25 Most Affordable Cities for First-Time Homebuyers

Johnstown, Pa. is the most affordable city for first-time homebuyers. A house payment requires just 19% of the area's median income.

The “28/36 Rule” says a homebuyer should spend no more than 28% of their income on housing. It’s an affordability guideline commonly cited by experts and financial websites.

But the coveted metric is becoming increasingly difficult to meet in most cities.

According to a Mortgage Research Center study, less than 6% of first-time homebuyers live in a housing market where 28% of the median household income could cover a house payment.

Luckily, affordability still exists, and 25 cities are still affordable, judging by this standard.

Key Findings:

• Johnstown, Pa.; Decatur, Ill.; and Baltimore are the three most affordable cities on the list, with a house payment requiring around 20% of the median household income in each

• While homes in smaller cities tend to be less expensive, a few larger metros, such as Baltimore, Pittsburgh, and St. Louis, still offer affordable homes

• Nearly one-third, or 846, of U.S. counties are affordable based on the 28% rule. But only 6% of the U.S. population lives in these counties

• Two-thirds of Americans live in an area where the payment on their first home would use more than 40% of the county’s median income

• One in 10 Americans lives in a county where a house payment would require at least 80% of the county’s median income – over 100% of the family’s take-home pay

Affordability Is Slipping Away For Many First-Time Homebuyers

The American dream isn’t as attainable as it once was.

Two-thirds of Americans live where the payment on their first home would use up more than 40% of their income. It’s nearly impossible to qualify for a mortgage at this housing debt-to-income, or DTI. Even if a homebuyer were approved, the payment could make them house-poor with little left every month for bare essentials.

Even more disheartening, one in ten Americans lives in a housing market where a monthly payment would require at least 80% of the median household income—more than the household’s entire take-home paycheck. According to the Organisation for Economic Co-operation and Development, the average American brings home only 75.8% of their gross income.

Affordable Housing Markets are Disappearing

First-time homebuyers won't be shocked that affordable cities, towns, and counties are becoming rarer by the day.

Only about 22% of the nation’s land mass is affordable, which sounds discouraging but not dire. However, that area represents only 6% of the population. Large swaths of the Midwest boast a healthy housing-to-income ratio, but the eastern seaboard is pockmarked with red on affordability maps like the one shown above, and the entire West has reached extreme unaffordability levels. Reviewing affordable areas by population tells a starkly different story than a map.

However, 25 cities are still affordable, judging by the 28% rule.

Mortgage Research Center calculated an estimated first-time homebuyer house payment assuming 5% down and current mortgage rates, property taxes for the area, and estimated homeowner's insurance.

That payment was then compared to the area's median income. A city was deemed "affordable" if less than 28% of the median income was required to cover the house payment.

25 Most Affordable Cities for First-Time Buyers

How Are People Buying Their First Homes?

All of the above begs the question: if only 6% of the U.S. population lives in an affordable area, how are people buying homes elsewhere?

Those who are still buying likely make much more than their area’s median income, make a bigger down payment, or use builder buydowns to afford a home. All of these tactics are smart, but they are not available to everyone.

Homebuying became an elite sport after the pandemic compared to the period between 2009 and 2021. Over that span, it took an average of 37% of the U.S. median income to buy the median-priced home, assuming 5% down and interest rates at the time.

Since 2022, a house payment has required 49% of the median income. This isn’t a realistic amount to spend on a home.

Other buyers are simply ignoring the fast-antiquating 28% rule.

The 28% Rule is Becoming a Relic

The popular 28% rule was more realistic in the past, but it’s becoming a relic after a massive one-two punch to affordability.

First, home prices shot up nearly 40% in two years starting in 2020, thanks to record-low mortgage rates. The second blow came in 2022, when the average 30-year mortgage rate climbed from 3.22% in January to over 7% later that year, about where it remains in late 2024, according to Freddie Mac.

The estimated total payment on the national median-priced home has risen from $1,850 to $3,300 in four years, a difference of $1,450 per month.

Along with home prices and rates, property taxes and homeowner’s insurance rates are skyrocketing in many areas.

It’s easy to see why few first-time buyers can meet the 28% rule today.

*Per Freddie Mac, October 2024. **U.S. Census Bureau 2023 data, most recent available

Lack of affordability is showing up in lending gauges. In 2012, only 15% of FHA homebuyers had a total debt-to-income (DTI) ratio of 50% or greater according to the HUD's annual FHA report to Congress. In 2023, the most recent data available, that has risen to about one-third of buyers.

All of this calls into question the validity of the 28% recommendation. While a good guideline in theory, it’s not a hard-and-fast cutoff.

Fannie Mae, the government-held agency that creates rules for most conventional loans in the U.S., has no housing ratio limit. Rather, it limits the total DTI, which includes housing plus debt payments, to between 43% and 50%.

The conservative zero-down USDA mortgage sets a front-end DTI maximum, but it’s 34%, not 28%.

This is good news for many first-time buyers who have little hope of meeting the 28% guideline.

How Much Should a Homebuyer Spend on Their House Payment?

While housing ratios are important, lenders look more closely at the back, or total, ratio. However, spending a large portion of income on the house could mean the buyer has to be virtually debt-free to qualify.

For example, if a home payment requires 35% of their income, the buyer may not pay more than 10-15% of their income to service debts like car loans, student loans, and credit cards.

But, savvy homebuyers with little debt could, in theory, allocate 40% of their income toward a house payment.

For many buyers, it will come down to their comfort level spending 30%, 35%, or even 40% of their before-tax income on housing.

Affordability: Endangered, But Not Extinct

The silver lining is that, at least geographically, a fifth of the U.S. is still affordable. Contained therein are 25 vibrant cities where a typical wage earner can afford a house without becoming house poor.

And plenty of other areas on the map are affordable, even if they are small towns.

As home prices rise and mortgage rates remain elevated, homebuyers will have to get creative, up to and including moving into more affordable cities.

Methodology

To determine affordability, we compared the county’s median monthly household income from the U.S. Census Bureau to a typical first-time homebuyer estimated house payment. Payments assume a 30-year fixed conventional mortgage with 5% down; 6.831% mortgage rate, the 60-day average from Optimal Blue Mortgage Market Indices with 700-719 score with less than 20% down; state property tax rates via ATTOM; 0.35% homeowners insurance; 0.78% private mortgage insurance rate per MGIC; No HOA. Home prices are from Zillow ZHVI. Affordable cities were defined as ones in which a first-time buyer with the above profile could afford a house payment using 28% or less of the county’s median income. Cities were then ranked by most affordable. To increase relevance, we selected cities within counties with populations of over 100,000. County data was used for home prices and median income and may differ from city data.

All mentions of payments and rates are for example purposes only and may not be available. Check with a lender for your personalized rate quote and homebuyer eligibility.