New Mexico First-Time Home Buying Assistance Programs & Grants
By Walecia Konrad
(Last Updated – 03/2024)
From the mountains in the north and east to the deserts of the south and west, New Mexico offers one-of-kind natural beauty for potential homeowners. But, as a first-time homebuyer, you may find it challenging to afford this state. The average home value is currently $290,781 vs. the national average of $342,921, according to Zillow, but prices have risen 5% year over year. And if you want to live in a hot market like Santa Fe, you’ll find average home values of $559,380.
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. Here, you’ll learn about these programs that can help with down payment, mortgage, and closing costs.
Who Is Considered a First-Time Homebuyer in New Mexico?
The New Mexico Mortgage Finance Authority and the federal government consider 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.
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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
The MFA FirstHOME Loan 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).
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 FirstDown and FirstDown Plus Loan
This FirstDown Loan program provides a fixed-rate second mortgage loan for down payment and closing cost assistance for first-time homebuyers in New Mexico. FirstDown must be combined with the FirstHome program. The requirements are similar to FirstHome; borrowers must have a minimum credit score of 620 in most cases.
An additional helping hand may be available: FirstDown Plus provides a fixed amount of $15,000 in the form of a 10- year, non-amortizing loan with a 0% interest rate. The $15,000 must be used only for down payment, and it’s a loan, not a grant. The FirstDown Plus loan has no monthly payments and will be forgiven if the borrower continually occupies the home for a full 10-year period and follows the other loan guidelines.
3. MFA HomeNow Program
The New Mexico MFA another assistance program for first-time homeowners: 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. MFA HomeForward Program
HomeForward is another option for first-time homebuyers in New Mexico. A HomeForward First Mortgage Loan may be available to prospective borrowers who do not qualify for the FirstHome program. The HomeForward can be used with MFA’s HomeForward DPA program, a second mortgage that can cover up to 3% of the sale price. Again, a credit score of at least 620 is required.
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. Consider these details:
• 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.
• 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 57% in some cases, vs. a typical 45% to 50% 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.
• 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.
💡 Quick Tip: Backed by the Federal Housing Administration (FHA), FHA loans provide those with a fair credit score the opportunity to buy a home. They’re a great option for first-time homebuyers.1
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
Are you an active-duty member of the military, veteran, and eligible family member? You 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. You can receive more information on these loans by contacting [email protected].
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 2024
Here’s a snapshot of typical New Mexico home sales transactions.
• Median home sale price: $290,781
• 3% down payment: $8,723.43
• 20% down payment: $58,156.20
• Average credit score in New Mexico (vs. U.S. average of 714): 702
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. For accounts held for less than five years, homebuyers will have to 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 to 25 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.
• 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.
Worth noting: New Mexico currently does not offer the mortgage tax credit certificate program.
The Takeaway
New Mexico has a robust state program for first-time homebuyers purchasing in the Land of Enchantment. You may find suitable programs to help lower down payment, mortgage, and closing costs. In addition, first-time buyers can look into government-insured and conventional loans on their own to find a good fit.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.FAQ
Should I take first-time homebuyer classes?
Yes! Good information is key to a successful home-buying experience for anyone, but especially for newcomers. These classes can provide those insights, and, what’s more, the courses 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 35.
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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