LendingTree released its annual ranking of the nation’s 50 largest metropolitan areas by how friendly they are for those buying their first home. Kansas City, Mo. leads the list of top metros for first-time buyers, followed by Oklahoma City, Okla. and Louisville, Ky.
The ranking considered the following factors in its ranking: average down payment, average down payment percentage, share of buyers utilizing an FHA loan, percentage of buyers with credit scores below 680, and share of homeowners who spend 30% of more of their monthly income on housing costs.
Best metros for first-time homebuyers
1. Kansas City, Mo.
Average down payment amount: $30,219
Average down payment percentage: 10.1%
% of buyers with a credit score below 680: 21.1%
Share of buyers using an FHA loan: 10.2%
Share of households spending 30% or more of their income on housing: 20.7%
2. Oklahoma City, Okla.
Average down payment amount: $28,777
Average down payment percentage: 10.7%
% of buyers with a credit score below 680: 20.8%
Share of buyers using an FHA loan: 11.6%
Share of households spending 30% or more of their income on housing: 22.6%
3. Louisville, Ky.
Average down payment amount: $46,375
Average down payment percentage: 13%
% of buyers with a credit score below 680: 20.5%
Share of buyers using an FHA loan: 10.1%
Share of households spending 30% or more of their income on housing: 21.7%
Other key findings from the report include:
Kansas City, Mo., Oklahoma City, Okla., and Louisville, Ky., are the metros that are most friendly to first-time homebuyers. Though each of these areas fall near the middle of the pack when it comes to the share of buyers using FHA loans, their high rankings across other categories make them appealing to first-timers.
Oklahoma City, Kansas City and Buffalo, N.Y., have the lowest down payments in the study. The average down payment in these three areas is $33,188, which is considerably lower than the average down payment of $63,216 across all 50 metros.
Kansas City, Salt Lake City and Oklahoma City had the lowest down payment percentages out of the top 50 largest metros. These three metros have an average down payment percent of 10.4%, which is about 4 basis points lower than the average across all 50 metros.
Memphis, Tenn., Las Vegas and Virginia Beach, Va., are the metros with the largest share of buyers who have credit scores below 680. Slightly more than a quarter of buyers in these areas have credit scores below 680. This suggests that people who live in these metros have a better chance of securing a loan with a lower credit score than they might need in other parts of the country.
At an average of 22.6%, San Diego, Los Angeles and Sacramento, Calif., had the highest share of buyers who used an FHA loan. FHA loans can be especially helpful for cash-strapped, first-time buyers in expensive areas like these, as this loan program requires a smaller down payment than some other loan types.
Indianapolis, Raleigh, N.C., and Buffalo contain the smallest share of households that are spending 30% or more of their monthly income on housing. Buyers in these areas can generally expect their mortgage payments to be relatively affordable.