state housing authority and organization pages
All these factors were scored, then added together to get a final score, which Credit Karma used to rank states from best to worst.
- Missouri Economic Research and Information Center for Q3 2022
- Census Bureau’s Building Permits Survey, 2021
- Redfin Data Center – Median sale prices, September 2020-2022
- National Association of Insurance Commissioners (NAIC)
- ATTOM, Foreclosure Rates
- U.S. Census Bureau’s 2020 American Community Survey 5-Year Estimates, Table B25034 – Year Structure Built
- U.S. Census Bureau’s 2020 American Community Survey 5-Year Estimates, Table B25077 – Median Value (Dollars)
- U.S. Census Bureau’s 2020 American Community Survey 5-Year Estimates, Table B25103 – Mortgage Status by Median Real Estate Taxes Paid (Dollars)
- Zillow Home Value Index (download)