Buying a new home is stressful, by definition, but nuances unique to New Mexico can make it even more daunting. State mortgage rates are stable but the pool of available homes for sale remains low, making it a seller's market. This guide will help you maneuver the rugged terrain of home buying, with data, details and expert advice on how to find housing counselors, state financial assistance for first-time buyers and the best possible mortgage rates in New Mexico.
Mortgage Rates: What to Expect in New Mexico
Mortgage rates differ by state and may fluctuate depending on the health of the job market, employment opportunities and local economic conditions. In New Mexico, rates are stable despite counties hard hit by job losses in the oil and gas industry. Natural disasters such as flooding and hurricanes also can influence rates, but New Mexico is less prone to disaster than most. Even student loan debt can influence affordable mortgage rates and unfortunately New Mexico's default rate is twice the national average, making home ownership harder for young people to get loans and keep up with payments. On the other hand, New Mexico is a 'judicial foreclosure" state. This added protection means you can only lose your home if a court case is filed and the judge allows the lender to repossess.
First-Timer? There's Help for You in New Mexico
Whether you need help getting a competitive, low-interest mortgage loan or money to cover a down payment or closing costs, New Mexico offers financial assistance. First-time homebuyers can work with the New Mexico Mortgage Finance Authority (MFA), a quasi-public agency established by the state legislature in 1975. Since its doors opened, MFA has helped more than 50,000 New Mexicans buy first homes, not to mention helping residents with advice about renting and repairing or upgrading homes. In 2015, MFA provided $189 million in loans to 1,456 homebuyers and $7.4 million in down payment assistance to 1,365 homebuyers. Erik Nore, MFA's director of homeownership says that first-time homebuyer funds are administered through two key programs. First Home can be used in conjunction with federal help from Fannie Mae, HUD, USDA and VA, while First Down helps with closing costs, prepaid expenses and down payment. Eligibility is based on household income, family size and the home purchase price. "Our clientele is usually capped out by income restrictions," Nore said. Applicant income may not exceed $59,450 to $61,600 for a one- to two-person household and about $68,300 to $70,840 for a household with three or more members. MFA purchase price limits also apply and range from about $256,000 to $350,000. Nore said most MFA clients have incomes of $42,000 to $43,000 and want to buy a first home costing $135,000 to $140,000. MFA lender rates range from 3.5 percent to 4.75 percent. Assistance can be in the form of a loan or a grant, depending on the need. MFA also requires a $500 personal contribution from potential buyers who must have a minimum credit score of 620. Finally, all applicants must attend a class or receive pre-purchase homebuyer counseling.
For more details on the home-buying process go to: /mortgage/resources/first-time-buyers-guide/
Financial Assistance for First-Timers Hoping to Buy in New Mexico
New Mexico offers grants and loans to qualified residents needing help with closing costs, down payments and even finding the best low-interest mortgage or refinancing rates.
To Get Financial Help in New Mexico You Must See a Housing Counselor
Can You Afford to Buy? Understanding What It Takes in New Mexico
Income, job stability and how much money you already owe to creditors will determine whether you can afford to buy a home. Mike Loftin, the CEO of Homewise, Inc., a New Mexico nonprofit that assists new homebuyers, said the larger the down payment, the lower the monthly mortgage costs. "But it creates a bit of a bind because many first-time homebuyers don't have enough money for the down [payment], which makes their rates higher," Loftin said. "You have to get a feel for how far you can stretch your finances. If there is no wiggle room in your monthly budget or your income is super low, it may not make sense to buy." As a general rule, potential homebuyers can handle a mortgage that costs roughly 2 to 2.5 times their gross income. In theory, if you make $100,000 a year you likely would qualify for a mortgage loan of $200,000 to $250,000. Lenders, however, will scrutinize in detail, looking at debt-to-income ratio and beyond.
New Mexico Mortgage Rates and Prices Affect Monthly Payments
|Metro Area||Estimated Monthly Mortgage Payment*||Q1 2016 (Change from Previous Year)||2015 Median Home Price||2014||2013|
Source: National Association of Realtors Q1 2016 Metropolitan Median Area Prices and Affordability report.
*Estimated Monthly Mortgage Payment is based on median home prices for the metro area in Q1 2016 and a 30-year fixed mortgage with today's rates.
Borrowing Limits Will Apply in New Mexico
Conventional and FHA loan limits, typically set by the federal government and influenced by Wall Street, vary widely from state to state and in some states vary by county. But in New Mexico, the loan limits are nearly uniform by county, with current conventional and conforming (Jumbo) loan limits at $417,000 per county while FHA limits by county topped out at $271,050, with the exception of four counties that exceeded the norm. Many first-time homebuyers in New Mexico go with FHA loans, which are easier to get and require lower down payments require payment of a Mortgage Insurance Premium, which can add hundreds to monthly bills. Conventional loans are less expensive than FHA loans but have stricter credit and income requirements.
Experts Say Conditions in New Mexico Still Favor the Homebuyer
Erik Nore is director of homeownership for the New Mexico Mortgage Finance Authority.
Mike Loftin is chief executive officer at Homewise in Sante Fe.
What are the biggest barriers for first-time homebuyers?
I would have to say that saving for the down payment is the biggest barrier for first-time homebuyers.
The biggest issue for people is getting access to financing. They may not have money for the down or they may be hindered by credit card debt. Student loans are still a big deal. We work on helping people get their credit in order by improving credit scores and helping them build equity so they can qualify for a good mortgage. The good news is that the interest rates are still low in New Mexico and our housing prices haven't spiked. They are still reasonable. But at some point the interest rates will go up.
What was the New Mexico market like before the crash, during and now?
The market here was robust in 2005, 2006, 2007 and 2008. They were very big years here but I don't if our market was burning up like others. In 2008 after the crisis, things slowed down. Credit got tight. We receive no funding from the state. Our financial loans with price advantages for first-time homebuyers rely on a type of municipal bond. They too were hurt during the crash. The rates were not good at the time and it was expensive to raise funds to make loan money available. 2010 and 2011 were our worst years. We are seeing gains now. In 2016 so far our assistance loans are three times higher than what we did in the worst years."
The crash wasn't as precipitous here as in hard hit places like Las Vegas and Florida. Our market was less speculative and we were slower to move into the recession. Before the crash popular cities like Santa Fe were going nuts; the median price hit $460,000. Santa Fe has the biggest affordability gap but after the crash prices dropped by 20 percent to 30 percent and now and the median price is in the lower $300,000's. Albuquerque is more affordable with median prices at around $180,000
What is the status of housing inventory?
Most of the state's housing inventory comes from existing homes up for sale. There is not a lot of new building going on and most of what is being built is at the higher end of the market. Just recently we have started to see one or two builders working on new home building that would be considered affordable.
Our inventory has been reduced a lot whether you are looking at available pool of distressed homes or not. You have to be prepared to move quickly once you find a home you like because we are seeing more multiple offers and more competition. We are not seeing as many foreclosures or distressed sales so you won't find the same kind of deals we saw a few years ago. There are still opportunities but they are not as frequent. If you decide to go for a foreclosed or distressed home the main thing people need to know is the process takes longer and the banks look harder.
New Mexico Closing Costs Higher than Most States
Closing costs in New Mexico are among the highest in the nation, surpassing the fees in big city markets like California and New York, according to this Bankrate survey. New Mexico closing costs are the sixth highest in the nation with the buyer fee hitting on average nearly $2,000 for a home with a purchase price of $200,000. While common court closing fees vary little from county to county, New Mexico laws allow title companies to compete on price for insurance costs and services, making it worthwhile to shop around before selecting a title agent. The New Mexico Superintendent of Insurance still sets a maximum insurance rate but allows for competition under the rate.
Average Closing Costs in New Mexico
Source: Bankrate's 2015 survey of closing costs.
What to Consider When Deciding Whether to Refinance in New Mexico
Fewer New Mexico residents decided to refinance their homes this year versus last year, although state market conditions still make it a viable option. The Federal Housing Finance Agency recently reported that 2,198 homeowners refinanced a mortgage in New Mexico during the first quarter of 2016, down from 2,469 homeowners who refinanced a home during the first quarter of 2015.
State housing executives say that it is still a good time to refinance because mortgage rates are stable and historically low, but the recent increase in housing prices suggest favorable market conditions may not last much longer. Refinancing has numerous advantages according to New Mexico housing executive Mike Loftin of Homewise. It can lower monthly payments, free up extra cash to make home improvements and lower mortgage rates for those who initially financed a home when rates were higher. "People come to us with a home repair loan at 6.5 percent, not realizing they could lower costs by refinancing," says Loftin. But there also may be pitfalls. "We don't recommend refinancing if you are going to use the extra money to pay credit card bills or buy a new big ticket item. You need to reinvest in the house. You need to be judicious about how you spend the money, Loftin said. For more comprehensive information, see our guide on refinancing.
Resources for First-Time Buyers in New Mexico
MFA helps low-to-middle income families become homeowners by offering low-interest loans and grant awards through several mortgage programs set up by MFA and administered through participating lenders. Restrictions and conditions apply.
This nonprofit organization offers counseling and education, financial workshops, down payment assistance and affordable, low interest mortgages to new homebuyers. Services include refinancing help and guidance on how to repair or make your home energy-efficient.
A statewide trade association with 5,500 members that tracks local home prices and conditions by county, making it a good resource for understanding the pool of homes up for sale. RANM has information on both affordable housing and luxury homes and can help potential buyers find the best realtor to address your special needs.
This nonprofit corporation helps families own their own homes. GAHP offers home ownership counseling services and helps first-time homebuyers find financial assistance.
The group is a HUD approved counseling agency available to residents seeking housing. They track housing prices, list available housing along with contact numbers and provide low-interest loans to qualified clients. The service is free to low-income home seekers.
Based in Santa Fe and serving northern New Mexico counties, the Housing Trust offers counseling and training to first-time homebuyers and works hand in hand with local lenders to help you find the best possible mortgage. The Housing Trust also helps clients determine whether they qualify for down payment assistance available through city and county programs as well as through its own pool of revolving loans that generally are available at a level of up to $20,000.
Offers foreclosure counseling & civil legal services to New Mexico homeowners in the counties of: Bernalillo, Sandoval, Valencia
The Navajo Partnership for Housing continues to bring mortgage financing to members of the Navajo Nation on or near its reservation, which sprawls across New Mexico, Arizona and Utah. To date, NPH has arranged or provided 435 loans and grants to 334 families to help tribal members buy, build or rehabilitate a home.
A HUD-certified housing counseling agency, providing homebuyer education classes and individual counseling for first-time homebuyers. Topics covered include: Preparing for Homeownership, Budgeting and Credit Management, Financing a Home, Selecting a Home, Managing Finances after the Purchase, Sustaining Homeownership and Avoiding Delinquency and Foreclosure. Homes on trust land are affordable because clients lease the land instead of buying it. Subsidies are based on individual need and can be as high as $50,000.