New Mexico First-Time Home Buying Assistance Programs & Grants for 2024

New Mexico First-Time Home Buying Guide

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    By Walecia Konrad

    (Last Updated – 07/2022)

    From the mountainous regions in the north and east to the arid desert areas of the south and west, New Mexico offers one-of-kind natural beauty and diverse landscapes for potential homeowners. The fifth largest state in land mass but only 36th largest in population also gives homebuyers plenty of room to spread out.

    May 2022 home sales dropped significantly compared with the same time last year, down almost 18%. But that hasn’t stopped prices from rising. The median sale price in the Land of Enchantment was $518,000 in May, up 11.5% year-over-year, according to Redfin. The biggest price jumps were in the Albuquerque area.

    Still, first-time buyers with low to moderate incomes may be able to get a toehold in the market with state assistance. Others may find a government-insured or conventional loan on their own.

    Who Is Considered a First-Time Homebuyer in New Mexico?

    The New Mexico Mortgage Finance Authority, and the federal government, considers anyone who has not owned a principal home in the past three years a first-time buyer.

    The agency requires all buyers to complete a homebuyer education course before the purchase. Homebuyer education classes can help buyers understand how much mortgage they can afford.

    Recommended: The SoFi Guide to First-Time Home Buying

    4 New Mexico Programs for First-Time Homebuyers

    The New Mexico Mortgage Finance Authority, also known as the MFA, administers several types of home loans through its FirstHOME Program. The agency also offers a down payment assistance program. Here are the details.

    1. MFA FirstHOME Loan

    This program for first-time buyers offers an FHA, VA, USDA, or housing finance agency preferred conventional loan. It can be paired with New Mexico’s down payment assistance program.

    Borrowers must have a minimum credit score of 620 (for buyers with no credit score, alternative credit qualification may be acceptable) and contribute at least $500 of their own money.

    There are household income and purchase price limits unless the buyer is planning to purchase a home in a targeted area. Residences that may be financed include single-family detached homes, townhomes, condominiums, homes in planned unit developments, and manufactured homes that are at least doublewide and attached to a permanent foundation.

    2. MFA NextHOME Loan

    This program is available to all qualifying homebuyers. That said, first-time buyers with low and moderate incomes may find the program especially beneficial.

    This program is a combination first mortgage and second mortgage for down payment assistance. The requirements are similar to FirstHOME; borrowers must have a minimum credit score of 620 in most cases and at least $500 to put toward the purchase.

    There is one significant difference: Income and purchase price limits — $95,000 and $346,600, respectively — are the same for all borrowers, regardless of location or household size.

    3. MFA Down Payment Assistance Programs

    The New Mexico MFA offers two down payment assistance programs for first-time homeowners.

    The FirstDOWN program may be paired with a FirstHOME mortgage. The same income and purchase price limits and borrower requirements used for the FirstHOME mortgage apply. This program offers the lesser of 8% of the purchase price or $8,000 to help with down payment and closing costs. An extended repayment term and low interest rates help make the second mortgage affordable.

    The HomeNOW down payment/closing cost assistance program offers a second mortgage with 0% interest and no payments and may be forgiven in 10 years for borrowers who still own and occupy their houses. This program is available to buyers who earn less than 80% of the area median income, have a credit score of 620, and have a FirstHOME mortgage. Purchase price limits also apply.

    4. Targeted Location First-Time Homebuyer Assistance

    First-time homebuyers may also find help from local programs like the one administered by the Santa Fe Community Housing Trust . And some lenders throughout the state offer down payment assistance.

    You also might want to look into homeownership programs offered by Albuquerque and Las Cruces or wherever you plan to live.

    Recommended: Understanding the Different Types of Mortgage Loans

    How to Apply to New Mexico Programs for First-Time Homebuyers

    The New Mexico Mortgage Finance Authority website contains more information and fact sheets on all of its first-time and repeat buyer mortgage programs and how they work with MFA’s down payment assistance.

    The agency does not lend directly but does list participating lenders , making it easier to compare interest rates, fees, and other costs and learn what you qualify for.

    Federal Programs for First-Time Homebuyers

    Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, like state programs, they can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.

    The mortgages are generally for single-family homes, two- to four-unit properties that will be owner occupied, approved condos, townhomes, planned unit developments, and some manufactured homes.

    Federal Housing Administration (FHA) Loans

    The FHA, which is part of the U.S. Department of Housing and Urban Development (HUD), insures mortgages for borrowers with lower credit scores. Homebuyers choose from a list of approved lenders that participate in the FHA loan program. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers, who typically need FICO® credit scores of 580 or higher. Those with scores as low as 500 must put at least 10% down.

    In addition to examining your credit score, lenders will look at your debt-to-income ratio (DTI, your monthly debt payments compared with your monthly gross income). FHA loans allow a DTI ratio of up to 50% in some cases, vs. a typical 45% maximum for a conventional loan.

    Gift money for the down payment is allowed from certain donors and will be documented in a gift letter for the mortgage.

    FHA loans always require mortgage insurance: a 1.75% upfront fee and annual premiums for the life of the loan, unless you make a down payment of at least 10%, which allows the removal of mortgage insurance after 11 years. For a $300,000 mortgage balance, upfront MIP would be around $5,250 and monthly MIP, at a rate of 0.55%, would be around $137. You can learn more about these loans, including FHA loans for refinance and rehab of properties, by reading up on FHA requirements, loan limits, and rates.

    Freddie Mac Home Possible Mortgages

    Very low- and low-income borrowers may make a 3% down payment on a Home Possible® mortgage. These loans allow various sources for down payments, including co-borrowers, family gifts, employer assistance, secondary financing, and sweat equity.

    The Home Possible mortgage is for buyers who have a credit score of at least 660.

    Once you pay 20% of your loan, the Home Possible mortgage insurance will be canceled, which will lower your mortgage payments.

    Fannie Mae HomeReady Mortgages

    Fannie Mae HomeReady® Mortgages allow down payments as low as 3% for low-income borrowers. Applicants generally need a credit score of at least 620; pricing may be better for credit scores of 680 and above. Like the Freddie Mac program, HomeReady loans allow flexibility for down payment financing, such as gifts and grants.

    For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site .

    Fannie Mae Standard 97 LTV Loan

    The conventional 97 LTV loan is for first-time homebuyers of any income level who have a credit score of at least 620 and meet debt-to-income criteria. The 97% loan-to-value mortgage requires 3% down. Borrowers can get down payment and closing cost assistance from third-party sources.

    Department of Veterans Affairs (VA) Loans

    Active-duty members of the military, veterans, and eligible family members may apply for loans backed by the Department of Veterans Affairs. VA loans, which can be used to buy, build, or improve homes, have lower interest rates than most other mortgages and don’t require a down payment. Most borrowers pay a one-time funding fee that can be rolled into the mortgage.

    Another benefit of VA loans is that they do not require private mortgage insurance (PMI) for borrowers who make a down payment of less than 20%. And they have more flexible credit score requirements. In some cases, even those who have previously been in foreclosure or bankruptcy can qualify.

    Borrowers applying for a VA loan will need a Certificate of Eligibility from the VA so make sure to review a guide to qualifying for a VA loan as a first step in the process.

    Native American Veteran Direct Loans (NADLs)

    Eligible Native American veterans and their spouses may use these no-down-payment loans to buy, improve, or build a home on federal trust land. Unlike VA loans listed above, the Department of Veterans Affairs is the mortgage lender on NADLs. The VA requires no mortgage insurance, but it does charge a funding fee.

    US Department of Agriculture (USDA) Loans

    No down payment is required on these loans to moderate-income borrowers that are guaranteed by the USDA in specified rural areas. Borrowers pay an upfront guarantee fee and an annual fee that serves as mortgage insurance.

    The USDA also directly issues loans to low- and very low-income people. For loan basics and income and property eligibility, head to this USDA site .

    HUD Good Neighbor Next Door Program

    This program helps police officers, firefighters, emergency medical technicians, and teachers qualify for mortgages in the areas they serve. Borrowers can receive 50% off a home in what HUD calls a “revitalization area.” They must live in the home for at least three years.

    New Mexico First-Time Homebuyer Stats for 2022

    Here’s a snapshot of a typical New Mexico home sales transaction near mid-2022.

    •  Median home sale price: $518,000

    •  3% down payment: $15,540

    •  20% down payment: $103,600

    •  Average credit score(vs. U.S. average of 714): 699

    Financing Tips for First-Time Homebuyers

    In addition to federal and state government-sponsored lending programs, there are other financial strategies that may help you become a homeowner. Some examples:

    •  Traditional IRA withdrawals. The IRS allows qualifying first-time homebuyers a one-time, penalty-free withdrawal of up to $10,000 from their IRA if the money is used to buy, build, or rebuild a home. The IRS considers anyone who has not owned a primary residence in the past three years a first-time homebuyer. You will still owe income tax on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home. The downside, of course, is that large withdrawals may jeopardize your retirement savings.

    •  Roth IRA withdrawals. Because Roth IRA contributions are made with after-tax money, the IRS allows tax- and penalty-free withdrawals of contributions for any reason as long as you’ve held the account for five years. You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. With accounts held for less than five years, homebuyers will pay income tax on earnings withdrawn.

    •  401(k) loans. If your employer allows borrowing from the 401(k) plan that it sponsors, you may consider taking a loan against the 401(k) account to help finance your home purchase. With most plans, you can borrow up to 50% of your 401(k) balance, up to $50,000, without incurring taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 15 years to repay.

    •  State and local down payment assistance programs. Usually offered at the regional or county level, these programs provide flexible second mortgages for first-time buyers looking into how to afford a down payment.

    •  The mortgage credit certificate program. First-time homeowners and those who buy in targeted areas can claim a portion of their mortgage interest as a tax credit, up to $2,000. Any additional interest paid can still be used as an itemized deduction. To qualify for the credit, you must be a first-time homebuyer, live in the home, and meet income and purchase price requirements, which vary by state. If you refinance, the credit disappears, and if you sell the house before nine years, you may have to pay some of the tax credit back. There are fees associated with applying for and receiving the mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh these fees.

    •  Your employer. Your employer may offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.

    •  Your lender. Always ask your lender about any first-time homebuyer grant or down payment assistance programs available from government, nonprofit, and community organizations in your area.

    The Takeaway

    New Mexico has a robust state program for first-time homebuyers purchasing in the Land of Enchantment. In addition, New Mexico has local programs that can help potential homeowners put down roots. Other first-time buyers can look into government-insured and conventional loans on their own to find a good fit.

    Make your dream of being a homeowner come true with SoFi’s competitive mortgage rates and down payments as low as 3% to 5% for qualifying first-time homebuyers.

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    Should I take first-time homebuyer classes?

    Yes! Good information is key to a successful home-buying experience for anyone, but especially for newcomers, who can easily be overwhelmed by the jargon, technicalities, and magnitude of applying for a mortgage and purchasing a home. First-time homebuyer classes can help. Indeed they are required for many government-sponsored loan programs.

    Do first-time homebuyers with bad credit qualify for homeownership assistance?

    Often they do. Many government and nonprofit homeowner assistance programs are available to people with low credit scores. And often, interest rates and other loan pricing are competitive with those of loans available to borrowers with higher credit scores. That said, almost any lending program has credit qualifications.

    Is there a first-time homebuyer tax credit in New Mexico?

    No. New Mexico is not a state that offers the mortgage credit certificate program for first-time homebuyers.

    Is there a first-time veteran homebuyer assistance program in New Mexico?

    New Mexico’s first-time homeowner programs include VA loans, which typically require no down payment and no mortgage insurance but do charge a one-time fee that is a percentage of the loan. New Mexico veterans may also may find options in the federal VA loan programs listed above.

    What credit score do I need for first-time homebuyer assistance in New Mexico?

    Programs administered by the New Mexico Mortgage Finance Authority require a credit score of 620 or above. For borrowers who have no credit score, alternative credit qualification is accepted in some cases. There are other private, state, and federal loan programs that borrowers with lower scores may be able to access.

    What is the average age of first-time homebuyers in New Mexico?

    The New Mexican age of first-timers is hard to come by, but the average age nationally is 33.

    Photo credit: iStock/ivanastar

    *SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

    †Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

    ¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

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